Tag Archives: supplier relationship management

How To Ask Suppliers For Discounts The Right Way

Before you even think of demanding a discount from your suppliers, try these avenues first – they’re far less treacherous routes


An essential part of procurement’s job, and something that will always be required of procurement, is to negotiate the best supplier deals for the business. And as much as we talk about strategic procurement (and this is really important), procurement’s success will always be measured by cost savings. Those savings are not the only way our success is measured, of course, but they are one of our raison d’etres.

So we know we need to save money for the business, but what is far from settled is how. Is a demand letter appropriate, especially in this year’s challenging business environment? Or should we use a more relationship-based approach? We’ve tackled the topic from a number of angles this year, so here is the very best advice from industry influencers and experts.  

What not to do

While the exact mechanisms of what to do when asking for supplier discounts is up for debate, there is certainly some consensus on what not  to do. When a post from Procurious Founder Tania Seary asking whether it was ok to send your supplier a demand letter asking for a discount went viral earlier this year, the procurement community seemed to be united on the fact that this wasn’t ok. 

In a nutshell, many people thought that this approach was a little arrogant, and that it gave the impression that you were a ‘big brand, doing it just because you can.’ And while this approach may have been acceptable 20 or 30 years ago, now it most certainly is not. 

More than that, though, many people didn’t like the idea of generic demand letters simply because they didn’t work. Discounts depended on good relationships, and demand letters did not cultivate those, as one procurement professional noted: 

“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.” 

Keen to hear what everyone else said? Here’s the original article. 

Developing strategic supplier relationships

When it comes to asking for discounts, the consensus seemed to be that doing so through establishing strategic supplier relationships was the best way to succeed. But how exactly do you do that?  

Joe Lazzerini, Manager at Corcentric, enlightened us on how we can establish these successful relationships, and there are many more avenues to doing so than you might think. 

According to Joe, many of us take the attitude of ‘if it’s not broke, don’t fix it.’ But when it comes to relationships, we shouldn’t be taking this attitude, but instead always be looking for the opportunity to improve relationships, streamline processes, and change cost models. In a nutshell, we need to challenge the status quo. 

This starts, he believes, with asking your suppliers the simple question of: ‘What can we be doing better?’ 

Beyond this, we should aim to improve on the following with all of our suppliers: 

  • Trust and loyalty (treat your suppliers as much more than just vendors) 
  • Technology and automation 
  • Adherence to payment terms
  • Communication plans
  • Creation of a dedicated Supplier Relationship Manager 
  • Internal alignment between Procurement and Supply Chain category leaders

Continually improving the above will drastically improve our relationships with our suppliers, which will, in turn, enable us to ask for further discounts. 

Potential areas for discounting

If great relationships enable us to ask for a discount, should we then just ask for one? Not quite, says Corcentric’s Joe Lazzerini. In fact, there’s so much more to discounting than simply hammering down the unit price. 

When asking for a discount, Joe recommends that you do as much preparation as possible, including considering how you can make discounting a win-win, and remembering that you need to collaborate, compromise, and at all times work with a partnership in mind. Here are 9 talking points to begin your discussion about cost optimisation: 

  • Contract length 
  • Reduced future cost increases with caps
  • Rebates 
  • Volume thresholds 
  • Delivery costs 
  • Payment terms
  • Ancillary charges 
  • Better reporting, more transparency, communication plans, etc. 

You can read more of Joe’s game-changing advice here. 

Relationships are always the right way 

This year, more than every other year before it, we’ve learnt that relationships, partnerships and people form the basis of success in just about everything we do. Asking for a discount is no different: if you first focus on developing a strong strategic relationship, everything after that will be more successful. 

How To Say Goodbye To Negative And Contentious Supplier Negotiations

Negative and contentious supplier negotiations ruining everything for you? Here’s how to negotiate in a positive and effective manner.


We’ve all been privy to supplier negotiations that have gone awry. The supplier begins to look uncomfortable. They avoid eye contact. Perhaps they even break out in a sweat, despite it being a sub-zero day. Alternatively, they get angry or perhaps they don’t say much at all, but then your relationship takes a nosedive and never recovers. They become the bane of your existence and you start wondering how the best deal could have turned into the very worst. 

No one likes negative and contentious supplier negotiations, and they often are the beginning of a poor partnership (not to mention relationship!). But are they necessary? Corcentric certainly thinks they may not be, and in fact, saying goodbye to this type of negotiation is one of the big supply chain and procurement ideas we think will change everything in 2021. But how do you do it? 

How to build trust in negotiations

The key to avoiding negative and contentious negotiations, says Corcentric, is to use trust-based and positive reinforcement based negotiations tactics. In order to build trust in negotiations, experts recommend six tactics: 

  1. Speak the supplier’s language

Supplier relationships are all about fostering an environment that feels like a win-win, and an important way to establish this in a negotiation is to speak the supplier’s language. What this essentially means is that you go beyond the facts of what you are being told and profile your supplier by trying to understand the perspectives, concerns, cultural and business implications, and even the less-than-obvious messages that a supplier might be giving you. 

