A long-term relationship between purchaser and supplier is necessary for best economy.

—W. Edwards Deming

Supplier

A Supplier is an internal or external organization that develops and delivers solution components, subsystems, or services to ARTs and development value streams.

Lean-Agile Enterprises deliver value to Customers in the shortest possible lead time with the highest possible quality. Suppliers support this mission by providing their unique competencies, skills, and existing Solutions to accelerate and reduce the costs of value delivery. Many Solution Trains and Agile Release Trains (ARTs) depend on supplier performance for their value delivery.

Suppliers will use varying development and delivery methods. Nonetheless, the SAFe enterprise treats strategic suppliers as long-term business partners, involving them deeply in the solution’s definition and building activities. They also work with suppliers to help them adopt Lean-Agile Mindsets and practices for the economic benefit of both parties.

Details

Suppliers play a critical role in SAFe. They provide unique expertise and existing components that accelerate solution delivery. Some suppliers are external to the enterprise. Others work within the organization, producing solutions as part of another value stream. Suppliers will have their own mission, additional customers, and Economic Framework that drive their decision-making processes. For organizations to achieve mutual benefits, close collaboration and trust are required.

Types of Suppliers

Supplier relationships are as varied as the suppliers, and enterprises have many types of contractual associations with external entities. Some common relationship patterns include:

  • Licensing commodity components and services. Some suppliers provide commodity solutions. For example, web developers build their applications on platforms like WordPress and utilize third-party services to authenticate email addresses and process credit cards. When working with these suppliers, solution builders should maintain alignment between their Solution Roadmap and their suppliers’ roadmaps and release schedules.
  • Contracting individuals and teams. Some suppliers provide skills vital to delivery, ranging from domain and technical expertise to the SPC and Team Coach roles that support a Lean-Agile, SAFe transformation. These suppliers should operate like other SAFe practitioners on teams and trains.
  • Contracting an entire development effort. Some organizations may outsource all development for a solution to a supplier who provides Agile teams, product management, architectural support, and other expertise. Ideally, these suppliers operate harmoniously with SAFe practices, with the organization acting as Business Owners to guide the development effort.

As illustrated in the SAFe Big Picture, a fourth type of supplier provides strategic, customized solutions, requiring co-development.

  • Co-developing a solution – Co-development suppliers provide strategic, customized solutions that require collaborative development and frequent integration with the overall solution. Their participation is necessary for the success of the larger solution and must be integrated to support more complex and strategic contributions than the other supplier models. Specifically, they contribute customized code, solutions, subsystems, and other assets.

The remainder of this article describes building an effective relationship with these critical co-development suppliers.

What is a Supplier in SAFe?

Suppliers in SAFe provide solutions and services to a SAFe Development Value Stream (DVS) to integrate into a larger solution, as shown in Figure 1. The direct customer is the DVS consuming the supplier’s work (see Customer definition in the Customer-Centricity article). Together, the direct customer and supplier define and evolve the technical interface described in the Solution Context. They also establish how the DVS will consume the supplier’s changes as their solution evolves, as shown by the direct customer’s Operational Value Stream (OVS). For example, suppliers may directly integrate their changes into the DVS’s Continuous Delivery Pipeline (CDP). Or they may periodically package their solution and provide it to the DVS developers for them to integrate. Together, they must address installation, support, training, and other OVS concerns.

Figure 1. Suppliers deliver value to the overall solution
Figure 1. Suppliers deliver value to the overall solution

Figure 1 also shows how suppliers have customers at multiple levels. In addition to meeting their direct customer’s needs, suppliers must also understand how the end-user, or indirect customer, employs their solution. Suppliers apply Design-Thinking to understand the needs of all critical customers.

Selecting Suppliers

When contracting with vendors and suppliers, organizations sometimes emphasize near-term pricing at the expense of longer-term economics. There are other anti-patterns as well:

  • Organizations searching for the lowest price may change suppliers without understanding the indirect costs of change, including lost knowledge and relationships
  • Organizations may aim to reduce or limit their number of suppliers without recognizing their unique strategic advantages
  • Instead of genuinely leveraging what a supplier can offer, organizations may assign work using detailed, mandatory specifications, missing the opportunity to leverage a supplier’s innovations
  • Due to confidentiality and other concerns, organizations may isolate suppliers from the enterprise’s goals and strategies, providing information only on a need-to-know basis
  • Contract structures may limit a supplier’s ability to adapt, committing them to early, predetermined requirements and a fixed, detailed schedule

While protecting investments is admirable, developing innovative products with fast time-to-market requires a different approach to supplier relationships that addresses the inherent technical, market, and business uncertainty the enterprise faces.

To enable business agility, Lean-Agile enterprises need a longer-term economic perspective, cultivating a collaborative, ongoing, and trusted relationship with their strategic suppliers. These suppliers become an extension of the culture and ethos of the enterprise; they are treated as partners. Their capabilities, policies, and economics are surfaced and understood. Strategic suppliers are selected based on their alignment in multiple dimensions:

  • Technical and business-model fit with the overall solution
  • A development model consistent with the buyer’s way of working
  • Cultural alignment with the buyer’s purpose, both now and in the future

However, reaching this state can be challenging if the supplier’s mindset, philosophy, and development approach are materially different from the buyer’s. Consider two cases:

  1. The supplier has already embraced and adopted Lean-Agile development.
  2. The supplier operates in the traditional waterfall model.

Typically, larger enterprises must address both, but the goal is the same—a more collaborative, long-term, and transparent partnership. The following two sections describe these two models.

