Category Archives: Supplier Relationship Management

Harnessing The Value Of Strategic Suppliers

We should care more about strategic supplier management right now, despite this being the time of COVID, budget cliffs, and “everything is on the table” portfolio reviews.


While procurement’s roots sometimes feel operational, based on the tactical action of turning a requisition into a PO, the trunk of the procurement tree is strategic sourcing. In even moderately mature organisations, we see teams organised around execution of an n-step sourcing process designed to consolidate volume with fewer suppliers and generate cost savings.

For those teams that have advanced to category management, there’s an effort to better understand stakeholder needs and the external market, and to build out a longer-term project plan to drive value beyond savings. Think of those projects as the branches that continue to grow and generate new value. Check out this post for more on cost savings opportunities and this one on post-COVID strategy.

It’s often not until we get past a certain stage of organisational maturity that supplier management really becomes an area of focus. In a seedling organization with a thin trunk, the idea of spending time out on thin branches may feel wasted when there is fresh spend to be sourced.

However, now that most procurement organisations are mature enough to be thinking about value beyond savings – and I believe most are, whether they are recognised for it or not – we need to think about the opportunities hanging off those branches. Where do we want to spend our time? On the thickest, strongest branches that can support our future objectives, with many offshoots for new value, of course.

Stepping away from the tree analogy (sorry if that went too far), what many of us in the function have learned over time is that more value can come from nurturing our existing supplier relationships than from sourcing events with new suppliers. In fact, when growth stagnates and we rely on these partners to see us through hard times, strategic supplier management can become a competitive differentiator. Companies with access to the latest technology, the best support levels, and the freshest ideas, are the ones winning in the modern world.

My first research study on Supplier Relationship Management (SRM) was back in 2006, and these concepts were just coming into vogue. Then I did two more studies, each five years apart, with very little difference in industry maturity.

In that time, I had numerous large organizations come to me saying, “we need to build up an SRM program.” Sometimes the same company, five years after the last attempt had failed and management was back to square one. Here I am again, testing the market with another study, this time focused on the practices and outcomes from our most strategic suppliers.

Why should we care about strategic supplier management right now, in the time of COVID, budget cliffs, and “everything is on the table” portfolio reviews? It’s important for a few reasons:

In times like these, we rely on our partners even more

As much as we want to run out and negotiate cost reductions, we all know many companies would not have made it through the last six months without a strong supply base. Monitoring risk and financial stability is critical right now. Knowing enough about the financials of a key supplier is important when seeking out savings – some are hovering on the brink of collapse, while others are doing just fine. (Talk to me about outsourcers’ margins here).

Innovation will get us out of this

If you thought digital transformation was a buzz phrase, wait until you are the only company handling paper mail from customers in a work from home environment while your peers have digitised their customer interactions. For those behind the tech curve, the last six months were more painful and lit a fire under some management teams to start investing. Who will enable that technology? Unless you have vast internal resources and capabilities, you’ll be leveraging third party partners (i.e., suppliers) to realize that vision. Categories like IT services are exploding with demand, and managing the outcomes of the largest partners will be critical to stay competitive.  

Portfolio reviews should be fact-based

What does that mean in this context? It means that if you are deciding which suppliers to keep and which to phase out, RFP away, or replace, you need to have a quantitative understanding of past performance. Too often, opinions, anecdotes, and emotions are brought to the table to keep or remove a partner. Strong performance management processes mean decisions can be rooted in actual performance, and perceptions can be validated or addressed proactively.

With these current day realities in mind, Everest Group recently launched a Pinnacle Model® study specifically targeted at management of strategic suppliers. Our Pinnacle Model methodology maps capabilities to outcomes and attempts to find the correlation between best practice implementation and results. By plotting organizations against each other, we can clearly see what is working and what is not.

In this study, we endeavor to understand how procurement organizations are handling the following challenges:

  • Lack of clear stratification of the supply base. With most organizations having thousands of suppliers per billion dollars of spend, it’s important to know where to focus your efforts. If the squeaky wheel is getting the grease, it’s easy for category managers to spend too much time chasing issues with less impactful suppliers.
  • Inconsistent or ill-defined internal roles. Many organisations have groups managing suppliers throughout the business as well as SRM efforts from procurement. If roles and responsibilities of various groups are not well defined, there can be overlapping work and missed opportunities. We delve into the objectives and activities of Vendor Management Organizations (VMOs) and other supplier management teams.
  • Too much manual effort due to lack of automation. Service management tools are well developed within IT but may not be broadly used across spend categories. There are now Supplier Performance Management (SPM) tools on the market using AI to tie contracts to service levels. Without proper tools in place – and adoption is still fairly low – tracking performance, monitoring risk, and planning actions across the supply base becomes highly manual. This is, in my experience, a primary reason many SRM initiatives failed. When we rely on spreadsheets and sweat, without a hard ROI, this is the first initiative to drop.
  • Poor outcome measurement. Even if the functional scorecard measures outcomes – and many don’t – are individual category and supplier managers rewarded for work done to manage suppliers? It’s typical to, at best, measure activities such as number of business reviews. Too often, teams are focused on savings to the detriment of value driven by innovation, performance improvements, and risk mitigation, and other stakeholder valued metrics.

Taking all these factors in consideration, are YOU giving your strategic suppliers enough attention? Take our Pinnacle Model study here to find out. I look forward to reviewing the results with you soon.

Is It Fair Game, Or Not OK, To Send Your Supplier A Letter Demanding Cost Cuts?

Is it acceptable – or not – to send your supplier a letter asking for a discount? You would be surprised…


Here at Procurious, we’re always trying to be progressive, challenge the status quo and push for our profession to be more innovative and value-adding. And in good news, we’re starting to see that many in our community feel the same. How do we know? 

In a now-viral post on LinkedIn, our Founder, Tania Seary, posited the question: Is it fair, or not okay, to send your supplier a letter asking for cost cuts? 50,000 views and 60 comments later, we now know this is a hot topic for our community!

It’s something we’ve debated before, but not to this degree. So in times where businesses all over the world are struggling, and there’s more pressure on procurement than ever before to secure discounts and keep organisations moving (or afloat?), is it fair game to demand cost cuts from your suppliers? Here’s a snapshot of what everyone thought … see if you agree. 

‘A stuck in the nineties’ approach

The vast majority of people who commented on our post did agree that this year has been a particularly challenging one for businesses and by association, for procurement. One Senior Procurement Director summed it up when he said: 

‘Procurement leaders need to be looking for cost reductions to support the strained financial positions of their organisations.’ 