In a nutshell, you listen a lot, and take the time to understand your supplier’s history, current business position, concerns, and even a bit about the person you are dealing with personally. A lot of this can also be industry-specific, and when learning about a supplier you also need to take into consideration industry norms and conventions, as well as industry terminology. Details that may seem small to you, include a unit of measurement (for example, a hectolitre), may be extremely significant to a supplier, so you need to be able to speak their language – literally and metaphorically. Doing so will help foster an emotional connection, and send the message that you’re committed to the supplier and the outcome, and will help build trust. 

  1. Manage your reputation

As many of us in the global supply chain and procurement community know, the world is certainly not as big as it seems. For this reason, your supplier’s reputation isn’t the only one you need to think about. 

Suppliers talk, of course, and what they say about you counts. So if you have a reputation for going hard on cost and squeezing out supplier profit, you had better believe that your supplier may already know this. Similarly, if you haven’t kept your word in a particular situation, or done something else detrimental that damaged your integrity, that supplier will have likely discovered this. In summary, if you’re known for any of these seven supplier negotiation fails, your reputation may be in trouble.

As such, always be careful of your reputation in the market. 

  1. Create an environment of mutual dependence

Regardless of your spend, if you’re bringing a new supplier onboard, it’s clear they will depend on you to some degree. And from your perspective, that dependence is power. But have you ever thought about it from the other perspective, insomuch as you need that particular supplier? 

Dependence is an uncomfortable psychological prospect, but research shows that its mutual existence does increase trust in a relationship. For this reason, try to establish the idea of mutual dependence by highlighting to your supplier the benefits of working with you and the positive mutual outcomes you’ll work towards. 

There’s significant evidence that procurement has already increased trust with the C-suite this year, so now it’s time for us to do the same things with our suppliers. 

  1. Make one-sided concessions

It’s something that many of us may feel uncomfortable with, but it is essential in gaining trust, and that is: make concessions. And not just any concessions: one-sided concessions. 

In negotiations, it’s difficult to not think that you, as the buying organisation, should have the upper hand. But in reality, what you are building is a long-term relationship in which you should be less focused on tit-for-tat concessions, and more on good outcomes. Before you concede, ensure that your organisation doesn’t suffer as a result, but you’d be amazed at what a single concession can do for trust in negotiations (and beyond). 

  1. Point out your concessions

Cringing at the idea of conceding? You might not like this news, but it’s a necessary evil. If you’re going to go to the trouble of conceding, you need to ensure that you deliberately point out what you have done. 

Why? Because pointing out your concession, including exactly how much you have given away and what that sacrifice will mean for your business (and hopefully, not just for your ego), shows that you are serious about looking after your supplier. Fortunately, doing this should also trigger their desire to look after you, further engendering trust. 

  1. Explain your reasoning 

Unfortunately, humans are simply not that trusting, especially in a situation which can be perceived as conflict, like a negotiation. For this reason, your supplier may assume the worst of you (and you the worst of them), before conversations have even begun. 

That’s why, when negotiating, it’s important to explain your reasoning for any demands you make. For example, say you require a certain percentage discount on volume orders. Instead of simply asking for this, explain that you need it to make your manufacturing feasible. Understanding your drivers will help give your supplier better insights into your business and how they might be able to help you. 
There is another, all-encompassing reason that we all need to avoid negative supplier negotiations. Discover what it is here, as well as many other game-changing ideas, in our compelling whitepaper 100 Big Ideas for 2021.

5 Best Practices for Raw Material Procurement

How do you leverage consolidated raw materials demand for best practice procurement? Here are five industry best practices.

This article was originally published on Supply Dynamics on October 22, 2020 and is republished here with permission of the author and website.

It takes tons – both literally and figuratively – of raw material to manufacture an aircraft. From fasteners to injected molded plastics and countless variations of metals, electronic components, and resins are needed to produce the millions of individual parts required to deliver a completed aircraft on-time and on budget. Case in point: An average commercial aircraft contains approximately 387 tons of metal alone!

If you’re an Original Equipment Manufacturer (OEM) in the aerospace industry such as Boeing or Airbus, raw material procurement and sourcing for countless parts can result in chaos. And this problem isn’t unique to aerospace. It persists across industries including oil & gas, automotive, industrial equipment, among others.

At Supply Dynamics, we estimate that our customers outsource on average 50-80% of product parts and components. This trend has resulted in complex, highly fragmented supply chains, reducing transparency for the OEMs, while increasing dependence upon contract manufacturers and their ability to manage their own complex supply networks.

sheet_metal_roll_sm.jpg

Raw Material Procurement

How many metals, plastics, electronics and fastener sources do your part suppliers purchase from? Five or 500? As long as you get your parts on time, does it even matter? Of course, it does.

