Tag Archives: supplier relationship management

Love It or Hate It – The Importance of Supply Chain Stability

A disagreement relating to rising supply chain costs has highlighted the importance of supply chain stability.

Ian Law/Shutterstock.com

Early on Thursday morning, the top news headlines weren’t about conflict or celebrity scandal, but the future of a famous British staple. Maligned and loved in equal measure, Marmite was the topic on everyone’s lips.

The sudden interest in the salty, yeast-based spread came about due to a very public spat between Tesco and Unilever over rising product costs.

According to reports, Unilever had requested that Tesco, and other UK retailers, raise the price of their products in store by 10 per cent. However, when Tesco refused to pass on this cost to customers, Unilever stopped supplying certain goods to the retailer.

Tesco responded to this by halting online sales of Unilever products. This sparked concerns of a prolonged shortage of goods on supermarket shelves.

However, by Thursday evening, the situation was resolved and the stand-off ended. It’s expected that Unilever goods will return to the Tesco website in the next few days.

It’s understood that Unilever gave some ground in negotiations, leading to an agreement between the companies. Asda has also publicly commented that it successfully negotiated with Unilever on the price increase.

Rising Supply Chain Costs

Unilever’s reason for the requested price increase was the continuing fall in the value of the pound. This has in turn led to higher import costs for goods into the UK.

While many of its products, including Marmite, are manufactured in the UK, Unilever imports products and raw materials from its base in the Netherlands.

Since the Brexit vote in June, the pound has fallen in value by over 17 per cent. As the pound dropped to its lowest level since June 23rd on Tuesday, it was reported that some airport Bureau du Change had been offering exchange rates of less than one Euro per pound.

Graeme Pitkethly, Unilever’s Chief Financial Officer, was quoted on Thursday morning as saying the price increases were part of “normal business“. But, while the price increases may be a normal part of business, experts have warned that this may just be the beginning.

As the UK’s exit from the EU comes closer, it’s expected that consumers will see rising prices for many products. As the UK imports more than 60 per cent of what it consumes, the FMCG industry will be one of the hardest hit.

Items such as bread, milk, bananas and wine are expected to increase as manufacturers and retailers stop being able to carry the increasing import costs. A rise of between 8 and 10 per cent is expected on clothing, while petrol will rise an estimated 4 or 5 pence per litre in the UK before the end of the month.

Importance of Stability

At a time when margins are being squeezed, the importance of supply chain stability is huge.

A survey published by the UK Food and Drink Federation (FDF) showed that 63 per cent of manufacturers are suffering from decreased profit margins. As well as this, 76 per cent a seeing higher ingredient costs too.

With 96 per cent of the UK’s food and drink businesses small or medium-sized, larger organisations need to be aware of the impacts of margins throughout their supply chains.

Some organisations will try to put increasing costs back on to manufacturers, without taking into account the long-term impacts. Any further supply chain disruption on top of what is happening already could potentially drive prices higher again.

While prices rises for consumers are probably inevitable, increasing supply chain efficiencies and demand forecasting can help to limit the damage.

Helen Dickinson, Chief Executive of the British Retailers Consortium, said: “Retailers are firmly on the side of consumers in negotiating with suppliers and improving efficiencies in the supply chain to control the inflationary pressure that is building through the devaluation of the pound.

“However, years of falling shop prices and higher costs have left limited scope for retailers to continue absorbing this pressure. Everyone in the supply chain will need to play their part in maintaining low prices for consumers.”

By building a greater understanding of the costs through the supply chain, retailers and manufacturers can try to overcome a lack of stability collaboratively.

Do you work in procurement in retail or FMCG? What are your experiences of the recent price rises? Let us know below.

Away from the worries of empty shelves, we’ve stocked up on the week’s big procurement and supply chain headlines.

GM in Court Over Price Bargains

  • A court in Massachusetts will heard a case last Friday, brought against GM by a now bankrupt supplier.
  • Clark-Cutler-McDermott, alleges GM knowingly led the company into a bad faith deal, and encouraged them to take on more debt.
  • GM have requested the case be dismissed, arguing CCM is trying to pass the blame for poor management.
  • The case will help to shed more light on the highly-criticised bargaining practices allegedly happening in GM’s supply chain.

Read more at Supply Chain Dive

Samsung Galaxy Note 7 US Recall Begins

  • Samsung have begun the process of recalling a further 1.9 million Galaxy Note 7 devices, bringing the total to nearly 3 million since the beginning of September.
  • A fault in the Note 7’s battery has led to it overheating, with users experiencing smoking, sparking, or on-fire devices.
  • The recall is expected to cost Samsung an estimated $2.3 billion.
  • The company has seen $21 billion wiped off its market value since Tuesday last week.