Yet should those cost reductions come from a demand letter sent to your supplier? Many people did not think it was okay to send your supplier a letter demanding cost cuts, regardless of the organisation’s circumstances. In the main, procurement professionals thought this approach was akin to a ‘power play’ and was a little arrogant, giving off the attitude that a big organisation is simply ‘a big brand, doing it because they can.’ 

Many procurement professionals recognised that while this tactic may have been appropriate at some other time, it no longer was. In fact, many people made reference to the nineties as a time where this may have been acceptable … but realised that those days were far gone. One person noted: 

‘This practice [the practice of demanding reductions] was used at Volkswagen in the 90s under its famous CPO. Though it showed a lot of success at the time, I believe such a practice belongs to the 90s – a lot has changed since then.’ 

Why doesn’t this approach work? 

Beyond the fact that the practice of sending a letter asking for a discount seemed ‘old-school,’ many professionals noted that for at least a few reasons, this tactic doesn’t actually work. 

The first reason why people thought this wouldn’t work was because essentially, demanding a discount goes against all the good work that procurement usually does in developing meaningful and strategic supplier relationships. Procurement professionals always need to remember that suppliers exist within a delicate business ecosystem, and it’s best to manage this responsibly: 

‘Customers depend on suppliers and vice versa. It’s a big ecosystem, and [we all need to remember that] if you squeeze out small suppliers and competition lessens, costs will inevitably increase.’ 

Beyond this, though, when making demands of suppliers, procurement professionals need to remember their negotiation training, insomuch as: 

‘Blind one-size-fits-all letters are a forced outcome, not a negotiated win-win discussion.’ 

What’s the alternative? 

It seems that within the procurement community, sending letters requesting discounts is absolutely a no-go. But in a time where discounts might, for some companies, be needed more than ever, what is the alternative? 

Being the savvy community that it is, procurement professionals had plenty of better options when it came to negotiating a better price. 

The most popular suggestion was to employ a process to assess cost saving opportunities in partnership with your supplier. This would lead, according to a few different people, to the supplier further negotiating, and then a potential automatic reduction in expenses for both. 

The other option available is to negotiate better terms, a tactic used often, but which should be done through a strategic lens. One person recommended that we all should: 

‘Engage with our suppliers and explain what we need in terms of realistic cost savings and the end goal.’ 

‘You’ve got many tools at your disposal, including SRM and category management, so much so that you need never revert to the dreadful “give me money off or else” letters.’ 

Do you agree? Or would you still send a letter requesting a discount if you needed it? Let us know in the comments below.

Your Supplier Made The News … For The Wrong Reasons. What Does This Mean For You?

What should you do if your supplier ends up in the news? Here’s what effect it could have on you and how you should mitigate the damage.


Let’s face it, 2020 has been the year that changed everything. Anytime you even go near a media website, you’re hit in the face with the latest pandemic disasters. 

Yet the domination of the news with COVID crisis has meant that there’s little room for much else, which, strangely, may have been a blessing in disguise for some of our organisation’s PR departments – and our own supply chain obligations. From whispers that much of the world’s current PPE is currently the product of modern day slavery to suppliers who have been caught out using substandard (and even contaminated) ingredients in food, there’s mounting evidence that while we’ve all been distracted this year, supplier standards may have been slipping. And while that may not have spelled disaster for us just yet, what do we do when the news catches up with them? 

It’s not good for them, and it’s not good for you. Here’s why … and what you should do about it. 

If your supplier makes the news, will your customers blame you? 

If you think that your customers are savvy enough to distance you from the reputation of your suppliers, think again. Ever since the Nike sweatshop scandal rocked organisations worldwide, it’s been clear that if your suppliers take a fall, you will too – and it can be highly damaging, if not deadly, to your reputation going forward. Businesses are just as – if not more – responsible for their suppliers than ever before. 

Concerningly, recent research has also found that even when a supplier mishap has, in essence, nothing to do with your product quality, consumers will still start to believe that your product is inferior. This means that if you were to have something like a COVID outbreak in your factory and it was widely publicized, even if you were able to maintain production, your reputation would still be tainted in your consumer’s eyes. Unfortunately, the reputational damage occurs no matter what the issue is: even if, for example, your supplier was caught polluting or even embezzling, your reputation would be the one to take the hit. 

If this sounds terrifying, it’s because it is. Even worse, conditions are currently ripe for it to happen. With our supply chains becoming more and more global and complex, it’s becoming harder and harder to track the activities of our suppliers, let alone our second and third tier ones. And with the rise of social media, the world is becoming more and more savvy – and any issues are becoming more likely to be exposed. Take, for example, Change.org’s famous campaign against Hersheys, which exposed, through social media, the continued use of child labour in its cocoa production in Africa, and forced the company to quickly change track. 

The conclusion? If your supplier has something to hide and the media finds out first, you need to be prepared to weather the reputational and financial hit. 

If it’s just slightly bad news, does it matter so much? 

As talented and thorough procurement and supply chain professionals, most of us already have an oversight of the worst risks and issues within our supply chain – and thankfully, we’ve mitigated them. So if something small slips through the cracks, will it really matter? 

Unfortunately, yes. Firstly, humans have a predilection towards bad news. Decades of psychological research have shown that we’re all naturally drawn towards bad news, so much so that even if nine out of the ten news stories we read are positive, we’ll always remember – and act on – the negative one. What this means is that we, as supply chain professionals, need to be extra cautious about what mishaps might slip through the cracks. 

Secondly, consumers don’t rationalise the ‘degree’ of bad news. In what psychologists call the ‘spillover effect,’ consumers were found to equally condemn companies for supply chain failures, even if the news wasn’t, technically, that bad. On every occasion, bad news in the supply chain meant that consumers were less willing to buy from the organisation for an extended period of time. 

How do you mitigate the damage? 

By now, you’re probably frantically checking and rechecking all of your suppliers, terrified that something may have gone wrong. And while the response is justified, and we should always aim to have as much insight as possible into our suppliers, know this: you can mitigate the damage done if your suppliers do end up in the news for the wrong reasons. 

And the best way to do this is to simply try to help find a solution, and communicate this to all involved. 

In positive news, research into the spillover effect has found that while damage can be done quickly, it can be undone at just the same speed. Organisations that act quickly to rectify issues, for example, those who instantly clean up environmental spills or put an end to labour issues, can rescue their reputation, if they take responsibility and put mechanisms in place to do better. And while consumer’s buying behaviour may not revert instantly, if you are able to win back the trust of your customers, the damage need not be long term.  