As a procurement leader, you understand there are efficiencies in streamlining raw material procurement at all levels of the supply chain. What if OEMs could orchestrate the joint-negotiation and forecasting of such materials to eliminate waste and improve efficiency through a systemic process?

By value-stream mapping actual raw materials used in part production and linking that to the demand for those parts, Supply Dynamics can help you forecast consolidated material requirements and provide a dynamic snapshot of your sourcing strengths and vulnerabilities. Sharing this information with contract manufacturers and raw material sources then enables transformational collaboration.

After more than a decade of helping our OEM customers obtain and leverage this kind of information, we’ve learned a few things. In order to successfully leverage consolidated material demand across a supply chain, we recommend OEMs follow these procurement best practices:

1) Calculate and share detailed raw material demand forecasts at regular intervals with service centers and mills

By sharing what we call a “material demand profile” with the sources of the raw material, OEMs can reduce risk for their raw material suppliers enabling them to operate more responsively, while increasing the OEMs ability to control pricing and ensure availability. Sharing a top level forecast only, with no definition of order form preferences (i.e. sheet vs coil or bar vs plate), discrete sizes and specifications, is virtually useless to a Distributor.

With such a forecast, Service Centers avoid speculation regarding which materials will be purchased or to what sizes and specifications and which site or contract manufacturers in the supply chain will purchase it. Knowing this in advance ensures service centers can stock the appropriate inventory quantities of the correct materials at the right time. This also serves to reduce lead-times. Some of our customers see their lead time reduced by 50% or more.

2) Make sure that shared forecasts contain a level of detail that reduces risk at the raw material source

If you ask a mill, distributor or standard catalog part manufacturer what really drives material prices (whether you’re talking about metals, plastics, or printed circuit board components) the answer might surprise you. While the quantity of material purchased and number of releases over time is a factor, other factors may have equal or greater impact on price, including

  • What is the accuracy of the forecast?
  • Are there limited life considerations associated with the material?
  • Are there unique packaging requirements?
  • Are there processing requirements or unique specifications associated with the order?
  • Can the customer specify quantities required by specific user, over specific time frames, and by unique sizes and specifications?

This kind of information is the proverbial “Holy Grail” for a mill or distributor because it allows them to service your business more efficiently, reducing the risk of obsolescence and allowing them in some cases to level load production and better manage inventory levels over time.

3) Establish “directed-buy” or “right-to-buy” contracts with Mills and/or Distributors

Ideally, an OEM establishes standard raw material purchasing agreements with Mills and Distributors and allows its Contract Manufacturers to purchase off those agreements. Transparency is essential to ensure that such agreements are followed.

On the flip side, if a raw material supplier cannot fulfill orders placed down the supply chain, the OEM is aware of the situation in advance and can properly address any potential delays.

An aggregation program gives the OEM significant leverage over raw material suppliers and contract manufacturers. It goes without saying, the OEM could switch suppliers should suppliers fail to deliver the promised level of service. However, suppliers are also incentivized to participate in these programs because their costs are reduced through better planning – a win-win throughout the supply chain.

4) Enforce the agreed purchasing behavior

Aggregation programs provide considerable benefits to the OEMs, contract manufacturers, and to the raw material suppliers. However, reaping the benefits depends upon all parties within the supply chain doing what they have agreed to do and properly utilizing and executing upon the agreed “terms of engagement.”

If contract manufacturers fail to purchase forecasted materials from the agreed upon source, the value of the demand forecast is questioned and the service centers are left holding the proverbial bag when it comes to excess inventory. For this reason, it is imperative that the OEM have a robust means of monitoring and enforcing agreed upon terms of engagement (across Contract Manufacturers, Distributors and Mills.)

5) Provide a means to validate material sizes, forms and specifications while keeping bills-of material up-to-date 

No two Contract Manufacturers make a part the same way and therefore no two bills of material (even for the same part) are ever the same. For this reason, the OEM must provide a simple, easy way for Contract Manufacturers to update or “validate” bills of material.

For example: Say an OEM needs 1,600 pieces of a specific aluminum part in the coming year. The blueprint suggests that the optimal way to manufacture the part is to machined it out of an 8.0” long piece of aluminum grade 6061, 2.0” diameter round bar. However, the minute the OEM outsources that part to an external contract manufacturers, it loses visibility into the actual form and size of material actually purchased. For instance, one contract manufacturer may choose to purchase material in different form or size than another (2.25” vs. 2.0” for example).

In addition, any sustainable program will require a thoughtful and systematic way of accommodating changes in the supply chain such as:

  • New Part Introductions
  • Engineering changes to existing parts
  • Transitions of parts from on Contract manufacturer to another

So how does it work?

