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Six Steps for Purchasing Professionals to Get the Most From Core Suppliers

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Enormous time and effort is spent analyzing your business strategy, market trends, vendor requirements, supplier segmentation, strategic supplier identification and development.

All of this assumes you have been able to identify your core suppliers, the negotiations with suppliers have come to an end, and you have successfully setup core supplier programs with favorable agreements signed which will benefit both parties upon execution.

Are congratulations in order? Has everything now come to the end?

What next thing, if anything, should you pay attention to?


Despite all of your previous work developing your supply chain, one of the most mission-critical stages is just now beginning: execution.

While it is important to make sure that in-scope purchases leveraging your core supplier programs are enjoying the price and terms you defined in these purchasing agreements, it imperative to understand that without real purchases, core supplier programs will not generate any adequate business results.

With the above in mind, below are six steps for better execution of your core supplier program.

1.     Communicate your core supplier program to your internal clients

After finalizing your core suppliers list and setting up corresponding programs, chances are your internal clients outside the procurement functions (e.g., internal non-procurement departments / functions such as product development, production, customer project teams, etc.) will still not have a good understanding of your objectives.

If this is the case, more effort will need to be invested into this important task. To do this, brief your clients on the following:
a.)     The capability of your core suppliers and how these capabilities align with your company’s business needs long-term.
b.)     Your sourcing program with core suppliers and why it is important and beneficial long-term to the company’s best interest.
c.)     Identify purchases that fall outside your core supplier program and mandate the requirement for everyone (all external clients) to execute within the program moving forward.

(By now, you should have already gathered enough input from your internal clients, before identifying core suppliers and contract service agreement negotiations.)

Take further steps to collect additional input from your clients to understand their willingness to cooperate. Push forward and emphasize execution.

2.     Communicate your requirement priorities to core supplier(s)

Understanding your internal clients’ business strategy and requirements over time will help you when re-negotiating with your core suppliers, thus allowing your core suppliers to make more proactive preparations and better support your overall strategy more efficiently.

3.     Establish effective problem solving channels

It is your responsibility to lead and setup effective problem solving channels with your core suppliers. One seemingly independently troublesome issue could evolve into more and bring suspicion to all future cooperation. Make sure management teams on both sides take the time and effort to solve issues that surface in a timely manner, keeping focus on treating the business (cooperation) as the highest priority.

4.     Establish effective tracking systems to handle exceptions

“All Roads leads to Rome,” as the saying goes. However, for some specific purchases, there are always multiple choices.

In these instances, your goal must be to adopt the best choice to balance efficiency and fair value, both short- and long-term for your company.

While there may be exceptional purchases which fall outside the scope of your core suppliers that need to be procured from other suppliers due to special circumstances (e.g., turnaround time, inventory, price, etc.).

Using the first three steps above, you and your core suppliers are already well situated to reduce any exceptional cases to a minimum. However, before an exception does necessitate, you should already have processes and principles in place to fulfill your business needs.

Meanwhile, you should also accurately record these exceptions then bring them into discussions with your core suppliers for improvement opportunities (step 6). Purchase-deemed exceptions can require ‘extra’ effort on behalf of your company and therefore are not in your company’s best interest long-term.

5.     Track performance with adequate utilization review

Plan to track and review utilization rates of core suppliers and related programs on a quarterly basis to help insure cooperative efforts with core suppliers pay off in their full capacity. Some questions to ask internally include:

  1. What is your total spending with your core suppliers?
  2. What are the exceptions?
  3. What is the impact from exceptional spending from core suppliers? (i.e., supplier rebates)
  4. What is the utilization rate of your core suppliers? (see below)

Core supplier spending = Core supplier spending + in-scope, but exceptional, spending to other suppliers

6.     Capture every iterative improvement opportunity

Prevent iterative improvement opportunities from becoming standardized processes. Review every ‘opportunity’ from a cooperative business perspective. This will be a continuous effort that will save you time and effort in the long run.

Overall, utilizing these six steps will assist with better execution of your supplier programs, helping your business to streamline, overcome unforeseen issues, and save both time and money in the long run.