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The Supplier Relationship Lifecycle

A customer and supplier relationship starts at the first point of contact established either during a customer survey of the supply market, or perhaps following a marketing approach from the supplier, and extends through a formal termination of the relationship into any post contractual obligations either party may be under.

Assuming that a relationship is productive (i.e. results in the supply of goods and/or services), it is likely to pass through the following phases:

  • Market analysis: market reviews, capability assessments against requirements
  • Evaluation and selection: Requests For Information (RFI), Request For Proposal (RFP)/Invitation To Tender (ITT), processes for scoring and selection
  • Contract negotiation: Detailed requirements, pricing and terms of supply
  • Contract operation: Performance review and improvement, business development opportunities
  • Change to terms and/or re-negotiation: Contract terms may need to be extended or changed following events such as a change in scope, an identified exceptional event such as a takeover, end of the contract period, or by mutual agreement
  • Termination: Covers not just the cessation of supply, but also post contractual commitments which may extend for a considerable period.

It is important that these phases are recognised from the outset so that the organisations have a common understanding of how the relationship is intended to develop, and that the contents of each phase are understood, so that a supplier understands the level of investment needed during selection, contract negotiation, and for operational reviews. 

Agreement of an exit strategy prior to contract signing will help to ensure that practical contractual provisions are established to ensure continuity of supply during a transition phase.  An exit strategy may also help both parties to appreciate the costs and consequence of terminating the relationship and hence the benefits to be derived making a relationship work!

 
 

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For help in developing and implementing, or reviewing the effectiveness of supplier management arrangements, please contact us: info@essentialcs.co.uk