We understand – this sounds like an Industry 4.0 unicorn, right? Likely, you’ve been managing your raw material procurement data with a team of folks sharing a macro-crazy Excel spreadsheet. This is where Supply Dynamics can help. Our Part Attribute Characterization service and SDX multi enterprise platform enables OEMs to captures contract manufacturers’ raw material data for each part without asking the part supplier to do all the heavy lifting.

In this way, OEMs can accurately forecast raw material requirements and manage the timely purchase and supply of material requirements across the enterprise.. All of this allows for better pricing and contract terms, shorter lead-times, and higher levels of performance from the supply chain.

For too long OEMs, contract manufacturers, and raw material suppliers have relied on historical data or guesswork to forecast future raw material demand. By better understanding the raw materials used in its products and sharing information with the sources of those materials OEMs can achieve step-change improvements in their cost of doing business, and actively monitor purchases of program-related materials. In addition, they can improve overall supply chain efficiency and ultimately improve on-time delivery of more profitable products.

What Will The 4 Hot Topics In Procurement Be In 2030?

Look at your latest supplier contract. Does it specifically mention Zoom catch-ups? If not, why not? Sally Guyer from World Commerce & Contracting talks with Procurious about getting the most from suppliers and technology.

Have a look at your latest supplier contract. Does it specifically mention communication like regular Zoom catch-ups or phone calls? If not, you’re missing a trick.

Procurious Founder Tania Seary recently spoke with Sally Guyer, Global CEO of World Commerce & Contracting on getting the most out of supplier relationships and predictions about the future of procurement. 



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It’s been a wild year, but disruption isn’t unique to 2020. 

“I think it’s really interesting because there have been numerous supply chain upheavals inflicted by disaster in the last decade,” Sally says.

“You’ve got things like the volcanic eruption in Iceland, Japanese earthquake and tsunami, the Thailand floods, numerous hurricanes, not to mention the global financial crisis which also needs to sit on that list; yet we don’t seem to have learned very much,” Sally explains. 

“Most companies still found themselves totally unprepared for the COVID-19 pandemic.”

After this crisis is over, companies will fall into two categories: those that don’t do anything and hope that a disruption like this never happens again, and those that map their supply networks.

Supply networks

You should know how your suppliers (and your suppliers’ suppliers) fit together, which is why mapping out your network is so useful.

Companies who already made the effort to document their network acted quickly when the pandemic spread. Other companies were floundering and reactive. 

“We know from our research that many organisations typically don’t see beyond the first tier of suppliers, or possibly tier two,” Sally says.

“If we ever doubted the importance of visibility, the pandemic has provided a dramatic example of why it’s absolutely essential to have insight into sources of supply.”

Sally is seeing leading organisations require suppliers to participate in supply chain mapping efforts as part of their contract.

And it serves an important part of rebuilding.

“[We’re] moving away from the linear and much more to a recognition that supply networks’ supply ecosystems are a huge number of organisations all interacting with one another where there needs to be fluidity amongst them all. 

“And that’s essential to accelerate and support recovery.”

Sustainable cashmere

Companies are also investing more heavily in technology to help them gain end-to-end visibility.

Blockchain technology is particularly noteworthy.

Sally gives the example of tracing Mongolian cashmere production. The country is famous for its luxurious fibres – producing nearly a fifth of the world’s raw cashmere

And even though cashmere is considered natural and sustainable, soaring consumer demand is fueling overgrazing and damaging the land. 

So Toronto-based Convergence.tech and the UN teamed up to create an app for Mongolian farmers, backed by blockchain technology. 

Now the UN is able to interact with over 70 different herders and eight cooperatives through a simple app.

Farmers use the Android app to register and tag their cashmere. Then their location is pinned on a map to allow for end-to-end tracking. The UN works with the farmers and other producers along the supply chain to improve sustainability.

“Farmers are willing to have their goods marked in return for training on better practises, and then open markets pay fair prices for truly sustainable and high-quality cashmere,” Sally explains.

“Everybody benefits. Everybody wins.”

Better contracts, better relationships

Another way technology is transforming the supplier/client relationship is through communication.

Sally advises all clients to include communication obligations in supplier contracts.  

“It comes down to simple things like if we want to do video conferencing does your organisation support Zoom or not, because if I do and you don’t then [that’s an issue],” Sally says.

It’s not rocket science. All good relationships hinge on good communication, says Sally.

“Fundamentally, partnerships are founded on robust and clear communication, and you know I always talk about professional relationships in the same context as I talk about personal relationships,” Sally says.

“If you don’t have clear communication with your friends, with your partner, with whomever is around you, then you are not going to have a very successful relationship.”

