To some, the idea of seeking feedback from suppliers doesn't make a lot of sense. After all, "The customer is always right" as the saying goes.

But to Tom Adams, operations director in the Houston-based Personal Systems Group (PSG) of Hewlett-Packard, getting supplier feedback is not about encouraging complaints. It's about building stronger supplier relationships. In fact, according to Adams, seeking supplier feedback is a no-brainer.

"I have always been very interested in supplier relationship (SRM) management and the interaction between suppliers and customers," Adams says. "The primary reason for SRM is to help build partnerships with suppliers."

As a general rule, HP sources things from certain suppliers because it believes that the suppliers can do it better than HP can—more efficiently, with better quality, more cost-effectively, and/or via better processes. So, it "just doesn't make sense" to ignore their feedback if they come to HP and make recommendations for doing things better, emphasizes Adams.

In fact, he believes, it is just good business practice not only to listen to suppliers, but to formally and informally encourage them to provide feedback. HP utilizes a number of ways to measure supplier performance. One is the Procurement Management Process (PMP), which covers a number of areas related to suppliers, including identification of needs, evaluation, selection, contracting, and execution.

There are two elements in the PMP process that relate to supplier feedback. One is the High Performance Supplier Scorecard. This is HP's way of measuring supplier performance in a way that encourages positive behaviors from suppliers, such as continuous improvement. "This enhances the relationship between our company and the supplier," he states. The Scorecard covers things such as technology, quality, assurance of supply, cost, business terms, general business environment, etc.

The other is the Supplier Reverse Scorecard. Here, according to Adams, the purpose is to maintain HP's high-profile customer image. "We want our suppliers to want to do business with us," he explains. "As a result, we want to make sure that the business practices we utilize with our suppliers and the way we manage suppliers enables them to continue to meet their contractual obligations to us. We want to reduce barriers for suppliers."

HP takes the information that suppliers provide, brings it back in-house, and actually changes the way it does business, when it makes sense to do so. This Scorecard covers topics similar to those covered in the High Performance Supplier Scorecard.

There are actually two types of reverse scorecards. The Operational Scorecard focuses on transactional activities. The Strategic Scorecard is used at the executive level of the company, and focuses on strategic things that suppliers feel HP can do to improve the relationships.

Formal feedback comes through Scorecard meetings that HP schedules with suppliers—quarterly at most, and annually at least. Here, executives on both sides review written documents. "We make measurements, and we take action as a result of the meetings," states Adams. Informal feedback comes via phone calls, e-mails, and personal interaction.

How often HP elicits feedback from suppliers, and whether it does so formally or informally, depends on the level of the supplier. HP schedules formal operational reviews with strategic suppliers monthly and quarterly. It also names an executive sponsor/champion to each strategic supplier, and these people talk with the suppliers almost daily, which provides access to informal feedback.

The company typically schedules formal reviews with partnership suppliers on a quarterly basis. "We may also talk with them informally on a weekly basis," he adds.

With transactional suppliers, HP arranges formal meetings either annually or semi-annually.

When HP receives feedback from a supplier, it utilizes a formal process to assess it. "The first thing we do is rationalize it," states Adams. This involves comparing what HP has been doing with what the supplier says HP has been doing, as well as what the supplier thinks should be changed.

If the analysis reveals that HP should make some changes, it identifies the actions that need to be taken, and then creates a team to work on those actions. "In most cases, when we do make a change, it's not a major one," he continues. "It simply involves tweaking an existing process to make it operate better, to make it easier, or to make it more understandable to the supplier."

HP then responds to the supplier, explaining that it will act on the recommendation, and then proceeds to the implementation phase. It also sets up a feedback mechanism on the implementation to gauge supplier response.

Also HP responds to suppliers if it decides not to take any action based on their recommendations, and offers explanations as to why it made those decisions.

In terms of benefits, Adams can recall a couple of situations where, when HP acted on supplier recommendations, it experienced some cost savings or improved efficiencies. However, the majority of benefits, and the most important ones, are intangible. "It builds a much stronger degree of trust, and that is what helps to improve the whole supplier-relationship management process," he says.