Read more at The Guardian

MPs Call for End to Antibiotic “Overuse”

  • A group of MPs has called for the curtailing of the “systematic overuse” of antibiotics in supermarket meat supply chains.
  • Conservative MP Zac Goldsmith tabled a motion calling on UK supermarkets to adopt policies prohibiting routine mass-medication of livestock because of the emergence of antibiotic resistant bugs.
  • The motion has so far received the support of 21 MPs from across the parties.
  • Goldsmith tabled the EDM after a report found resistant E. coli in supermarket pig and poultry meat.

Read more at Supply Management

Amazon Fined by FAA Again

  • The FAA has proposed a fine of $78,000 for Amazon for breaching regulations on shipping of hazardous materials.
  • It’s the online giant’s fourth fine in as many months, with more likely to come from the UK.
  • The latest fine relates to the shipment of an ethanol-based hair tonic, without the correct documentation for flammable goods.
  • The issues highlight the hurdles Amazon faces in scaling up its own logistics and transport operations.

Read more at the Wall Street Journal

Setting KPIs for Beginners: Why Bother?

An introductory overview of the role and relevance of KPIs to support Supplier Relationship Management (SRM).

KPIs article 1

In this three-part article, we discuss some of the different KPIs that are used specifically for SRM. This list is by no means exhaustive; it can’t be, as performance indicators must be relevant to your own organisation, customers, and requirements.  However, this list can be used as a guide and can become an essential part of your toolkit.

We’ll also review some of the popular ways people measure and monitor KPIs through systems and reports. Again, this won’t be an exhaustive list because of cultural and technical requirements unique to every organisation.

You’ll also find some key tips for implementing KPIs successfully, including a checklist (more tools for your toolkit!).

We will explore how dashboards can be a fantastic tool for procurement professionals to use when communicating to stakeholders and promote hard-won benefits to the business. An effective dashboard will include KPIs that demonstrate how suppliers or categories are being managed and their impact on the business. Remember, the KPIs you set may influence senior management decisions. Therefore, you need to get it right.

Why bother with KPIs?  

To get started, let’s talk about why we use KPIs.

As procurement professionals, we’re responsible for making smart purchasing decisions that support the values and principles of procurement, such as probity and value for money. These decisions must also support the philosophy and strategy of individual organisations. Importantly, we need to be able to justify and document how (and why) we’re spending money.

KPIs can help us justify spend. In fact, KPIs can be used to identify risk, cost savings, innovation opportunities and successes, value-for-money initiatives, customer satisfaction and any number of other factors that we or our customers feel is important.

The role of a supplier KPI is vast. They set the performance standard and have measurable features used to identify areas of improvement, such as establishing a baseline, identifying where you want to be and developing a path to get there. But it doesn’t stop there – KPIs can also be connected to payment milestones, credit payment and liquidated damages.

The important point to remember is that supplier KPIs must be agreed upon by all parties involved. If your supplier doesn’t know what is expected of them, they won’t be able to comply, let alone excel. That’s just one side of the relationship.

The other side of the relationship involves the professionals within the buying organisation. How do you, the procurement professional, know which KPIs to use? Are cost savings important? Delivery times?  ISO standing? Inventory reduction? You won’t know unless you ask your customers about their requirements.

So, why are KPIs important?

What gets measured gets done. KPIs are a way of ensuring your supplier focuses on your fundamental business needs. We can do this through:

  • Incorporating our customers’ requirements into the KPIs to align supplier performance with organisational goals.
  • Providing constructive feedback (rather than punitive criticism). Why? Because the end goal is a win-win situation where you get what you and your customers need, while the supplier gets to improve its reputation and build its business.
  • Promoting a continuous feedback loop using KPIs to drive supplier performance, initiative and improvement. KPIs should be linked to the terms of the contract but remember, the focus is on the relationship. Indicators should therefore reflect the “spirit” of the contract as much as the “letter”.
  • Bringing clarity to overly generic contract requirements to drive meaningful performance.

Challenges in KPI management

Here are some common challenges that we’ve seen through our own experience:

  • Capturing the data – identifying the relevant data and accurately acquiring the data points.
  • SRM fatigue – motivating yourself, your team and your suppliers to continue SRM activities over the life of the contract, which can be months or even years. Activities can easily become stale and sometimes you’ll need to push them along.
  • Comparing and contrasting suppliers – supplier performance will be very different depending on their size, sector and region. Ensure you’re comparing apples with apples.