While you can’t provide for every eventuality in your contracts, you need a robust framework to support the relationship which means communication needs to be at the top of the agenda.

Predicting the future

The year is 2030. What are the hot topics in procurement? Here are Sally’s predictions:

1) Sustainability

“We’re still a long way from creating our sustainable planet and it has to be something that we all continue to champion,” Sally says.

“We need to be promoting best practises to reach the next level where we’re actually starting to give back. Not just to seek neutrality but actually give back.”

2) Social inclusion

“I can’t imagine that social inclusion wouldn’t be important in 2030,” Sally says. “Perhaps a scorecard of corporate performance on social inclusion and social value.”

3) Technology

“Numbers suggest we’re only using 30% of the data that we are producing,” Sally says. 

“And if organisations are genuinely on a journey of continuous improvement then they need to be using data and the likes of artificial intelligence natural language processing if they’re going to continue to advance.”

4) Integration

“We need to organise for integration,” Sally adds. “We need to break down the internal barriers that exist.

“We all operate in silos. We’ve got organisations who have a buy side and sell side and they have no idea what’s going on on either side of the organisation. So those companies are starting to look at how they create an integrated trading relationships function.”

Sally Guyer can be seen in our exclusive series The Future of Supply Chain Now.

9 Ideas To Reduce Costs Using Supplier Relationship Management

At a time when costs need reduction but healthy Supplier Relationships are paramount, here are 9 ways to reduce costs using Supplier Relationship Management.


There isn’t a procurement pro on the planet right now who isn’t looking at ways to reduce costs.  But this comes at the end of a year where we’ve all been sorely reminded that strong supplier relationships are paramount … especially during a crisis.

Common practice is to look at procurement categories with large amounts of spend and start searching for ways to reduce that spend. One of the more routine approaches is to run an RFP, inviting incumbent suppliers along with potential new partners to help drive competition for your business, with the end-goal to ultimately reduce cost.

But what if your cost base has already bottomed out? What if you are buying a good or service that is difficult to come by, thereby putting the power in the suppliers’ hands? How are you able to reduce your spend in a category where all the signs are pointing to a cost increase?

In order to answer these questions, we must start at the beginning by looking at Supplier Relationship Management.

What is Supplier Relationship Management (SRM)?

Supplier relationship management is the discipline of strategically planning for, and managing, all interactions with third party organisations that supply goods and/or services to an organisation in order to maximize the value of those interactions. In practice, SRM entails creating closer, more collaborative relationships with key suppliers to uncover and realise new value and reduce the risk of failure.

Getting back to the initial goal of cost savings, the question becomes ‘when cost savings is a critical driver in supplier selection, how do you balance the collaborative relationship with low cost?’

The key is internal alignment between procurement and the business units. Supply Chain leaders must be able to explain why vendors who may not be the low-cost option for reasons like customer service, on-time deliveries, payment terms, reporting, etc. are actually the best overall value option for the business.

Category leaders must be able to explain how new suppliers versus incumbent suppliers will impact the company. There are too many cases where the grass appears to be greener on the other side. Sometimes, by selecting a low cost, new supplier, operational differences get lost in the shuffle and the transition becomes a disaster.

Why is Supplier Management Important?

In plain simple terms, it creates a competitive advantage. Whether you are the procurement or the supply chain leader for your organization, having a strong supplier management system will maximise cost-reduction opportunities, value driven services and overall systematic efficiencies, which otherwise would not be achieved. 

Supplier Relationships

As stated previously, a critical component to any company’s success is their ability to maintain strong working relationships with their suppliers and vendors. Supplier relationship managers should always look to avoid complacency. You should never be satisfied with the idea of “if it’s not broke, don’t fix it” and be always be looking for opportunities to improve the relationship, streamline processes or procedures, or change costing models. Relationship Managers should always be looking to challenge the status quo.

Another key to strong supplier relationships is to open the lines of communication and not be afraid to ask the question, “what we can be doing better?” Here are some quick ideas how you, as a customer to your key suppliers, can help enhance your relationship and make those suppliers want to compete for your business.

·   Trust and Loyalty (treat them as more than just vendors)

·   Improve technology and automation

·   Adhere to payment terms

·   Develop communication plans

·   Differentiate between price versus value

·   Have a dedicated Supplier Relationship Manager (SRM)

·   Internal alignment between Procurement and Supply Chain Category leaders

Putting Supplier Relationship Management to Practice

Now let’s look at a specific category – supply chain and logistics – and see how we can apply some of this thinking.

How to Become a ‘Shipper of Choice’ within your Supply Chain and Logistics Network

Logistics spend often plays a role in a company’s effort to reduce costs. Logistics spend can be a substantial percentage of accounts payable, at both the direct and indirect categories. When looking to reduce spend in shipping, taking the low-cost approach can potentially cause more headaches than the savings are worth.

