A good portion of my day is spent qualifying alternate suppliers, and while price is always a factor, ensuring a supplier can provide the right combination of service, product quality, and price, is the best way to make sure the new relationship is a successful one.

One aspect of a service offering I always look in a new supplier is a cross-functional account management team. A single sales contact allows customers to utilize the sales channels to act as an advocate for the customer within their organization, but that advocacy only goes so far.

Dr. Robert Handfield of North Carolina State Univerisity has done extensive research in this area, and a colleague of mine had the opportunity to hear him speak. Dr. Handfield illustrates the differences between a standard customer/supplier relationship and a cross-functional relationship this way:

Standard Customer/Supplier Relationship Model

Cross-Functional Customer/Supplier Relationship Model

Particularly in direct materials and services, it’s important to know that you have a point of contact exclusive of the sales channel, as sometimes questions come up that make more sense to direct to operations, marketing, or finance within the supplier organization.

And, as a general rule, it’s always best to let the engineers talk amongst themselves.

That being said, I recently had an experience where the introduction of a cross-functional team during the sales cycle actually helped a supplier lose business. Without going into too much detail, at the end of an RFP process one supplier was the clear winner on service and another was the clear winner on price. The last factor to check, quality, would require a month long testing process with each supplier. Before we committed to that process, we asked the service leader to try to close the gap on price. If they could come close enough, multi-supplier testing would likely not be required.

The sales team we were working with was very motivated by the aspect of being the sole testing candidate, and went back to the account management team to discuss pricing options. What should have taken a day or two at most ended up taking nearly two weeks. In the end, sales, finance, and operations could not come to an agreement on the provisions behind additional cost concessions, and essentially passed at offering any additional cost reduction.

In this case, the supplier went from a 90% chance of getting awarded the business (pending final testing), to a 50% chance at best – and also extended the timeframe for placement of a first order by no less than 1.5 months. In addition, one of the aspects of the supplier’s service offering that gave them a clear service level advantage – the cross-functional account management team – now became a disadvantage to the customer and lowered their total score on the RFP evaluation.

So what really went on here? My father-in-law likes to use the saying “too many cooks in the kitchen”, and it goes without saying that was the issue we encountered. Many times I have seen cross-functional account management teams produce tremendous results, but only when they have a clear decision maker. What’s missing in the model for this particular supplier is leadership and coordination.

Without a decision maker setting the agenda and keeping consensus, conflicting opinions can create timing delays and lead to little or no real response from the supplier in terms of additional incentives. By essentially having too many hands in the pot, a clear asset for the supplier has now become a liability. An account that was almost a sealed deal could potentially walk away from the table.
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Joe Payne

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