Managing risk and reputation 

Given the complexity of supply chains these days, maintaining accountability of your suppliers has long been an issue, especially when it comes to tier two or three suppliers. Yet just because this task is challenging, it doesn’t mean it isn’t important. Thankfully, if reputational damage does occur, it is possible to reverse it. But do we want to take the risk of finding out? 

Has your supplier ever ended up in the news? What did you do about it? Let us know below.

Do Supplier Panels Deliver On Expectations Or Leave You Wanting More?

Are supplier panels as outdated as your nan’s rug? Do they stifle innovation? Or are they a basic essential for every procurement pro’s toolkit?


Supplier panels have been around forever. They are as old and ubiquitous as the crocheted rug on your nan’s couch. Just because they’re part of the furniture, does it make them a good solution? Are they old fashioned? Or worse, do they limit innovation? Why do we still use panels?

Read on to find out!

What is a supplier panel?

A supplier panel is a list of suppliers who have been pre-approved / vetted and have agreed to the terms and conditions for supply which is generally ratified by the supplier signing a standardised head agreement. Panels are suitable when there is an ongoing need for the goods or service and there is enough volume to support multiple suppliers.

It’s an (approved) little black book of key suppliers that you can call on in your time of need.

Why bother?

The two major benefits.  You can secure a list of verified suppliers who you know can deliver what you need.  The terms and conditions are locked in, which often includes rates. The major benefit to the suppliers is that they become a preferred partner and will get first dibs on any work coming out of your organisation.

Are they still relevant?

Traditionally supplier panels were established to create efficiencies in sourcing. The premise is simple, agree the majority of terms up front and call off what you need when you need it through a slimmer form of contract, like a statement of work or purchase order. Easy right?

Well, not entirely. There are several pitfalls to avoid when it comes to supply panels.

  • The initial process can be exaggerated and onerous. There are supplier panel processes that have taken over a year to run, can you imagine?!
  • Once the panel is established, there can be a lack of work due to a large volume of suppliers being selected or the business not using the panel
  • The energy and enthusiasm of the establishment phase can disappear, stringent scopes in the head agreements can narrow what the panel can be used for, therefore stifling innovation
  • The secondary processes (where the work is actually awarded) can often succumb to  supplier bias / familiarity and not be competitively tested

Supply panels do have a place in procurement; they just need to be established with the right motivation in mind and be right-sized to the requirements.  Don’t dress mutton up as lamb, just call it like it is. If you need a phonebook of suppliers, then do a simple registered suppliers list.

Where to start – plan for success!

Many panels have failed to deliver. Imagine, all that effort up front only for it to never be used! It can damage the reputation of the buyer when suppliers feel jilted at having invested so much into a process, only to “hear crickets” from the buyer. Avoid this situation procurement pro’s!

Follow this useful guide to ensure you only invest your valuable time where it’s actually needed.

Five winning strategies for panelsAction stations!
The first key decision is do you need a panel? Really? Really, really?Let data drive you – not your customer or management team. Make sure you invest the time to test the need.  Back it up with evidence.
What’s the goods / services? What category does it fit into?The type of goods and services should define what type of panel you should establish. Don’t design a Rolls Royce if you only need a mini!   Use Kraljic’s purchasing matrix to help.
What relationship management style do you want and need?If you are buying a bucket load of pens, then you don’t need to follow any fads and produce a 400 page partnership agreement, pens are usually goods / units and tactical procurements.   The relationship management style should drive the type of panel you establish.   Relationship Management Spectrum contained on page 12 of this guide
How are you seen as a buyer?It’s important to know your position in the market to understand your attractiveness and what leveraging power you have.   Power and dependency model
Where does this product / good / service fit in context of the total spend of your organisation?What is the criticality of this service to your business? How dependent are you on this supplier? And what is the value of the contract in comparison to your total spend?   These questions help inform the contract style, the effort you should put in and the relationship style.   Supplier positioning matrix

The work is not complete when the contracts are signed, in fact it has only just begun.

To get the most out of your panel, ensure you:

  • engage regularly with the suppliers
  • Issue pipelines of upcoming work to incentivise them
  • Communicate regularly with your internal users
  • Try to ensure all panel members are utilized either through competitive quotes, rotating contract opportunities

What are your top tips for managing supplier panels?

Suppliers: Who And Where Are Your 1%?

You might think that your most strategic suppliers are the ones you spend the most with. But supply chain crises may shine a light on which suppliers are actually strategic.


Modern-day supply chains are truly global, highly complex and getting longer and longer. 20 years ago, most of a company’s suppliers were probably within a very short radius. Today they could be on the other side of the world.

The reality is that organisations have more difficulty than ever keeping track of their entire supply chain – from Tier 1 all the way down to the smallest supplier organisations. This poses enough challenges for organisations when it comes to issues like environmental performance or modern slavery, let alone with supply chain efficiency or continuity of supply.

With so many suppliers to keep track of, organisations have to make decisions about who their strategic suppliers really are. Traditionally, organisations (and their procurement departments) have fixated on the suppliers with the largest spend volumes. In reality, they should be most concerned about a supplier’s risk profile.

This risk profile is thrown into light at times of crisis in global supply chains. This may come from volcanic eruptions disrupting global flights and travel, or from a global pandemic, such as COVID-19.

What Does the 1% Look Like?

All suppliers are unique, bringing different things to an organisation beyond the goods and services they provide. When assessing which suppliers to manage as ‘strategic’, procurement departments have traditionally focused on their visible suppliers. This usually is defined by spend profile and determined using traditional methods such as the Pareto 80:20 principle.

However, it’s the less visible, hidden suppliers that are often the most strategic. These are the 1%.

This group is made up of the suppliers who are easiest to ignore as they supply something low-cost and apparently trivial to the organisation. In truth, this trivial component may be manufactured from an expensive or rare raw material, be a proprietary item, or come from a supplier who has a monopoly or dominance in the market. Despite this item costing very little, the likelihood is that it is difficult, if not impossible to replace. This makes the potential impact on the supply chain huge should the supplier fail to deliver.

Assessing these suppliers using another procurement favourite, the Kraljic Matrix, they would fall into the ‘non-critical’ or ‘bottleneck’ categories (see below).

Figure 1 – Kraljic Matrix via Forbes.com

However, in many cases, the risk aspect of supply is downplayed or removed entirely, leaving the focus solely on profitability. This is where the issues with your 1% lie.