What are some key goals of the shipper?

·   Avoid Disruption

·   On-Time Delivery

·   Low Cost

·   Damage Free

What are some key goals of a carrier?

·   Finding the right shipper

A carrier has a valuable commodity and finding the best shipper to partner with to utilize that commodity is very important for maintaining a good operating ratio. There is a finite amount of space within the global logistics network. What would make a carrier want to move your products versus someone else? Prior to any cost negotiations, a shipper should be looking for ways to make their freight something a carrier wants in their network. They will fight for your business because they value you as a partner, and vice versa.

What can a shipper do to ensure carriers will want their freight?

·   Effectively label freight

·   Safely and adequately package freight

·   Provide accurate descriptions of the freight

·   Use standardized dimensions when possible

·   Use quality pallets

·   Provide ample lead-time when possible

·   Be flexible on your end while remaining consistent in your process

·   Provide a clean, safe and overall attractive driver facility

Achieve Supply Chain Savings: Cost Reduction Negotiations

Once the proper groundwork has been laid and a solid foundation is in place, the relationship developed between a procurement and supply chain organization and its suppliers is now, finally, ready to discuss cost optimisation. By going through the Supplier Relationship Management process, you are now well equipped to conduct cost negotiations. Here’s 9 talking points to reduce costs and build the relationship with your suppliers:

·   Contract length

·   Reduced future cost increases with caps

·   Better discounts or incentive tiers

·   Rebates

·   Volume Thresholds

·   Delivery Costs

·   Payment Terms

·   Ancillary Charges

·   Everything Else (Better reporting, more transparency, communication plan)

One of the keys to entering these negotiations is to come to the table prepared to discuss these types of cost savings opportunities. If your main goal is to just hammer down the unit price, then there is a good chance your supplier will not be overly receptive to that approach. Listen, collaborate, compromise and develop a partnership that will ultimately be a win-win for all those involved.

In conclusion

Top suppliers are always looking to do business with companies who value the partnership and are willing to make improvements in order to make the relationship smooth and efficient.

This type of partnership will lead to your suppliers offering the best possible discounts and pricing and give you the peace of mind that you are getting the most out of your supplier.

Supplier Relationship Management is key to developing a long-term PARTNERSHIP with your key vendors!

What key insights and strategies have you taken from 2020? Share your experiences and hear from the most innovative thinkers on the planet at the Global Big Ideas Summit on November 18.

Tough Talk: How To Deliver Bad News In A Good News Way

If you haven’t already delivered bad news to a supplier, you’ll likely have to soon. Here’s how you should do it.


Economically, this year is officially the worst year since the Great Depression. And while we, as procurement professionals, have largely been shielded from the worst of it owing to our critical importance to organisations, many others have not been so lucky. Many businesses, too. And unfortunately, some of those businesses include our suppliers. Even worse, sometimes it may be us that has to deliver some bad news to them. 

Psychologically, humans find it very difficult to deliver bad news. Procurement professionals would agree with this finding: telling a supplier, especially one that you’ve cultivated a valuable strategic relationship with, that something drastic is going to change can be nerve-racking at least, terrifying at most. But can you deliver bad news in a good way? You can, and here’s how. 

What kind of news might you have to deliver at the moment? 

So much is changing in the economy and our supply chain relationships at the moment, that there’s literally hundreds of different types of bad news that you might have to dish out to your supplier. But for most companies, bad news will fall in a number of categories. 

Firstly, you may need to tell your supplier that you have to reduce your volume. On the surface, they may see this as unfair, especially if they know that your overall output hasn’t changed much. But what they may not understand is that in the current risk environment, you can no longer be reliant on them and need to diversify. Similarly, you may not be able to use your supplier at all due to a whole host of risk-based reasons. 

Secondly, for just about all of us, COVID has meant that we’ll have to amp up our compliance. What this will mean for your supplier, and they certainly may not like it, is that you now need more documentation from them and more authentication of their sources. 

Thirdly, you may need to adjust payment terms. In an ideal world, especially if you work with small businesses, this adjustment may mean that you’re paying earlier. But for many reasons, this may not always be an option due to cash constraints. A conversation about longer payment terms is always challenging. 

Finally, COVID has forced many of us to change our requirements. Whether this be a changing product or input spec, whatever these changes are, it will most likely affect your supplier’s business, so may be a difficult conversation. 

How should you deliver this bad news? 

Businesses all over the world are struggling right now, especially many small businesses. So what may have been a difficult conversation last year, may now mean the difference between hanging on and financial ruin for your supplier. For this reason, you need to approach all conversations with suppliers delicately. When you do, make sure you employ all of the following: 

  1. Listen – before you speak 

Usually in organisation-supplier relationships, procurement professionals are used to having the ‘upper hand’ – so to speak. Essentially, we are effectively the ‘client’ of our suppliers, and we expect a level of professionalism and respect as a result. Interestingly, in relationships where the power lies more with one party (even if we may not act like it), the individual that holds the power usually does more of the talking.

