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Supply Chain/Outsourcing the dialogue and the evolution of the partnership. provide updates on their businesses. These meetings serve as a baromEach side also needs to bring top leadership to the table. That demeter of how well the relationship is working. onstrates a company is serious about working together and has enlistMaking progress and experiencing success not only furthers both ed the people with the authority to make decisions and resolve issues. companies' goals, it strengthens the relationship. On the other hand, The dialogue in early meetings should describe and compare the two "If you meet once a month to 'renew your vows,' but nothing hapcompanies' businesses and goals. "This doesn't mean the goals have pens, the relationship is bound to deteriorate," says Melotte. to be aligned," says He explains that in Melotte. "But it does addition to these fremean they cannot be quent meetings, it is exclusive." The point helpful to occasionally in establishing the relagather groups of parttionship is to further ners together to contheir mutual goals and duct an open conversadiscover how they can tion on the process in strengthen each other. general. For example, Hans Melotte, VP and chief procurement officer (CPO), J&J; Melotte recommends as part of the launch that, when you can, of its supplier engagework on creating a joint charter. Such an agreement could involve ment program in 2012, J&J; invited the leadership of a select group of building a manufacturing facility or redesigning a product. The charter its strategic suppliers to a roundtable. The purpose was to provide a sets goals for an initiative or project, describes what success looks like, venue where the partners could engage with J&J; senior leadership in and delineates responsibilities, time lines, and resources. an open dialogue about business strategy and opportunities to drive growth. SEGMENTATION AND SELECTING PARTNERS J&J; brought its top management to the roundtable to meet their "Shape your partner base so that it complements who you are and counterparts. J&J; executive leadership opened the meeting by sharyour business needs," Melotte says. Neither volume of business, hising their business model, products, plans, and strategic imperatives. tory, or size necessarily moves a supplier to Segment 1 status. Instead, Further discussions grouped suppliers in a manner that they could it's a matter of the supplier's strategic importance to the partners. share ideas on common issues and facilitate networking. Appropriate First, look at your supply chain and determine if your supplier base representatives from J&J; were paired with the suppliers to moderate has the right mix to offer what you need. This isn't merely a question discussions and record feedback. In follow-up, suppliers expressed of whether your company gets enough pens, bolts, and equipment. their desire to continue the dialogue on an individual basis and Examine if the base meets the company's strategic business plan. For meet again in this general forum annually. They also commented instance, a company that wants to expand into Asia might need to that they had not been approached by other companies with such complement its current supplier base with suppliers in Asia. The new an opportunity. partner becomes a Segment 1 supplier because of its strategic location AN ECOSYSTEM OF SUPPLIERS AND PARTNERS or expertise. At this stage of the deployment of a supplier management program, "Another consideration in segmentation is your vantage point," many of the metrics are activity-based. The current proxies are the says Melotte. "I might designate a small supplier as Segment 3 in the supplier customer-of-choice survey and a net-promoter score. "About overall J&J; universe. Yet that supplier might be ultracritical to our 70 percent of Segment 1 suppliers rate us as one of their customers of baby business in India. So, the supplier may end up as a Segment 1 choice," says Melotte. "This suggests that more than two-thirds of our relationship." suppliers are inclined to dedicate their best and brightest resources to Segmentation is a dynamic process. It has to keep pace with changus, or to come to J&J; with their innovative ideas." For him, the ultiing markets and opportunities. Melotte says, "Our business portfolio, mate test is how the company performs in meeting its goals and doing our business needs, and our strategic priorities change, so our supwhat is right by its patients and customers. plier base needs to change." He believes their supplier management Melotte says, "It takes time, failures, and successes to learn to program provides the platform to meet change. It calls for continual manage business relationships with other companies, but any evaluation of the size and mix of J&J;'s supplier base. If necessary, the enterprise needs other companies to succeed in today's world. To staff can resegment suppliers and continue to manage relationships in grow and survive, a company needs to form an ecosystem of supa consistent manner. pliers and partners that, in the aggregate, make them a stronger STRENGTHENING THE RELATIONSHIP system." He suggests that while this is true for a large company like Sustaining relationships requires consistent face-to-face contact and J&J;, it may be even more important for a small company that often feedback. J&J; meets regularly with suppliers to measure progress and has very little room for error. "It takes time, failures, and successes to learn to manage business relationships with other companies, but any enterprise needs other companies to succeed in today's world." 38 LifeScienceLeader.com December 2013