Building better relationships with suppliers are crucial to a long-standing partnership based on the commitment to the trustworthiness and enhancing transparency as well as traceability. This works in direct correlation to figuring out how to combat supply chain complexity.
Leveraging the supplier base as a source of driving product/service innovation, CSR (Corporate social responsibility) initiatives, quality assurance, sustainable development, and overall performance is key to advancements in the procurements cycle and to reduce the complexity of the global supply chain.
Suppliers should always be treated with integrity and empathy. Bleeding each other dry will only lead to a disastrous affair. Hence lead with good intentions as Suppliers are our friends, not food!
Data, Data, Data!
According to Forbes in 2018 “ 90 percent of the data in the world was generated in just 2 years”. That data is utilized in a systematic way could help leverage suppliers as value creators.
Value creation entails knowledge of business intelligence surrounding supplier risk, performance, and overall potential. This, of course, requires a systematic gathering of data at various supplier touchpoints all the way from tender to delivery.
All procurement decisions should be data-driven gathered from SRMs (Supplier relashionship management platforms) and can serve as a foundation going forward.
Whether you’re looking to consolidate the supplier base, better define your category tree, strategically plot your suppliers within a matrix or looking to simply report back certification compliance of suppliers to your board, there’s nothing that will support your decision-making process better than an analysis of defined supplier intelligence.
Defining your business-critical goals that are properly planned out will allow you to quickly understand which suppliers are flourishing, and which ones are hitting a dead end.
Let’s talk about some items in the procurement cycle. For example development of long-term relationships, collaboration and innovations are all strategic items of your supply chain however they also cause increased supply risk as the suppliers become more valuable but on the other hand increase the profit impact that a supplier can have.
Leveraging the exploitation of your full purchasing power or targeted pricing negotiations will create a high supplier impact whilst keeping the supply risk low.
Data is your friend, and it will show you which of your suppliers are your friends; not food!
Always think about value creation in partnership with your suppliers by evaluating commercial and societal gains in parallel.
“The concept of shared value resets the boundaries of capitalism. By better connecting companiesʼ success with societal improvement, it opens up many ways to serve new needs, gain efficiency, create differentiation, and expand markets” (Porter & Kramer p. 3).
The procurement process of buying and supplying is a joint effort between you and your suppliers that directly impacts societal and commercial gains within various tiers of the supply chain ecosystems. Therefore, the relationship harnesses a large potential for scaling shared value creation.
The only way to combat any complexity in this relationship is by enhancing hands-on buyer-supplier engagement which will lead to the development of the supplier base; scaling shared value.
Just to give you an idea of companies that want to set an example, Nestle tried to combat their complex procurement processes by redesigning their procurement. They worked intensively with their coffee growers, providing advice on farming practices, guaranteeing bank loans, and helping secure inputs such as plant stock, pesticides, and fertilizers. This effort enabled their supply of good coffee to grow significantly and the shared value was created! This development also ensured active engagement with suppliers, and supplier output and efficiency met Nestle’s organization goals.
Utilize your position to your advantage but not to their disadvantage!
Power dispositions exist between suppliers and buyers, hence your procurement team is fully in control of the power they have.
Suppliers also have a say in who they choose to work with, hence your procurement and sourcing are not the only selective party in a buyer-supplier relationship.
“When the economy is going well, you might be able to dictate the supplier’s goods and services, When times get tough suppliers will typically reevaluate your organization’s needs. To secure suppliers’ your organization should establish collaborative and mutually productive partnerships with them” (cerasis 2015).
Your buying power must be handled responsibly by your teams and they should keep the brand and supplier’s best interest in mind throughout the course of a buyer-supplier relationship. So next time you communicate with a supplier who can equally impact your revenue you may want to consider using an SRM for data driven insights and time saving.