Yet given the precarious economic situation, now might be the time to do less of the talking, and more of the listening. Even if you do have to give bad news to your supplier, it pays to first listen to how they have been going, and what, if anything, you might be able to do to cushion the blow of the bad news you’re about to deliver. 

  1. Have empathy – not sympathy 

In situations like these, it’s tempting to want to show sympathy to suppliers, especially if they’re struggling. But research shows that sympathy is often misguided, and empathy is better. But what’s the difference? 

Sympathy is when you feel bad for someone, and pity them on account. For example, showing sympathy to your supplier when they tell you that they may be going into administration would be to say ‘That’s awful – I understand how you feel.’ This statement could be a little frustrating to them, as in your position, you don’t actually understand how they feel. 

Empathy in these situations is always a better response. Empathy is when you take the time to listen to someone and understand what emotions they are feeling, but you acknowledge that you don’t necessarily feel their emotions. For example, an empathetic response might be: ‘I’m so sorry to hear that. I couldn’t possibly understand what you’re going through.’ 

  1. Be upfront – but also see if you can give, a little 

When it comes to delivering bad news, it’s best to simply be honest and upfront about what it is that you need. Prolonging delivering the bad news drags it out and will most likely make your supplier frustrated and nervous for the future. 

But after you’ve delivered your news, don’t just leave it there. See if there is anything you can do for your supplier, and then genuinely try and do it. This may include negotiating a slightly longer contract, flexing payment terms, or referring them elsewhere. Little things help and in this economy, those little things could be everything. 

Have you had to deliver any bad news to your supplier? How have you done it? Let us know in the comments below. 

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.

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?

5 Ways to Thank a Supplier this Holiday Season

Gifts are fairly common this time of year. But are you doing anything to recognise and thank your suppliers for their hard work this year?

thank you
Photo from Gratisography on Pexels

Let the gift basket parade begin!

It is the holiday season. The cheese trays, cards, fruit towers, yeti coffee cups pour in from suppliers at this time of year. Savvy sales teams and account managers might even take the time to hand write a card thanking you for the business relationship and surprise you with a very thoughtful gift. 

Of course, these gifts are then shared, according to the policies and practices of ethical receipt of gifts, around the office, increasing the festive mood for everyone. 

As in any great, or even good, relationship, the gifts are exchanged – both ways.  Therefore, I am perplexed by the one-way exchange of gifts between suppliers and their customers.  Maybe that is because traditionally the gift from the customer was their business? 

However, what if we changed that this year and offered the gift of recognition and appreciation to our high performing and high potential suppliers?  Just like anyone else, a simple gift of appreciation motivates, builds trust, and breaks down barriers in the relationship. 

Here are 5 simple ways to do just that.

1. Write a thank you note

What if each year in October you performed a quick review of suppliers, noting the ones who performed exceptionally well this year?  Then, the category teams would acquire some thank you cards and write notes of gratitude to those suppliers. 

This simple act would be something that the suppliers would find as extraordinary. And therefore, would be motivated to give their best to you in the new year. 

2. Ask them how you could help them and then do it

Great suppliers love to help you. Often sharing expertise, insights into the marketplace, and solutions to complex business problems. 

At the same time, suppliers could also benefit from the same from their clients.  What if we asked our high performing and high potential suppliers how we can help them?  First of all, the supplier will not be accustomed to this. 

Once they realise the sincerity of the question and the help is received, there will be a bond formed with that supplier, open lines of honest communication are achieved, and more innovative solutions offered. 

3. Pay on time

Seems simple enough, right? (This made me laugh.) 

After working on these processes for most of my career within Procurement, this is a constant struggle for most. Then, you layer in some of the cash flow practices around the end of the year that some do, and the late payments escalate. 

How impressive would it be if, for your best suppliers, there was a proactive review of the accounts every autumn to ensure the accounts were paid up current by the end of the year. Wow! 

Not only would that make the suppliers extremely happy, but it would get Procurement and Accounts Payable resources out of the woods on those accounts for a while heading into the new year.

4. Facilitate an introduction

Suppliers always want to meet people who you know. These people could be within your company, or external within your networks.  Facilitating the introduction would be a great way to recognise a job well done. 

It shows you trust the supplier to perform well and that you are willing to share the success with others.

5. Give them a social media shout out

Of course, you will have to check on your internal policies on this one, but there is a large trend on social media platforms like LinkedIn to recognise suppliers for outstanding performance. 

This trend creates a perfect win-win scenario – often showing off some project that the buy side organisation is implementing, the supplier who helped them achieve success, and how they partnered together to get it done.  Sometimes these are large achievements, and sometimes they are small day to day ones like providing outstanding safety to employees. 