The Role of Technology

In times of supply chain crises, every supplier – even your ‘transactional’ and ‘bottleneck’ suppliers – need the same attention in order to ensure you’re not missing something. What may have once seemed like an impossible and highly inefficient task has been aided considerably by the advancements in procurement solutions and technology.

Organisations have gone from a reliance on their transactional systems, such as their ERP, and the knowledge and experience of their procurement teams to manage their suppliers. This has left organisations exposed through a lack of data to define and manage strategic suppliers, as well as the loss of knowledge when people leave to join another organisation.

Procurement technology and solutions have developed to the extent that they can help provide the necessary foundation for tracking an entire supply base. This has moved the profession from a position of weakness, to a position of strategic responsibility. In the current climate, people are now actively talking about supply chains and procurement’s role now and in the future.

Therefore, the profession cannot undermine itself by failing to manage its 1% effectively. Even big organisations, with highly developed supply chains can be caught out, as we can see below.

Real World #1 – Keeping Supplies Zipped Up Tight

The fashion industry has taken some very public, very high-profile hits for its supply chain. Organisations have a uniquely complex situation to contend with – finding suppliers who are flexible, reactive and usually low cost on one hand, while on the other ensuring that the highest ethical standards are still achieved.

Suppliers can frequently be small, family-owned and geographically challenging too. However, you might consider an everyday item on many items of clothing a product of a 1% supplier – the zip.

You might overlook it, but a zip is a critical item for manufacturers and designers. The market is dominated by two major suppliers, YKK and SBS, but there are other players there too. However, the majority of these are geographically focused in Asia – specifically Japan and China. Switching supply is unlikely to be easy, so all it takes is a supply chain crisis in this region, say a lack of key raw materials or alloys for production, and supply could be disrupted, without viable alternatives.

Low value compared to other items in the fashion design process, but very high risk.

Real World #2 – Bearing the Risk

Manufacturing is another industry with highly complex and multi-layered supply chains to manage. In automotive manufacturing, supply chains have moved towards the ‘Just-in-Time’ method pioneered by Toyota, making continuity of supply and supplier reliability critical at all times. It’s no use having 99% of the parts available to use, when the 1% is stuck in its factory, two tiers down your supply chain.

As such, a greater focus on quality over price is required, but even this is not fool proof. Fiat Chrysler announced in February that it was halting production at one of its factories in Serbia as it couldn’t get parts from China. Manufacturers who would traditionally hold minimal stock to remain competitive and agile are faced with a situation where that very strategy could pose a huge risk to their organisation.

As the impact of COVID-19 related factories closures around the world continues to grow, even large manufacturers may actually stock out before there’s a chance to re-align. And these items could be as simple as ball bearings for wheels – very low value, but huge risk at this time.

De-risking the 1%

Is there a solution that overworked procurement professionals can take advantage of in the face of a supply chain crisis? When it comes to supplier risk, there are a number of actions that may be taken immediately in order to reduce this.

According to KPMG, these can include setting up a response team to manage the flow of information across key stakeholder groups, reviewing key contracts with customers and suppliers to understand liability in the event of shortages, and conducting a full risk assessment to provide a list of actions to take, which may include shortening supply chains and assessing alternative options.

In the long-term, however, the focus needs to be more on supplier management and the creation of truly ‘strategic’ relationships, built on risk profiles rather than value. This should be done across the entire supply chain and aim to go down through the various Tiers that exist in it. This is defined as ‘Holistic Supplier Management’, a concept explored in more detail by JAGGAER in their latest whitepaper.

JAGGAER’s research uses a similar model to the Kraljic Matrix for supplier positioning, but with the key difference that it focuses on risk and cost to the business (rather than cost of supply) in the event of supplier failure.

Figure 2 – JAGGAER Supplier Positioning Matrix

A concept is all very well but being able to deliver Holistic Supplier Management and manage suppliers on risk and cost requires being able to access data on current performance, the impact of an individual supplier on your organisation, as well as the value that they deliver. This is where technology comes to the aid of procurement and it’s what is offered within the JAGGAER Supplier Management solution.

The solution not only provides the data and analysis that is required by procurement for key decision-making, but also gives a deeper understanding of suppliers to help construct better contracts that deliver greater value to the organisation. By using technology like this, procurement can effectively and efficiently de-risk their supply chains, keeping them better prepared for managing crises when they inevitably hit.

Don’t Get Caught Out

The key message, as every procurement professional knows, is that good communication is key to maintaining a strong and stable supply chain. However, as supply chains grow more and more complex, geographically dispersed and multi-tiered, individual procurement professionals and departments need to make use of all the resources at their disposal.

Holistic Supplier Management can help procurement be better prepared, mitigate risks and start to understand what strategic procurement and strategic suppliers really are. You can find more information on the JAGGAER website, or by downloading their latest whitepaper, ‘How To Achieve Holistic Supplier Management: Orchestrating Supplier Management for Maximum Benefit’.

No matter how safe you think you are, how stable you believe your supply chain is and how strong your links are with your strategic suppliers, there is always an inherent risk within that 1%. By being better prepared and truly understanding your supply chain, you can avoid being caught out in time of crisis.

What You Need To Know About Supplier Payments, Bankruptcies And The Financial Impact Of COVID-19

Considering this macro-economic turmoil, new research shows that most contracts and supplier partnerships held strong during the pandemic


The early days of COVID-19 were financially tumultuous and incredibly stressful. For most business executives, uncertainty ruled the day: Would my contracts hold? Will I get paid on time? And will I have enough funds to pay my team and suppliers?

The issue is exacerbated in the supply chain, where late payments and cancelled contracts in one part of the world create chaos for unrelated businesses located millions of miles away. Of course, these short-term concerns were ultimately trumped by even bigger issues relating to bankruptcies, business closures and unemployment.

Considering this macro-economic turmoil, Procurious’ latest research shows that most contracts and supplier partnerships held strong and stood up to the stress test – which is a major testament to procurement’s response and the strength of existing buyer-supplier relationships.

Our survey of 600-plus procurement and supply chain leaders found that nearly 60% of organisations (58%) are still operating and paying their suppliers per their contract. In fact, 14% of organisations are speeding up payments to suppliers and 6% are providing direct financial support. On the other end of the spectrum, 10% said they are delaying payment to all suppliers, and another 11% said they were delaying payments to non-strategic suppliers. Overall, this is positive news – for buyers, suppliers and the broader economy.

However, the longer the crisis plays out, the more financial strain it will cause. Despite the positive news on payments and contracts, there has already been substantial financial hardships and fallout among suppliers. Our research found that as of May 12, 2020:

  • 6% of organisations said they had a key supplier go out of business
  • 11% said they had multiple key suppliers go out of business
  • 20% said they had a supplier declare fore majeure on contract obligations

Our analysis shows that the companies hit the hardest by COVID-19 were more than 50% likely to have multiple key suppliers go out of business compared to other organisations.

