Presented at Strategic Fleet Management 2010

SYNOPSIS

The opinion I will present today are my own based on 25 years of fleet experience and even longer in Logistics.

That experience has been with the Public Service & Publically listed companies with fleets ranging from 300  to 1,300 vehicles.

To give a little background to the Northpower fleet, we operate 900+ vehicles in New Zealand and 200 in Australia including cars, utes, vans, trucks, trailers and plant.

We own most of our fleet  and lease some which are the result of a buy-out.

Most of our vehicles are managed in-house with a finance system adapted for fleet management system. Northpower is implementing a module of the finance system specifically for fleet management.

We have approximately 1,000 staff, everyone of them knows everything about fleet management or at least knows a better way to do it. Diplomacy can be a fleet managers greatest asset sometimes.

Who is the most important person in the Supplier Relationship?

1. It is every person in the supply chain from the potential driver to the person who delivers the vehicle to you. If anyone in that chain makes a mistake it can be very costly. It could be the vehicle groomer
2. Mistake examples – Wrong specifications (driver overruled by the budget controller) interim decision makers making decisions, late delivery & the payment process.
3. A shortened supply chain can minimize problems.

The Agenda

 

Trends and New Approaches for Strategic Supplier Relationships

Real Life experiences – an organizational strategy for developing and managing relationships

How to balance risk and trust

Resolving challenges and disputes    

Trends and New Approaches for Strategic Supplier Relationships

What is a Strategic Suppler Relationship?

It should be a partnership, one in which the role of the buyer and supplier are understood by each of them. If one does not have an understanding of what the other is responsible for the opportunity for error is huge.

e.g An account manager appointed by a lease company was responsible for a company which had a large number of specialist commercial vehicles, the account manger did not know what a ute was!

It should develop into a ‘marriage’ of the parties to the extent that the parties can ‘correct’ the other when an error is made. A suppliers knowledge of your business could save you a lot of time, money and anguish.

Trends

Technology has had an effect on supplier relationships. Email diminishes the rapport that I suggest is essential to the establishment of useful relationships.

The use of Brokers has increased in recent years. Some organization use lease companies in a ‘broker’ role others use professional brokers such as GSB. The broker should not just be a means of saving money.

Internet Research certainly can save time, the amount of information available can be daunting and it is essential to have a ‘refined criteria list

Single Brand/single agent – benefits of product knowledge,  established rapport and processes. Disadvantage of familiarity (breading contempt) product  recalls and eggs in one basket in the event of the company collapse or similar problem.

       Eg All vehicles off the road due to a safety issue.

Personal Preference – Ford vs Holden etc.  It is very easy to allow personal preference or personal relationships to effect decisions.  The benefits can be knowledge and confidence; the disadvantage – are you getting the best vehicle?

New Approaches

Everyone can suggest alternatives to the current method of purchasing vehicles, some of the more recent are:

Purchasing groups – the utilization of the buying power from companies in similar industries. It has been my experience that these work well for consumable and single option items but getting agreement 1on things like vehicles is difficult.

Brand/Agent/Country combination – can be useful if you are based in more than one country. Many manufacturers will give head office rebates or combine fleet totals when deciding on a discount level.

Reciprocal Arrangements – you scratch my back, I’ll scratch yours. If you buy my product, I will buy yours.

Whole of life agreements are a good way of establishing budget needs – probably close to a lease agreement and do limit your options in the event of business changes

Prioritize the selection criteria,  Usually decided by a committee which has its own problems in getting to a decision and then any changes due to availability model changes or operational demand have to be re-considered.

Reverse Auctions – some reluctance in NZ to take part.  The lowest bid wins and there is a fee for the company conducting the auction.

Real Life Experiences

Build Rapport, I have mentioned this previously, the benefits are particularly important when times are tough or there is a shortage. I have been able to obtain a vehicle at very short notice when a specialist vehicle was written off. The supplier obtained a vehicle from a competitor, had it fitted out and operational in a very short time.

