Suppliers — like employees — are at their best when they’re happy and motivated. Supplier relationship management (SRM) is one method for achieving this objective. With performance at the core of the approach, SRM is particularly handy for certain supplier categories that use quantitative data to measure outcomes. It also offers collaboration and innovation opportunities for buying organizations while providing suppliers with a view of how they are doing.
However, SRM is often poorly executed. Its performance-based nature causes the tool to favor goal tracking over relationship building. It’s common for organizations to drive competition or withhold payments to get the most out of suppliers. And the model tends to be so strict that supplier-led innovation is stifled. Finally, the system doesn’t support two-way feedback, which makes achieving a healthy relationship difficult.
Having just a so-so relationship with a supplier can really backfire in times of crisis. When multiple customers are in a bind, the supplier is likely to prioritize its customers of choice — the ones that offer it mutually beneficial relationships. Of course, in today’s fast-paced market, organizations always need the best from their suppliers — from quick response times to on-time delivery to correct quantities to first access to innovations. Some of these might also be reserved for customers of choice. Therefore, working toward better supplier relationships is critical for success in good times and in bad.
Supply chain organizations need a new and better strategy: supplier experience management. This principle calls for organizations to consider what it’s like for suppliers to interact with them. Despite 78% of chief procurement officers believing they are excellent to work with, more than one-third confess they should offer suppliers better services and support, and more than two-thirds know they need to resolve supplier queries faster, according to a HICX survey.
Having the right cultural mindset and technology framework are essential. Culturally, make a deep commitment to view 100% of the supply base as partners with shared goals and wins. For technology, establish a digital strategy that supports a single source of truth in supplier data. This adds a layer of transparency and makes it easy for the customer and the supplier to see where the pain points are and to work to reduce friction.
Once issues have been identified and addressed, actively preserve the health of the relationship. Make a habit out of stepping into the supplier’s shoes. Do any new or recurring issues need tackling? Is the give-and-take balance conducive to mutual success? Is the value of the supply base being fully recognized?
In addition, suppliers must receive a one-to-one journey that is relevant and streamlined. Rather than applying a blanket approach to all suppliers, different groups need to be treated independently. This is especially important in today’s market. Gone are the days when organizations could rely on only a handful of suppliers. Now, organizations need a diverse supplier base so that they can pivot during times of disruption. It’s essential to have good relationships with all of these suppliers in order for this risk management strategy to pay off.
Finally, to sustain a strong supplier experience, the experience needs to be owned. There is no better champion for this cause than procurement specialists because they have visibility into the supply chain and deep understanding of the supplier landscape.
As uncertainty in the business landscape continues, the supplier experience management movement presents enterprises with a significant opportunity. By embracing this next evolution of supplier management, organizations can shape strong and healthy relationships with all suppliers. This is the way to build true supply chain resilience.