The Economic Forecast: Cloudy with 100% Chance of Unpredictability

Predicting what’s next economically is difficult, and possibly even an exercise in futility. We’ve heard it all from the experts, with projections changing by the day: V-shaped recoveries, U-shaped recoveries… and even the swoosh.

What’s not hard to predict: regardless of how fast the economy recovers, the response from procurement teams will continue to play a critical role in ongoing business continuity and financial resiliency. During the pandemic, 65% of organisations had to source alternative supplies for affected categories. Procurement responded quickly and effectively – with 53% able to lock down new suppliers in less than three weeks, and 18% finding new suppliers in a week’s time.

Post-pandemic, it will be interesting to watch if and how contracts evolve, and the weight put behind different conditions and KPIs. We are already expecting macro supply chain strategy shifts , which will naturally impact sourcing decisions and contract negotiations. Expect to see even more emphasis put behind collaborative supplier relationships, and new investments in predictive analytics and supplier risk monitoring, specifically as it relates to financial viability.

The financial picture remains uncertain at best. How are procurement and supply chain leaders responding? Get the latest in our “Supply Chain Confidence and Recovery” Report.


Navigating The Next Normal With Outsourced Service Providers

What are the decisions to make when planning for the next normal in outsourced services?


As we slowly and cautiously, masks on and two meters apart, think about emerging from the COVID-19 crisis, there is quite a bit of uncertainty about what the world will look like when we step back outside. Knowing there is no cure or vaccine on the near horizon means workplaces will be different. The economic impact of the virus has changed the corporate landscape. What we thought was temporary just may be permanent.

For procurement teams managing outsourced services categories, there are more questions than answers. While we grapple with this uncertainty in our own companies and careers, we must also set expectations with suppliers. It’s a double challenge.

Early in the crisis, the focus in services was enabling a transition to work from home. While that may have been a small speedbump for office roles in developed countries like the US and Australia, certain offshore locations faced additional challenges. Offshore service centres scrambled to enable workers who used fixed desktop computers and worked in clean room environments to ensure data security. MSA waivers were given to service providers, and large firms compromised a bit on standards as we rushed into what appeared to be a short-term fix.

For the most part, providers managed to keep the virtual lights on; while reports varied, most services were stabilised within two weeks. Providers of voice services struggled a bit more, but end-consumers also adapted and accepted an online solution as a sufficient substitute for a call. We dug in and started to think about the next stage – what if the virus infected so many people that a significant percentage of workers were out sick or caring for loved ones? We talked about talent resiliency and resource continuity planning. Save for a few heavily impacted areas (New York City, Mumbai), the lockdown worked, the curve was flattened, and there has been no significant productivity drop (yet). In fact, some buyers and suppliers are claiming productivity is up in this new work from home world, and that’s changing how we view the future.

So, what’s next? At Everest Group we see two paths in play: a scramble to reduce costs and prop up financials in light of the recessionary environment, and a reset to what we call the “next normal” in outsourcing and offshoring. Where your company and your procurement team fall on these paths will vary quite a bit by industry, corporate strategy, and even timing.

The coronacrisis is changing outsourcing and offshoring very quickly


Shoring up cost structures

While some industries were hit exceptionally hard by the crisis (retail, travel, energy), some seem to be weathering the storm with a more limited impact (banking, food and beverage, life sciences), and others are thriving (high tech, home media). Regardless, the drop in consumer spending and high unemployment will have a ripple effect across all markets.

Smart CEOs and their boards have started to buckle down. In a late April 2020 survey, 71% of companies were looking at operational costs, while 62% were addressing external spend. Since then I’ve had contacts in procurement say “I thought our costs were competitive, but my leadership wants more.” Outsourced services spend tends to be a significant cost, so expect to hear that knock on your door if you haven’t already.

Where to start with cost cutting? We shared tips to optimise and modernise delivery in our “5 Cost Levers To Pull Right Now With Your Outsourced Services” webcast on Procurious. That advice still stands, and you can hear more directly from our pricing assurance practice leader in this new session on “Outsourcing Pricing: Key Opportunities to Improve Costs Now”. As we said in both sessions, this is not a time for hard line, tactical negotiation. It’s a time to look at modernising your model and making structural changes that benefit both buyer and service provider. Regardless of where you are in the term of your contract, it’s a time to arm yourself with knowledge of the market and have a serious conversation with providers about how to take costs out of the system.

What are you doing to prepare for the “next normal” (or to return to some sort of business as usual)?

Everest Group 2020

Planning for the next normal

The other path is nearly universal to all organisations: navigating next steps as we struggle to emerge from the crisis. While these decisions stand on their own, they are also deeply intertwined with cost takeout initiatives. Through many conversations with service providers and buyers we have outlined six key areas of focus. No one knows all the answers to these questions yet, but for each component there are targeted questions to ask within your organisation and to your service providers.

Sourcing strategy and provider portfolio

  • Do we need to prune our portfolio to strengthen the core?
  • Shall we consolidate providers or diversify our portfolio?
  • Which activities should be brought in-house?
  • Which new activities could be outsourced?
  • Are there changes in the scope of our agreements we should consider?

Solution design

  • Should we shift more work onshore or offshore?
  • Where are we too geographically concentrated?
  • Which countries would diversify our portfolio?
  • Where do we need multi-location mitigation plans?
  • How will office space restructuring affect service centre output?
  • Will remote work be allowed or encouraged by providers?
  • What new skills are required? Where is retraining needed?

Pricing and cost

  • How should we change our pricing model?
  • Are we paying the right rates?
  • Are we getting enough value?
  • Where can innovation reduce operational costs?

Performance management

  • How do we measure productivity in a remote environment?
  • How do our SLAs and metrics need to change?
  • What new relationship management techniques are required?
  • How do we build in incentives for innovation?

Policy and contracting

  • How do we ensure information security and compliance in the new environment?
  • What policies need to change to support this new strategy?
  • What flexibility needs to be built into contracts?
  • How has liability changed for either party?

Risk management

  • How should our business continuity planning change?
  • Which new data sources do we need to improve monitoring and mitigation planning?
  • How can we enable more agile sourcing decisions?