Consistency – systems, processes and time frames help to minimize difficulties

‘Honesty is the best policy’ - particularly important in maintaining supplier relationships. If you make a mistake acknowledge it.

Communication – this is a two way street. Expecting the supplier to know what you are thinking or to know there have been changes is not practicable. My experience suggests too much communication is better than too little. It has also been my experience that the supplier who seldom calls once a sale has been made, does not provide the whole of life interest that is important.

Work in partnership – having a supplier who knows your business is invaluable. Arranging the fitting of accessories is for Northpower a time consuming exercise. A supplier who delivers the vehicle between fitting agents or who thinks the way you do in such things as options is very worthwhile.

Lead times – The promise of a new vehicle to a staff member can be a morale booster, not being able to supply when you said can create difficulties from an operational and staff morale perspective.

Minimise curve balls – regular and frequent changes to your requirements will cause friction with your supplier, create delays in supply and often cost money.

Risk & Trust Balance

 

We are a small country, a long way from many of our manufacturers. The risks inherent in any supplier relationship are exacerbated by distance and size. Many New Zealanders rely on people they know to meet their needs.

Risks in Supplier Relationships

Availability – for many years suppliers carried stocks of new vehicles that would allow almost instant supply, that is not the case today.

Costs – exchange rates, model changes and fluctuating discounts may necessitate a review of the vehicle you require.

Familiarity – whilst it is important to establish relationships and a rapport, familiarity can lead to a ‘take it for granted attitude’ from either the supplier or you.

Supplier eg: They won’t mind waiting an extra couple of days

You eg: They won’t mind if I change the order at the last minute.

Staff changes: Most of us rely on our network of contacts, there is a risk that a change in the staff of your supplier through promotion or resignation may result in quite a different relationship that can take a lot of time to re-establish the rapport you enjoyed previously.

Trust in Supplier Relationship

            It is important when selecting a brand or supplier that the following are considered:

            The suppliers product and industry knowledge is paramount. Not only a knowledge of their own product but of their competitors.

            There are very few suppliers that can provide the full range of vehicles that Northpower uses, it has been very helpful to have a supplier who is able to recommend both a product and dealer alternative.

            Whole of life support – is the vehicle and or the supplier going to be able to support the vehicle for its usable life. Will the supplier still be in business when the vehicle is 5 years old.

            Value for money -  The cost of supporting a low capital cost vehicle can be expensive in terms  of dealer network support, availability of parts and financial stability of the supplier. Value can only be measured in ‘whole-of-life’ costs. The accessories which are additional cost, availability and cost of parts, service intervals, dealer networks and residual benefit need to be considered.

Resolving Challenges and Disputes

            Even in the best of regulated societies difficulties do arise. You may be able to justify your position through the ‘catch-all’ of I am the customer and the customer is always right. If you need to revert to that comment, perhaps your position was not very strong. Some ways to minimize or resolve challenges and disputes are:

            Communication – it is a two way street. While email is a very useful tool it can through tone create more problems, certainly worth confirming by email but a face to face or telephone call can resolve things in minutes where emails can go on and on.

            Supply Agreements – even a basic agreement of who/what/when can minimize disputes and challenges.

            Mutual respect – if you treat suppliers as servants the level of service will be the bare minimum and will lead to disputes.

            Don’t allow to escalate – if the molehill becomes a mountain it will take a lot more time and effort to resolve. There is also a residual feeling of distrust.

            Maintain records – written records of meetings and telephone calls can assist in the settlement of a dispute. Generalizations as the result of definitive information can cause more problems:

            Eg       Every time I call you are out!

            Research – Google, telephone, talk to colleagues, it may save embarrassment and you may learn something.

            You can’t make me angry – you can choose to be angry which invariably will ensure you lose your reasoning ability.

Summary

Supplier relationships built on a partnership of mutual respect & honesty will maintain continuity of supply and minimize conflict.