Engaging end-users is important

When driving supplier performance over long-term contracts, we want to keep things moving so end-users don’t feel that nothing is happening. Keep end-users in the loop, ensure their voices are heard and let them know how things are progressing.

We often focus on senior management as our primary “customer”, but the end-user is arguably more important – especially when it comes to compliance. After all, they’re the ones who will use the product, system or tool that is being purchased.

Stay tuned for Part 2 of this series, which will explore the different types of KPIs, complete with a KPI checklist and contract-level KPI reports.

In Search of Your Perfect (Supply) Partner

With an estimated 200 million suppliers operating around the world, how can you be sure you have the perfect partner? Fortunately, here’s where technology can lend a hand.

Recent estimates put the total number of suppliers operating around the world at a staggering 200 million. To put this in context, that’s like having every person in the UK operating a supply business. Three times over.

The risks for procurement in this scenario are there for all to see. With an enormous number of potential suppliers, how do you know you are dealing with the right ones? Are you getting the best deal you could?

And with the suppliers you do have on board, how are you driving contract compliance? As well as being expected to deliver the value in the contracts, procurement needs to ensure that objectives are aligned with internal stakeholders, including the CFO.

Innovation in ‘Tail’ Suppliers

Common thinking in procurement now is that the profession can no longer ignore small- and medium-sized suppliers. By continuing to use the same suppliers, procurement misses out on innovation opportunities, as well as savings opportunities.

Traditionally these suppliers have been dismissed as ‘tail spend’, and ignored in terms of strategy. As we experience a period of unprecedented market change and volatility, procurement is now looking to these same organisations to help drive efficiencies, and competitive advantage.

The other factor procurement must take into consideration is how to measure the risk within their supply chain. One slight issue from a first, second, or even third tier supplier, could have drastic consequences for an organisation’s reputation.

Technology as Competitive Advantage

If organisations want to thrive in increasingly volatile climates, they need to leverage their technology. Effectively using IT capabilities and procurement technology can help develop a competitive advantage.

More and more organisations are streamlining traditional procurement activities, and freeing up resources for strategic projects. The ability to do this, while sourcing and managing suppliers, requires up-to-date IT capabilities and analytics, as well as best in class procurement technology.

Oracle’s aim is to provide its client with complete, open, and fully integrated solutions which help to reduce both the cost, and the complexity, of the IT infrastructure.

David Hudson, Business Development Director at Oracle Cloud Solutions, believes procurement needs to realise that the future is now.

“Delivering the right capabilities for Procurement professionals to drive greater collaboration, process standardisation, increased efficiency at a reducing cost remains a big challenge.

“At Oracle, we aim to help our customers achieve great cost savings and overall value, while reducing supplier risk, and increasing compliance. Technology, such as our Strategic Procurement portfolio, can help to deliver these key benefits, particularly when integrated throughout the process, as part of a modern Cloud solution,” says David.

Build Your Competitive Advantage

Procurious Founder, Tania Seary, has previously stated that, “Today’s supply chain executives must be brave and bold. They are expected to handle cataclysmic events and act with extreme agility.

“There’s one qualification – and I would go so far as to say that it’s the defining qualification for today’s supply chain leaders – that separates the highest performers from the herd. And that’s courage.”

This courage can be bolstered by understanding the role and benefits of technology, especially Cloud software and platforms, in procurement strategy, planning and decision making. By being more informed, procurement leaders can make these bold decisions, and ensure they are staying ahead of the competition.

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To find out more on how procurement can better manage risk and complexity, and integrate technology to help them thrive in a changing world, join Tania Seary and David Hobson for a free webinar on 7th November. Find out more information and register here.

10 Ideas to Encourage Suppliers to Go the Extra Mile

Are your suppliers willing to go the extra mile for you? What can you offer them to drive the extra effort?

Buyers rely on suppliers to perform numerous requests from the very beginning of their relationship.

From the first RFx, to the laundry list of requests on tight timelines, suppliers play an integral role in the sourcing process. And having them wanting to help can make a huge difference.

What can supplier enablement do to encourage suppliers to meet their deadlines, and even go the extra mile beyond the bare minimum?

Here are ten potential ‘carrots’ to offer suppliers: 

1) Invite to Assist with eProcurement Pilots

Suppliers welcome getting as much exposure as possible. Particularly if they are a new supplier, or you’re rolling out a new eProcurement system.