Decisions to make when planning for the next normal in outsourced services


In our recent discussions, the greatest focus has been on planning for solution design, risk, and governance. Of course, the path for each of these areas will dictate cost models and price. A few significant decisions set the foundation for others and seem particularly tricky. The first is partner strategy. Balancing a multi-country strategy to mitigate risk seems to contradict the desire to bring down costs by concentrating work with fewer providers. While this seems counterintuitive, we’re at a point where everything is on the table. It makes sense to reconsider location models while reassessing the partner portfolio.

Even the concept of pushing for cost reductions feels a bit tacky for some vendor management folks, given these are strategic partners and we’re all weathering the same storm together. That’s why we need to think win-win in modernising delivery and reshaping solutions in a way that benefits both parties. Simply asking for line item discounts for crisis-related shortcomings will not get us there. We often talk about “strengthening the core” – that means letting go of lower-performing providers to focus efforts on high value relationships with strong partners. Keep in mind that most of the top 25 service providers are in a relatively good place financially. While they don’t want to give up margin, they do want to do the right thing for their clients, including structural and digital improvements. They can even enable these initiatives both financially and with a different level of expertise. While these may not be the easy, short term cost take-out tactics we might want, they leave us with a stronger and more cost-efficient portfolio longer term.

I wish I could end this blog post with a very simple recommendation for surviving the crisis and thriving in the next normal, but that just isn’t realistic. There is no one right answer. Of course, it depends on your industry, your current portfolio, and many other factors. You can, as a procurement professional, arm yourself with the tools to facilitate the development of a plan with all stakeholders. Start with the checklist above to make sure you don’t miss critical decisions. Dust off your make/buy model, category strategy, and any previous location analyses. Check in on your rates and contract competitiveness, performance data, and risk profiles. Ask your service providers their proposed plans, see how they mesh with your MSA and policies. Your team has decisions to make, your role is to make sure they are fact-based and all possibilities are on the table. If you’re missing parts of this list or need a sounding board, the Everest Group team is available to help.  

Assistance for services buyers

During the COVID-19 crisis we are offering pro bono assistance to services buyers in the procurement community:

  • A locations data check comparing two global locations on key factors such as size of entry level talent pool, market landscape of providers, financial attractiveness, and operating and business environment risk – consider whether geographic diversification is a smart move.
  • A service provider risk profile covering four key parameters (finance, governance, operations, reputation) –  find out if there are underlying concerns with your provider beyond the immediate crisis.
  • Complimentary price checks on up to three standard roles in three different locations – a pulse check to see if your rates are in line or out of line with the market.
  • A conversation with one of our analysts on any global services related topic – ask questions, test your strategy, or get feedback on what others are doing from our senior team.

The Everest Group team is excited to be working with Procurious, and we look forward to helping members create value for their organisations.

Amy Fong

Vice President – Strategic Outsourcing and Vendor Management
Everest Group

You Ask All Of Your Suppliers For A 5% Discount. What Can Possibly Go Wrong?!

What does best practice supplier relationship management look like? Not like this…


With sales at her company in freefall due to the Covid-19 crisis, the pressure was on for Sally’s* procurement team to reduce costs. In a desperate pitch to do what she could, Sally decided to issue a letter to all suppliers, asking for an overall price reduction of 5%. In exchange, Sally dangled the carrot of ‘to-be-determined’ commitments that the business would fulfill post-Covid. These could include, she thought, accelerated payment terms, additional volumes, or contract extensions.  

What could possibly go wrong, she thought, as she hastily finalised the letters and forwarded them on. Even if most say no, some might say yes and procurement will be lauded as heroes. 

We’ve all been in Sally’s position – or if we haven’t, we certainly can imagine being put in it. When faced with the pressure that a crisis brings, isn’t it always the best idea to at least try to reduce costs by asking for a discount? On the surface, it seems like a logical approach – all you need is for one supplier to agree and your effort pays off. But is it possible that taking such a black-and-white approach can end up costing you more than it saves you? 

Issue 1: Vague notions of success can’t be measured 

In Sally’s situation above, you could argue that ‘success’ looked like one supplier agreeing to discount. But what if they agreed to a 1% discount, would that suffice? Or if they agreed to a 5% discount without complaint, would you ask if you had done more? 

The problem with a strategy of ‘doing something and hoping for the best’ is that there really is no benchmark for what ‘the best’ is and whether it has been achieved. This leads to issues with measuring success internally, and naturally, the same question is always asked: how has procurement added value here? 

Issue 2: No discount is as simple as asking – negotiation will be required 

If achieving a 5% discount was as easy as sending a letter, then procurement would likely be out of a job. Herein lies another problem with Sally’s strategy – it’s unlikely that vendors would respond with a simple ‘yes’ or ‘no,’ leaving her to need to negotiate for whatever she could get. 

And these negotiations would not be simple. Those suppliers who may be inclined to agree would expect more clarity and certainty on any future commitments from the company, which could turn discussions sour, quickly. 

Those on the other end of the spectrum, however, may feel the need to explain why they can’t offer a discount, and may enter the conversation feeling defeated or exposed. 

Whichever way these discussions transpired, they would certainly be time-consuming. In an environment where time is money, you have to ask yourself what the small percentage gains you might secure are really worth. . 

Issue 3: Your supplier is in a crisis, too 

Supplier Management 101 tells us that we should treat our suppliers like we’d like to be treated. But is sending out a generic request the way we’d like to be treated, especially if we’re in crisis too? 

The answer is a resounding and obvious no. Any suppliers that Sally is dealing with would also be deep within this crisis, and may in fact be considering a price increase to save themselves. On top of this, a lack of personalised correspondence could be perceived as insulting to the relationship. The request might net a discount, but it would cost far more than that in future relationship capital. 

If Sally’s plan wouldn’t work, then what would? 

Step 1: Shore up your fundamentals 

In times of crisis, and indeed, in ordinary time procurement must have a clear goal and an execution plan for what is needed for the business operations to continue undisrupted (or minimally impacted) and more importantly, for creatively increasing value to the organisation. 

These are essentially the fundamentals required to maintain a strong supplier base and elevate procurement. From a pure supplier relationship perspective, engaging strategic suppliers to assess their crisis preparedness and ability to continue to serve the organisation is the first step. 

Step 2: Creatively and empathetically engage your suppliers

Once you’ve got your fundamentals organised, you need to engage your suppliers in strategic conversations about how to creatively increase efficiency, optimize processes quickly, reduce waste (of time, resources and costs), and where possible, decrease costs and deliver additional value. 

Beyond this, you also need to discuss with them what value is added,  how much, for how long, what are the contingencies. This will help you establish a win-win approach with short and long term impact. 