Suppliers love this type of shout out, as it gives them instant access to your network of contacts and a vote of confidence from you at the same time.

As Procurement organisations are looking to add value well beyond cost, your ability to create trusted, value adding, innovative relationships with your suppliers takes centre stage. Often big changes like the shift Procurement is going through, start with simple steps forward. 

So, this holiday season, let’s be grateful to those suppliers who achieved excellence this year by saying thank you. 

Suppliers: Partners not Punching Bags

If suppliers are treated as part of the team, rather than punching bags, it can actually help to accelerate procurement’s ability to add value.

Photo by i yunmai on Unsplash

When you are hiring employees, do you focus just on the salary negotiations?  With the only goal being to get the lowest cost talent?  No, because we know the value we are going to receive from that individual is through many years of ideas, quality work and the leadership they provide to others.   

The price negotiation is a point in time, while the relationship is the multiplier.   

The same holds true with suppliers.   

As you look across our supply base, procurement has a range of suppliers from “high potential” to “needs improvement”.  As we do with top performing teams, procurement has the opportunity to cultivate high potential suppliers through exposure, stretch assignments, and trust. 

There is also an opportunity to manage up or out the “needs improvement” suppliers by developing their capabilities and giving them the opportunity to improve.  Through this approach, procurement now has the ability to discuss with their new-found talent how to creatively reduce total cost of ownership, to solve problems, and to provide innovative solutions.  

When trusted are offered development opportunities, suppliers will go above and beyond for the customer.  They assign their best people on the account.  They look for ways to improve the relationship, reduce costs, and proactively call out risks.  And, in times of short supply, will serve their preferred customer of choice first.   

Through one change in perspective, one change in a relationship, procurement achieves lower TCO, lower risk, more innovation, and a reliable supply chain – this is the key to delivering value.   

The Next Big Idea in Procurement  

Procurement is on the brink of significant change, as are many more areas of our lives.  There will be many big ideas that brilliant procurement professionals implement into their organisations to support the advancements in technology, the new expectations of talent, and techniques to add value well beyond cost.  These are exciting times to lead, inspire, and create within procurement.   

Each year a small group of influential procurement thought leaders gather in Chicago for the Procurious Big Ideas Summit.  Participants are inspired and take back many big ideas for their personal growth as well for their organisations.    

While technology advancements often receive a lot of focus, perhaps the biggest shift within procurement is the expectation to move beyond cost to becoming value providers.  Procurement is being challenged to find new ways to reduce risk, increase sustainability, to help solve complex business problems, to increase revenue, to generate new innovations, to become an internal consultant to their stakeholders to obtain the best out of every investment. 

This expectation is becoming more pronounced and will allow procurement to analyse how they measure success, the skills their talent need, and even what technology they might need to deploy.   

Those organisations who make this change exceptionally well will also realise that their suppliers offer a limitless capability to accelerate procurements’ ability to add value.  When suppliers are treated as an extension of the supply chain, as part of the team, the relationship with suppliers also moves beyond cost.  In fact, one could argue that becoming a customer of choice to suppliers is the key to unleashing value, reducing risk, increasing innovation, and achieving agility within the supply chain.    

Leading the Supply Base 

An idea is just an idea until it is implemented, so how do procurement organisations get started with this change?  Below are some low investment ways to start this journey. 

  • Toss out outdated segmentations – Start looking at the supply base like one would talent.  Understand high potential suppliers, remain in role, and need improvement suppliers.  This does not need to be complicated nor does this need to be scientific.  Without putting much effort into this, the top performers and the lowest performers could be listed.  Start there.   
  • Offer development programmes – As one would with their internal talent, offer programmes that will help suppliers operate with excellence.  These programmes can even be supplier funded, but it shows suppliers that procurement cares about their success.  It develops a relationship where it is understood that procurement is only as good as their suppliers.  When suppliers perform at their best, procurement, suppliers, and the communities around them all benefit. 
  • Think differently about procurement’s role – When procurement starts thinking about their role as a hiring manager to suppliers, it creates a change within every interaction.  Set the expectation that a procurement manager’s role is to lead their team of suppliers to success.  This will have downstream impacts around measurements and skills needed but starting here will start the cultural change needed for success.   

Procurement is on the move.  These are indeed exciting times to renew the spirit of what procurement is all about.  Let’s not be overwhelmed and paralysed by the amount of opportunity.  The best thing to do now is to start.  Start taking the small steps that will create big change and the next big ideas.   

As the Big Ideas Summit Chicago facilitator, Amanda Prochaska will be harnessing the biggest and brightest ideas presented. You don’t need to be “in the room where it happens” – you can register as a digital delegate and get up-skilled and uplifted from the comfort of your own desk.  Register now by clicking here.