You can let suppliers know that if they can meet or even exceed your requirements that you’ll highlight them during testing and User Acceptance Testing (UAT). You can include them in your test scripts, and call them out during demos, amongst other things.

2) Feature on eProcurement System’s Home Page

Some modern eProcurement systems give admins the ability to display whatever you’d like on the homepage using business enabled CMS blocks.

Offering this prime real estate to highlight suppliers who have excelled (e.g. provided an awesome catalogue or offered heavy discounts) would be a huge inspiration for a supplier.

3) Float Sales Items to Top of Search Results

Modern eProcurement systems allow admins to affect search results giving specific items more weight or even float to the top of search results.

Similar to how suppliers promote sales items on their B2C sites, you can offer suppliers to boost items they agree to put on sale for at least a period of time.

4) Invite Onsite for ‘Meet and Greet’

Most suppliers will welcome the opportunity to come in and informally meet with their end customers. Maybe even allow them to setup their trade show booth or a table in the office lobby.

I’ve seen some buyers even create some co-branded marketing material, including booth signs or posters, stating that the supplier’s products were available on the eProcurement platform.

5) Visit Them Onsite

When suppliers have to come in to meet with you in your office, it’s typically a nerve-racking experience for them. They’re probably all dressed up and a little nervous as they enter your, likely relatively lavish, corporate office building.

But offering to come to their office for an informal tour/meet-n-greet would likely be an enjoyable honour for them. 

6) Promote in an Email Blast

How every supplier wishes they had the ability, and their buyer’s blessing, to send even one email to all your employees.

Offer them the chance to promote their offerings in a company-wide email blast and every supplier will jump at the opportunity. 

7) Display an Ad on your Intranet

It’s in a buyer’s best interest to entice more employees to use their eProcurement system to make purchases. The buyer’s intranet is probably a popular place where employees go daily.

You can display an ad on your intranet to let employees know they can procure that supplier’s category via the eProcurement system. For example, “The New iPhone 7 – Now on eBuy!”

8) Offer a Testimonial

Suppliers are very proud of their relationship with their customers. They’re especially proud of being selected to tightly integrate with a customer’s internal eProcurement system after all the effort both have put in. 

When a buyer gives a supplier a testimonial that they can use to grow their business. It’s often a very welcome shot in the arm for the supplier’s marketing efforts.

9) Blessing for a White Paper

A step up from a testimonial would be a buyer’s blessing to allow the supplier to create a white paper on how they’ve helped you.

For example, getting the supplier to tell the story of how they exceeded requirements for the buyers on a new project. 

10) Issue a Press Release

While I’ve never heard of it being done, there is one absolute ultimate carrot (apart from a multi-million dollar contract) which would ensure the extra mile from the supplier.

This would be to give the supplier their blessing to issue a press release to let the world know about the partnership. Ideally the release could also include a quote from the buyer.

Admittedly, this would only make sense if it was a very strategic and unique arrangement, and that a press release would make BOTH companies look good.

Some of these may be out of the question for your organisation. But hopefully they’ll at least give you a sense of what’s often valuable to suppliers, and some ideas on how you can help them to help you.

What are some other examples of ways you’ve been able to encourage suppliers to go the extra mile?

Has Procurement Dehumanised The Sourcing Process?

It’s only a matter of time before the procurement profession realises that it’s dehumanised the sourcing process, a move that will negatively impact the industry.

Procurement needs a new measure of success that reflects its impact, not its output. This is according to a Melbourne-based procurement coach, and self-proclaimed procurement disrupter, Matt Perfect.

Procurement with Purpose

Just as conscious businesses are learning that profit is a by-product of business with purpose, so too savings will be a by-product of procurement with purpose.

Perfect argues, “What have we really ‘saved’ if we drive down our suppliers’ pricing to unsustainable levels?

“Levels where they are forced to compromise on service and quality, or worse, safety and ethics? Procurement needs a metric that reflects the exponential impact of its decisions throughout the supply chain.

“The impact on suppliers and their employees…and suppliers’ suppliers and so on. This metric must measure real human value. Not just economic value,” Perfect says.

Cost at Any Cost

The Melburnian has carved an enviable niche in the Australian procurement landscape. Perfect has worked in numerous procurement roles, including for FreeMarkets, National Australia Bank, Toll and The Faculty.

Now as an independent coach and facilitator, he advocates the importance of supplier relations, and feels that major disruptive change within the procurement industry is only a matter of time.

