I have been tracking the procurement activity at LG Electronics (“LG”) since Tom Linton joined as the first Chief Procurement Officer (CPO) in company history (after a long stint at IBM and few years as the CPO of Freescale Semiconductor, the Motorola spinoff) and was very pleased to have been invited to attend LG Electronics’ Supplier Day in early April at the Grand Hilton in Seoul, Korea. Unfortunately, my travel plans the following week, will not provide enough of a cushion for me to make the long trip east. I do, however, hope to meet Tom, when he comes to the East Coast in a few weeks and discuss this year’s Supplier Day and the initiatives that he and his team are focused on in 2010 and beyond (I’ll return with highlights if/when this conversation happens).
For a company like LG that sources close to 80% of its product materials and components, working with the highest value suppliers can have an extraordinary impact on the company’s profitability (impacting expenses AND revenue) so it is no wonder that the company goes to such great efforts to develop a compelling agenda for the approximately 250 suppliers that will join Linton, CEO Yong Nam and an executive team that includes many Company Presidents. The agenda includes addresses from many executives including the CPO and CEO and several presentations on innovation, product strategies and product roadmaps. From the agenda and the LG executives that will be in attendance, it is clear that LG values its supplier relationships and sees them as a critical component of overall success. In the company’s own words,
“This annual event allows LG to forge closer relationships with global partners and helps shore up the competitiveness of all companies involved. This is especially important during an economic downturn.”
If I were the CEO of an LG supplier, I would do everything in my power to personally attend and bring the strongest team I could organize. Let me explain: The sourcing/negotiation process that results in an executed contract in as many cases as not, ends up defining the post-contract relationship. Win-win negotiations are difficult to achieve and are candidly, not a goal of many procurement negotiation strategies. The aftertaste of hard-fought and protracted negotiations can make mutual understanding and collaboration (which are built on good communication and mutual trust) difficult to achieve. And whether or not my account team has already developed a level of trust and understanding, I would want my company’s leaders to participate in this tremendous opportunity to (1) extend the current relationship with my customer and (2) learn firsthand the direction that a key customer and market leader in my industry plans to take.
A Supplier Day can be a highly effective means to gain alignment with the executive team and partner with the business in developing proactive supplier relationship management strategies. As LG CEO Nam said after last year’s event,
“Fair and transparent management and trade are an essential to building a strong company. Collaboration and partnerships are more important these days as those are ways to allow us to get through the economic downturn and to be fully prepared for the future.”
For the largest companies and those in manufacturing, Supplier Days are not uncommon. But a vast majority of procurement departments do not conduct them. I think this is a missed opportunity. With thousands of suppliers and constrained resources, it can be difficult to scope and support the first Supplier Day. To start, ask your team and company business leaders which suppliers have the greatest impact on the overall business (invite as prioritized), determine a set of goals, set a budget, and begin to develop an agenda. I would be happy to vet an agenda or hop on a quick call in support of your initiative. Please drop me a note.
Supplier Day [It’s a beautiful day], don’t let it get away.