The idea is that a continuation of a growing partnership will drive the right behaviours, not just during this crisis but in the future. Supplier-driven innovation should always be a top priority to both procurement and the entire organisation. 

After you’ve finished your initial discussions (and note, these type of discussions should always be ongoing) use learnings from them across all other supplier segments. The behavior you want to drive here is ensuring suppliers not only want to continue doing business with you but are eager to strategize with each other during the crisis.

Going back to Sally’s situation, this approach works for a number of reasons. Even if suppliers couldn’t immediately offer reductions they will be clear on expectations and will be committed to perform at a high level and produce ideas for the company, while increasing supplier engagement and value as a byproduct. Suppliers will be willing to explore solutions to avoid disruption, which is exactly what the business needs. In addition to this, the effort expended is targeted so no time will be wasted and in fact, the time spent may even produce market intelligence that can be brought back to the business to refine their own mitigation strategies. 

Also, finally and perhaps most importantly, the role of the procurement will be elevated to a truly strategic function (with lasting impact) to the organisation.

Continue supplier relationship best practice? 

For procurement professionals that realised early that Sally’s approach wouldn’t work, none of the advice here on how to rectify it should come as surprise: it is, quite simply, supplier relationship best practice to treat your suppliers in this way. 

In fact, for organisations that already implement supplier relationship best practice, they may not even need to take these steps – throughout this crisis, their suppliers may already be knocking on their door with creative mitigation strategies. They may even be using this crisis to bring the relationship to the next level. 

But for those who are yet to establish supplier management best practice, this example provides the perfect reason why you need to. Supplier relationships are a key enabler to business success, and when they are strong, the risk of business disruption is greatly reduced. 

What have you done to strengthen supplier relationships throughout this crisis? Let us know in the comments below. 

5 Cost Levers To Pull Right Now With Your Outsourced Services

At times of enormous disruption to global supply chains, it’s easy for procurement only to think about direct spend. But it’s just as critical to ensure value is delivered in outsourced service contracts.


“Today’s health and economic crisis, as a result of coronavirus, means that typical approaches to cost management will need careful consideration as business’ key focus has to be staying in business” Lorna Brown, Former CPO, Global Financial Services

We live in an ever-changing world, where what had been predicted as a prosperous year for a business could turn into a fight for survival thanks to something that it has no control over. As the world pulls together to combat COVID-19, businesses face the challenge of reduced revenue forcing them to tighten their belts and search for further savings.

In times of crisis, most organisations will fall into the same pattern and focus their cost reduction effort on direct spend categories. After all, your first thought in a crisis or risk management situation is more likely to be ensuring the stability of your production supply chain, rather than identifying the cost savings you can secure from the organisations delivering your HR or IT Support services.

But why is this the case? Organisations may consider their direct categories as more business critical, or believe that they can release greater value from them with closer management of their global supply chain.  For an increasing number of organisations, however, outsourced services form the core of their business. And by focusing on the right cost levers, review of these service contracts  could deliver just as much in terms of savings as direct spend.

Pulling on the Cost Levers

Structuring a contract for the procurement of services is can appear to be a different beast to one for the procurement of goods. Many procurement professionals will go their entire careers without creating a single RFQ, tender or contract for an outsourced service.

The reality is, however, that there isn’t a great deal of difference beyond what is delivered by the supplier. Procurement still needs to know that suppliers are able to meet an organisation’s requirements. A robust contract needs to be put in place to ensure that services are delivered efficiently and effectively.

And when it comes to cost levers, there’s no need to start with a blank sheet of paper when proven procurement strategies will still fit the bill. Everest Group, a consulting and research company with an established history in the outsourced services space, has conducted extensive research on this topic. Amy Fong, Vice President in Everest Group’s strategic outsourcing and vendor management practice, is clear that this research has highlighted five key cost levers for procurement to use right away when it comes to their outsourced services: “we see a lot of common themes where buyers can do a better job.”

1. Pay the Right Price

Former CPO in Global Financial Services, Lorna Brown, believes that organisations need to be “a bit curious and engage with the supplier to understand how they are delivering the services.” This will allow for a greater understanding of how the service is built up, but also what is driving the costs, and consequently the price in the market.

Services in high demand, but with a lower supply where there are fewer people capable of providing a quality service will cost organisations a premium.  In the  IT services market, this premium has been charged for everything from basic digital skills all the way up to large-scale, highly complex data analytics over the years. The availability of labour with these skills is the key cost driver.  With each ebb in the requirement for these skills, rates for outsourced services will come down.

Being clear about how the cost of labour has influenced your price is a great way to pull this particular cost lever.

2. Understanding Total Cost

Procurement’s consideration of cost needs to go beyond the ticket price that is paid. There are other factors to take into account such as quality of support and adherence to Service Level Agreements (SLAs). It’s all about Total Cost of Ownership.

Got a great price for your basic service agreement? Great! But did you discuss and agree a price for ongoing support? Or agree how many people are assigned to your contract? Or how much you are paying for secure data storage? It’s critical to understand the whole picture beyond the basic price.

If you are just looking to drive savings on the bottom line price by whittling down your supplier’s margin, they will look to move or hide costs elsewhere. No matter how good a deal you think you have at the outset, if you aren’t tracking TCO you’re probably losing any savings you may have initially achieved and leaving this cost lever un-pulled.

3. Find the Right Deal Structure

One of the key decisions an organisation will have to make regarding its services is which model or structure their deal is going to take. In outsourcing of services, a fully Managed Service can be very attractive to an organisation with day-to-day operation provided by an external specialist, with the business free to focus time and effort elsewhere.  

However, organisations using a Managed Service have to accept the fact that they will hand over a level of control, which in turn raises their risk.  Procurement still needs to understand what’s happening throughout the outsourced service provider’s supply chain.

Organisations may also choose to use on-demand outsourcing, where they pay for support based on the number of times it is used, or a ‘Break/Fix’ service where it pays for just the work that is done. There is no right or wrong answer as this will differ from organisation to organisation. What’s important is picking the right option.

4. Innovation

When it comes to cost savings, innovation is a key part of the puzzle that cannot be missed. And when it comes to pulling the innovation cost lever for outsourcing services, the focus should be on “Big I” Innovation (i.e. digital transformation), rather than “Little i” innovation (i.e. continuous improvement activities).

As with the other cost levers we have shown, innovation that is being looked at in other areas of the business can just as easily be applied to outsourcing too. Consider all the current industry favourites such as Robotic Process Automation (RPA), AI and Machine Learning – these can have an impact on costs.

