Discuss Five methods by which a buyer can establish whether a supplier has quoted a realistic lead-time
Establishing whether the supplier has quoted a realistic lead-time is an important factor as so often suppliers quote the date you want to hear rather than the actual date of delivery. There are a number of ways to give confidence in the lead-time quoted from the supplier and to ensure it is realistic. Typically the buyer would use a number of the following methods:
The first method would be to ask for a break down of the activities or a plan of these leading up to the final delivery. This can often be a good test, and for example looking at whether the plan holds together, are there any external dependencies that the supplier is dependent on can be a good guide. In an example of a recent contract the supplier was dependent on a piece of work being undertaken by one of the providers. When we discussed this plan further with the supplier it became clear that they had not contacted this provider and when this was done suddenly the lead time was extended by a further 6 weeks. Of course, in this example this may have been the case with all suppliers however, once we understood the problem we were able to discuss this with the provider to manage the delay.
Allied to the plan of activities leading up to the delivery the second method would be to investigate the resources allocated to the activities. Looking at whether these have been properly identified, are already within the firm and have the relevant expertise to undertake the work are all factors that could make the lead-time unrealistic. The way I have often looked at this area is to ask the supplier for evidence of staff competencies and numbers so that it is possible to map these against the plan. In a large contract it would be impossible to interview all staff but to take a sample across the plan would improve the confidence. On a recent re-tender for mentoring we have done just that and interviewed a sample of 10 % of the candidate staff and scored this on a scale of 1-10. A score of above 6 gives us reasonable confidence in the staff whilst below that we might want to interview some more and around 1or 2 we would start to have serious doubts about whether the lead-time was realistic.
The third method, is again another confidence factor, and is one that is often talked about but rarely looked at in detail; this is the level of maturity of the organisation in terms of it processes and procedures. We currently rate a number of our suppliers against the Capability Maturity Model (CMMI) and is an international framework which indicates how proficient the organisation is in terms of for example project management, requirements management, Quality Assurance and other specialist disciplines. By using this framework and the associated ratings attached to it, the higher the level of maturity the more likely the organisation is to be able to deliver against the plans that it has produced. It is also more likely to have good risk management processes in place, and organisational structure for management and so on, making it much more probable that the organisation will deliver. As a procurement expert one way would be just to ask for the maturity of the organisation against this and perhaps other standards such as ISO 9001. In these cases it can often be useful to undertake spot assessments before contract award to satisfy the buyer that this is both valid and applies to the part of the organisation that is delivering the capability. It is often the case that on closer inspection although the parent group is rated against a certain model the organisation that actually does the work or its subcontractors are not – so this can be a very useful thing to check.
The fourth method is not necessarily concerned with the supplier itself but with what other suppliers have done in the past on similar projects. This would be an akin to a benchmarking type exercise. For example if a supplier was quoting to build a new supermarket in a certain time it should be possible to look at previous supermarket builds and then use this as a comparison against the supplier. This could extend not just to the timescales but also the resources, the cost to see whether the supplier was actually being realistic in his estimates. So for example if he thought he could build it with 10 staff and £100K but all other previous supermarkets have cost £200K and required 50 staff would flag an immediate warning signal. So further discussion with the supplier would be needed for example, to understand why his costs were lower and indeed this may be the case if he is employing staff from overseas but then this would also flag up the issue of competency of these staff and language barriers. So this can be a very powerful tool in ensuring the supplier has realistic lead times.
The final method is to review the experience of the supplier on previous projects. In our organisation we often have large complex projects to manage and deliver. However, the suppliers that do these are often relatively few in number and extremely experienced so much so that they have built up an extremely good track record of delivering similar type projects to the agreed cost, time and quality. So looking at this area is a useful tool. It often relies on the buyer having his own in house data but if the project is routine then reference site visits can be extremely useful in establishing how the supplier performed against their plan. It does need to be used in conjunction with the previous method of benchmarking to ensure that the supplier does not become complacent and fails to reduce delivery time or costs.
As in all methods used in isolation or without application of common sense can be misleading and at times requires much more detailed questions to be asked of the supplier so an old adage but if looks to good to be true it probably is.