Selecting the right supplier

By Drew D. Troyer

Selecting the right lubricant supplier is a crucial decision, particularly if the contract is for multiple plants and/or divisions within a large organization. Regrettably, the decision is often based solely on price, with only casual attention paid to the relationship’s more important elements. Regrettably, this results in unclear expectations and ill-defined value propositions that create stress and tension, sometimes dooming the relationship from the start. Here’s an all-too-common scenario:

1) Plant personnel fail to provide any specifications to purchasing about the requirements in a lubricant supplier.

2) Purchasing negotiates a contract based solely on price because it lacks any other definition of requirements.

3) After the fact, plant personnel demand services from the lubricant supplier that either were not included in the negotiations or only briefly discussed.

4) The lubricant supplier can’t provide the requested services because the contract doesn’t produce enough profit to cover the costs.

5) A rift develops between the supplier and customer, so the organization elects to switch suppliers.

6) The cycle repeats.

Lubricant plays such a vital role in mechanical reliability. A more robust approach to selecting the lubricant supplier is in order — one that includes a clear definition of expectations, a systematic method for determining the degree to which a supplier matches your expectations, and a forthright discussion between you and the supplier about the cost for the supplier to deliver on your expectations.

Begin the supplier selection process by clearly defining your expectations. A good way to do this is to assemble a representative group of stakeholders. For a multi-plant and/or multi-division organization, bring together a group that can effectively represent the lubrication interests of the entire maintenance and reliability team. The team can be assembled in-person or virtually via teleconferencing or videoconferencing. Once assembled, appoint a facilitator (either an internal lubrication expert or a third-party lubrication expert) to help the team define what it expects from a supplier. Criteria often include, but are not limited to, the following.

• Geographic coverage of the areas where the plants are located.

• Range of products offered, including specialty or niche products that are important to one or more of the organization’s facilities (e.g. food-grade lubricants).

• Technical product support capabilities.

• Technical application support capabilities.

• Willingness and ability to provide and manage the delivery of products offered by other lubricant companies, even those offered by competitors, when it is the best product for the application.

• Availability of lube scheduling and oil analysis software and/or Web-based services where required.

• Provision of high-quality, flexible used oil analysis services that can be crafted to meet the special requirements of a machine and/or plant.

• Pricing strategies, including the ability to bundle or unbundle products and/or services as required.

Often, the process will result in the creation of dozens of individual criteria. Large and diverse (functionally and geographically) organizations will create a large number of expectation criteria. Once created, the criteria must be weighted to define their importance. Weightings must represent the collective opinion of the entire organization.

To minimize bias, I like to use a modified Delphi technique to establish the weights. It’s really very easy. Using a secret ballot, the facilitator asks each participant to rate the criteria on some predefined scale (e.g. 1 to 10 rating). The facilitator then reports the average, standard deviation and coefficient of variation (standard deviation divided by the average) to the group. Criteria with a large coefficient of variation require more discussion and often must be split into two or more criteria because of major differences between subgroups in the organization. Once finalized (it sometimes takes two iterations), the values are normalized and assigned to the criteria as weights.

With weighted criteria, the organization is ready to listen to the proposals of lubricant suppliers vying for the business. The criteria themselves represent a talking sheet for your representatives to use in questioning each lubricant company during their pitch. The conversation becomes targeted and highly relevant because the requirements have been defined in advance.

Your company will value different characteristics from a lubricant supplier. For instance, Supplier A may be pitching its used oil analysis program, but if you prefer to contract with a third-party laboratory, that capability offers little value to you.

When the supplier presentations and meetings are concluded, employ the Delphi method to rate each candidate supplier relative to the weighted selection criteria. Then, begin negotiations with the supplier whose capabilities most closely match your requirements, and use the weighted criteria as the basis for the contract.

If you clearly define your expectations, select the supplier carefully and systematically, and exhibit a willingness to pay for value delivered per the agreement, you will greatly improve your relationship with your lubricant supplier.

Drew Troyer is the senior editor of Machinery Lubrication Magazine. If you have a lubrication or oil analysis question, contact Coach Troyer at 800-597-5460 or e-mail dtroyer@noria.com. 

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