However, despite the fact that there is increasing importance placed on innovation in outsourcing, many organisations are still missing the mark. There’s a lot that can be achieved from deploying this cost lever in the right way at the right time.

5. Financial Engineering

Cost lever number 5 takes the modernisation and digital transformation found in the innovation space one step further: when it comes to the concept of innovation not just about the business scoping out activities for different areas of its categories, but more about how it modernises the entire solution.

It’s important to use financial engineering to have the impact on profit that is required as the initial outlay or investment across the board will be significantly higher than a service that doesn’t include these types of outcomes.  Organisations may choose to look at alternative sources of finance, assess potential Joint Ventures or Managed Services with flexible margins (in line with traditional Financial Engineering). Using this cost lever is about getting creative and perhaps walking the path less travelled for success.

Pull the Levers with Care

The 5 cost levers for outsourced services represent an individual and collective strategy for cost savings in the outsourced services space.  Pulling one alone would be effective, and using all of them in some way could deliver also deliver great results.

To find out more about these cost levers, and to access expert advice on how to use them, register for the Everest Group sponsored webinar 5 cost levers to pull right now with your outsourced services, to be broadcast on Thursday May 7th 2020 at 2:30pm GMT. To find out all the information you need, including how to sign up, visit the Procurious website or click here.

Supplier Motivation, A Key Component of Supplier Management

Motivate your suppliers rather than merely manage them


As we have already seen in a former blog, enterprises often fail at maximizing the value of collaborating with smaller companies. Convinced that their sizes and brands will attract suppliers anyway, they entrench themselves behind the gates of rigid procurement processes. They miss the huge opportunity of co-innovating with these businesses, especially startups, by failing to take a differentiated approach. This multi-channel strategy tailored to suppliers’ capabilities is what differentiates best-in-class from a peer group as a report from The Hackett Group reveals.

On the other hand, let us not forget a wise piece of advice from Procurement Management expert, Natacha Trehan, in her keynote last year at Ivalua NOW –  every customer wants to collaborate with the best suppliers, which means that, eventually, the supplier chooses who they want to work with. This translates into a powerful lesson learned for Procurement: motivate your suppliers rather than merely manage them.

This is a method medium-size companies have already integrated in their supplier innovation strategy.

I was lucky to attend an inspirational presentation on the subject by Virginie Favray, Urgo Healthcare’s CPO, at a Procurement roundtable event, before the lockdown. Urgo is a leading international healthcare group which specializes in advanced wound care and self-care. Their €640m turnover qualifies them as a medium-size company, especially if you compare them to pharmaceutical giant Sanofi with its €35b revenue.

Even taking a cautious approach to comparing figures, I cannot help but notice that Urgo’s revenue growth rate is more than double some of its larger peers. Is a strong supplier innovation strategy the key to additional growth points? It certainly contributes and we will dig into Urgo’s methodology.

This methodology was new to most Procurement peers attending due to both its philosophy and the way it translated into concrete actions.

When it comes to the philosophy, Urgo decided to play a different tune compared to its larger peers. They cannot leverage the massive spend volumes that the pharmaceutical giants can. Additionally, if their brand awareness is strong in France, it has limited traction on international markets. That is why, the group fully plays the trust card.

How do you build such an asset and how does it turn into better innovation?

It all starts with building up a transparent relationship. What are they transparent about? They share Urgo’s business strategy, how it drives Procurement objectives and finally how strategic suppliers are valuable stakeholders of it. As I have often highlighted, there is a prerequisite for that to happen: Procurement practitioners must enlarge their focus to embrace the full strategy of their company, which often they do not. At Urgo, they do.

Establishing trust in a relationship is a safe place to start. However, it will not last long if no long-term relationship management is applied. This is something Urgo has perfectly understood. As most Procurement organizations do, they evaluate their suppliers. Nevertheless, they do not satisfy themselves with this one-way view. In fact, they ask suppliers to assess Procurement too. Due to this 360-degree assessment, their relationship trust index reaches high scores. The postulate here is that detecting and solving inevitable business frictions on a regular basis allows a healthier relationship on the long run.

In order to turn this healthy relationship into a thriving partnership, they have developed a supplier award program which recognizes suppliers’ efforts. In the HR realm, expressing gratitude is widely acknowledged as a powerful means to foster motivation. Why would it be different for suppliers? Each year, Urgo acknowledges three suppliers for direct and for indirect spend. They are rewarded with a “best supplier of the year” certificate, some Urgo products and a personal note from the CPO.

Once such a favorable environment has been set up, initiatives aiming at capturing co-innovation with suppliers can be implemented. Urgo employs a wide range of tools to do so.

First, they have a suggestion box concept for suppliers to submit. This is a method that is proving more and more efficient to boost innovation according to procurement consulting group AgileBuyer. On Urgo’s suggestion form, suppliers may recommend new products or improvements to existing ones. They must be as specific as possible about their idea (investment cost, timeline, potential savings…). If the idea generates savings, these are shared between Urgo and the supplier. Buyers receive about a thousand forms per year and commit themselves to responding in a reasonable period of time.

Second, every two years they organize a supplier-buyer speed dating event, focused on indirect spend. As a result of these encounters based on a specific theme, two or three new processes are designed. For example, last year’s topic was about digital marketing. They created a commercial through a crowdsourcing process instead of using traditional communication agencies. Indeed, some preparation is necessary before this innovation event: fifty new suppliers were sourced and only ten were selected for speed dating.

Third, they have an annual two-day innovation workshop which mixes stakeholders from Urgo as well as direct suppliers and even tier 2 and tier 3 suppliers. These workshops focus on specific topics that are prepared ahead to get the most of this workshop. Last year, sixty concepts emerged from the discussions which eventually shortlisted into three projects.

Finally, buyers also spend time on their strategic suppliers’ premises. This is not to discuss day to day operations or business or pain points but rather serve as a vehicle to discuss long term strategy, find synergies in situ and foster innovation ideas.

Obviously, this is not an approach you can replicate with every supplier you work with. This is why, Urgo applies a supplier attractivity matrix which identifies the partnerships they really want to nurture. Only strategic suppliers are part of this matrix. A supplier becomes strategic when it ranks high in a wide range of criteria: margin level, market share, supply chain criticality, procurement annual review score, ethics and innovation rating. Suppliers are then positioned against a second axis: the maturity of the relationship with Urgo. Combining these two filters brings to focus the suppliers that are core to the business and which innovation proposals can truly be beneficial.

All these are smart and actionable ideas which can easily be replicated into any large enterprise. Let’s get started!