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ASCM Insights

Simple Procurement Strategies for Being Customer of Choice

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In the course of my career, I have always been fascinated by the way that certain procurement professionals are able to engage their supplier partners. Some of our valued suppliers went the extra mile to source critical components when they were in short supply; others prioritized serving us over their larger clients. One thing is clear: Supplier relationships matter.

Recently, my team conducted more than 50 interviews with business leaders in the retail, pharmaceutical, health care, automotive, and technology and hardware industries to validate the business model for our supplier relationship management startup. Specifically, we wanted to learn more about how business decision makers — from those at Fortune 100 companies to those at mid- and early-stage companies — thought that supplier relationships affected their supply chain outcomes. Our research unearthed three fascinating themes, which we believe can lead to the realization of billions of dollars of untapped value.

1. Suppliers and vendors as strategic partners

Companies that successfully manage their supply chains optimize their supplier relationship strategies. The leaders we spoke with advocate for companies to see and treat their suppliers as valuable assets, in the same way they would treat any other valuable resource on their balance sheets.

Organizations that succeed at optimizing their relationships evaluate suppliers holistically. They don't always go for the cheapest supplier, and they certainly aren’t myopic in how they characterize a vendor. In our interviews, Sumbal Rafiq, vice president of engineering at Cadence Design Systems, pointed out that, in today’s market, price absolutely should not be the top priority. Instead, procurement managers need to find suppliers who can, well, supply. Other characteristics to look for include quality, service, industry connections, manufacturing strength, contingency plans and even the supplier’s CEO’s relationship with your CEO.  

Still, many times companies unduly commoditize their own supplier base. In order to avoid this error, implement a common rubric across the enterprise to assess supplier service, quality, delivery, price and other key features to assess short- and long-term potential.

We found that suppliers want this type of a relationship with their customers too. When we met with suppliers, they unanimously wanted to be characterized by factors outside of just price. In fact, the more a supplier was committed to customer satisfaction, the more it wanted to be judged by a holistic rubric. This rubric can be translated to a comprehensive report card that is shared with suppliers to actively address opportunities for improvement or simply to congratulate the supplier on successfully delivering on key elements for a company’s business needs.

2. Disciplined and rigorous application of data

As companies view suppliers as a high-potential asset, it is critical they apply the same data and analytics to supplier relationships as they do to client relationships. As part of this supplier portfolio approach, procurement professionals will want to analyze risk by supplier or supplier groups and, as previously mentioned, use a common framework or report card for assessing suppliers.

Don’t hesitate to dig deeper and find information about your supplier’s suppliers too. Cadence Design Systems often needs to source hardware products with multiple subassemblies. In these cases, it is important to understand your supplier’s relationships with its suppliers. If those supplier relationships are weak, your supplier may not be able to supply the components it needs to complete your order, which can put you in a financial and operational bind. To eliminate these risks, it is important to have a transparent data relationship with your supplier so you can be aware of hiccups in its supply chain. To achieve this, be upfront with your supplier about your concerns and ask your contacts to share their analysis of their own supply chain.

As organizations analyze risk by supplier, they’ll also want to ensure that they have their own healthy contingency process. Gather apples-to-apples information from suppliers you have determined to be contenders for your business. Even if you ultimately select only a single supplier, you must at least have data about other suppliers’ capabilities — such as their specs, planned ship dates, inventory and pricing — to help you mitigate failure if your first choice is unable to deliver. The last thing you would want is to start back at square one if a supplier relationship fails. Relevant data readily available about a contingent supplier should keep things moving and prevent delays. Better yet, for critical components, have at least two suppliers filling your orders and then have backups for both of these to prevent bottlenecks.

3. Memorialization of supplier insights

We’ve touched upon tactics that involve the gathering, digestion and dissemination of data. After all of this effort, it is critical to have a tool or other internal method that allows an organization to memorialize the data. Many of our interviewees shared with us that they lost years and in some cases decades of supplier and procurement data to employee turnover. All too often, procurement professionals keep information parked on a local spreadsheet, in a cell phone or even in a notebook. This information is siloed, frequently lost with turnover and typically not actionable. 

It is critical to save negotiation history, vendor contacts, report cards and supplier project history in a place that is searchable, central and accessible to at least the procurement team. These bits of data can be used to make major decisions and help facilitate richer supplier relationships.

Put in the effort

Building richer supplier relationships takes time and effort. It is important to invest time in connecting with your suppliers, asking questions, and sharing any data and insights you have. Of course, this also means spending time cleaning up your own data, analyzing it and determining what is most beneficial to share with your supplier. Depending on the supplier, becoming their supplier of choice may require small changes in the way your company operates. Embrace these opportunities to grow with your supplier and improve your operations. After all, suppliers are the cornerstone of any supply chain. Without them, companies would not have the materials or components they need to conduct their operations and ultimately serve their customers.

To get started, adopt some or all of the recommendations above. They will undoubtedly deliver better supply chain outcomes, increase supplier value and support bottom-line improvement.

 

About the Author

Tasneem Manjra CEO, Caravan

Tasneem Manjra is CEO of Caravan, which supports one of the world’s first vendor relationship management platforms. She also is a product and marketing executive with nearly 20 years of experience scaling startups and Fortune 500 companies. Manjra may be contacted via caravantech.io.

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