Working with Lean-Agile Suppliers

Involving suppliers with a Lean-Agile mindset and existing ways of working is the more straightforward case. Suppliers already operating in SAFe are ideal since the terminology and development models are already aligned. In these instances, organizations can apply Lean-Agile collaboration practices:

  • The supplier is treated like an Agile Release Train (ART) and works in the same cadence as the other ARTs
  • The supplier participates in Pre-Plan and Coordinate and Deliver activities, including PI Planning
  • Their dependencies with other ARTs appear on the Solution Train Planning Board
  • The supplier demos their subsystem or components in the System Demo, participates in the Solution Demo, and continually integrates their work, providing feedback and receiving it from other ARTs and teams
  • The supplier participates in Inspect and Adapt (I&A) to improve their Lean-Agile practices and enhance the entire development value stream

Working with Suppliers Using Traditional Methodologies

Occasionally, systems builders still need to work with suppliers using traditional methods. Even in these cases, continuous collaboration across the organizations provides significant value and should inform the selection process discussed earlier. The more strategic the relationship, the more that alignment becomes critical to success. However, when working with traditional suppliers, organizations may need to make some adjustments:

  • Since the supplier will expect more formal requirements and design documents, System Architects and Product Management must allocate time for themselves and certain teams to create and evolve the specifications
  • The supplier may not be able to deliver incrementally; frequent integration may be challenging
  • Changes to requirements and designs need to be understood earlier, and the response to changes will take more time

Organizations should also set some expectations:

  • Suppliers should maintain alignment with the solution roadmap as it evolves.
  • Suppliers should communicate their progress toward upcoming milestones in Pre-Plan activities to allow dependent DVSs to plan properly.
  • Key supplier representatives should attend PI Planning to understand milestones and collaborate with dependent teams.
  • Suppliers should attend Solution Demos to present their accomplishments and provide feedback on the demos of the other trains.
  • Involvement in the I&A workshop is crucial since traditional suppliers will have longer learning cycles. They should use this opportunity to raise problems or issues and participate in the overall solution.

In addition, suppliers may have limited flexibility in adjusting their plans, and, as a result, other trains will have to adjust accordingly.

In addition, the solution’s architecture may play a significant role in supplier collaboration. The article, Technical Strategies for Agile and Waterfall Interoperability at Scale, discusses several practices that enable better collaboration with traditional suppliers.

Collaborating with Suppliers

Collaboration with suppliers occurs at all levels of SAFe, from formulating Strategic Themes to prioritizing Team backlogs. As described in [1], Honda collaborates with its suppliers on the kinds of products and markets it plans to pursue in the future. This increases alignment and enables their suppliers to offer better value through more strategic offerings. Instead of hiding information from suppliers, Honda shares it for better economic outcomes.

Suppliers also collaborate in formulating requirements, avoiding over-specification that can inhibit decentralized decisions and handcuff innovation. Instead of providing suppliers with detailed specifications, forward-thinking enterprises include them in the specification process. The supplier’s teams should be treated as an extension of the ART and Solution Train teams.

The supplier’s solution builders communicate directly with their ‘customer’ counterparts along the aspects shown in Figure 2:

  • Product Management ensures the supplier’s Backlogs and Roadmap align with the larger solution.
  • System Architects ensure technical alignment and a compatible solution design.
  • The System Teams share, build, integrate, and test infrastructure, including scripts, environments, and hardware. To enable early and frequent integration and improve quality, suppliers and ARTs need to share interfaces, tests, simulators, and other infrastructure.
  • Agile Teams frequently collaborate directly with their supplier counterparts to ensure alignment and remove bottlenecks on either side.
Figure 2. The Customer-supplier relationship is multi-dimensional
Figure 2. The Customer-supplier relationship is multi-dimensional

Helping Suppliers Improve

Changing to a Lean-Agile way of working significantly impacts the organization’s supply chain, often disrupting years of collaborative experiences and relationships between organizations. For some enterprises, changing their supplier relationships may be as critical to achieving Business Agility as their own transformation.

To help support the transition, some organizations host a ‘Partner Day’ event to explain why the organization is making the change and offer insights into future collaboration. Partners are invited to an open discussion to share concerns and expectations.

Lean-Agile enterprises also encourage suppliers to learn Lean-Agile ways to benefit both companies. They may include them in training events, allowing them to hear the same information and gain alignment with the internal teams. Knowledge transfer and growing T-shaped skills across the supply chain reduce bottlenecks and improve flow (see SAFe Principle #6 – Make Value Flow Without Interruptions). Enterprises encourage organizations to collaborate and build knowledge between suppliers and their solution builders. This helps develop technical and process knowledge, improving delivery times, reducing costs, and enhancing relationships.

Agile Contracts

An effective working relationship with suppliers requires mutual trust. Traditional contracts can lead to undesirable results and unintended consequences. For example, a cost-plus contract award might yield a competitive, low-cost award, but result in overall cost increases or quality challenges as changes occur.

Building innovative systems with high uncertainty requires a different type of relationship and contracts that support it. Contract terms should include language on the new way of working, encourage shared responsibility for solution delivery, and foster win-win relationships. The Agile Contracts article provides more information on contracting to exploit the inherent variability in complex system development and how to make faster, easier changes to the supplier’s work as new knowledge emerges.

 

Learn More

[1] Liker, Jeffrey, and Thomas Y. Choi. Building Deep Supplier Relationships. Harvard Business Review, December 2004.

[2] Aoki, Katsuki, and Thomas Taro Lennerfors. New, Improved Keiretsu. Harvard Business Review, September 2013.

[3] Deming, W. Edwards. Out of the Crisis. MIT Center for Advanced Educational Services, 1982.

 

Last Update: 7 March 2023