Perfect writes about the disruption of the procurement sector in white papers. One, titled Supplier Love and Why You Need More of It, published in July last year, explains that as much as 70 per cent of revenue now goes to third parties (according to Proxima Group). Never before have suppliers been more important stakeholders in an organisation’s success.

Yet, despite significant investment in procurement capability and strategic focus over the last few decades, many supplier relationships remain transactional at best and at worst, adversarial.

Businesses continue to prioritise shareholder value above all else, sometimes even at the expense of customers, employees and the environment, but almost always ahead of suppliers’ interests.

One might be forgiven for thinking that ‘cost at any cost’ is the primary operating model for these businesses.

Conscious Business

Conscious businesses understand that this is not sustainable. Fortunately, there is a better way, but it requires a fundamental shift in the way we define stakeholders and value.

“We need to be looking at ways to win the hearts and minds of suppliers, rather than purely relying on negotiation tactics. When you look at the mindsets of procurement professionals, relationships just aren’t playing a big enough part at the moment,” Perfect says.

“You need to look at supplier relationships and help improve those relationships to get better outcomes. I work to improve that level of trust in a relationship, with the view of generating greater impact. I also look at the broader impact of relationships, which comes down to how it affects the lives of people.”

Perfect says that procurement is ripe for disruption, and is in fact on the cusp of a major shift. Part of this shift should include the consideration of whether procurement accurately sums up the role – supplier relations could be closer.

“There will be a shift to a new age. A human age, which is a process that procurement doesn’t have its head around yet as a profession. We need to be more engaged with vision and purpose moving forward as a profession.”

Perfect believes the younger generation will drive the changes as they strive for a more human-centred career.

Remembering the Human Element in Sourcing Process

A focus on supply chain issues, and the human elements within supply chains, is another driver for change.

Other industries embrace change more readily than procurement has to date. Marketing, for example, understands that to be really effective and cut-through, it has to touch the lives of people.

The human relations industry has also moved away from seeing staff as a number and has improved the way it operates within the business environment by focusing on the people. Procurement hasn’t made this leap yet, he says.

“We’ve also got to be thinking about how to appeal to the hearts and minds of consumers. We need to head into this space as a broader industry if we’re ever going to survive. I urge my clients to be the change they want to see in the world.”

At the moment, the industry is narrowly focused on shareholder value, rather than a broader stakeholder orientation, which is drawn from the realm of conscious capitalism.

“There needs to be an interdependence that creates value without trading off one another,” he says.

People Over Process

Matt Perfect
Matt Perfect

Perfect has an undergraduate degree in economics from Cardiff in the UK, and pursued a consulting career before landing an analyst position, specialising in e-sourcing and online technology. This kick-started a procurement career spanning multiple consulting and management roles in a variety of industries.

He left The Faculty a couple of years ago to focus on coaching. He works to help his clients create better and more conscious relationships with their internal and external stakeholders.

“This is where I focus my energy now. Looking at all spending in procurement and how that impacts on people. I believe we all need to have a greater focus on people than process.

Since working as a procurement coach, Perfect has worked with Social Traders, CPA Australia and The Trusted Negotiator, among others.

You can follow Matt at mattperfect.com or on Twitter at @m8ttperfect.

Procurement Turns to Supplier Relationships for Innovation

As procurement seeks to increased its involvement in innovation, it’s turning to its supplier relationships to drive change.

This article was written by Daniel Ball, Director at Wax Digital.

Wax Digital’s Procurement Innovation Pathway research is based on 100 interviews with the UK’s senior procurement professionals, to canvass their opinions of the key topics in the profession.

Previously, we highlighted that procurement wants to be more involved in innovation. However it is the risk averse nature of procurement that appears to be holding it back.

In this article, we assess the importance of good supplier relationships.

Mutually Beneficial Relationships

Achieving effective, mutually beneficial relationships with suppliers can be a great way for procurement to drive positive change. That’s just one reason, according to new research, why procurement professionals are prioritising suppliers in their quest to innovate.

In fact, Wax Digital’s research showed that procurement’s top two innovation areas relate to working with suppliers.

In first place, 57 per cent cited supplier relationship management as an area that can aid innovation. Sourcing suppliers for product innovation came in second, with 49 per cent. Reducing supply-chain risks also scored highly.

Turning to Supplier Relationships

Compared to lower scoring areas, like automating processes to save time/resource, and improving spend management by empowering people, the supplier is clearly where procurement is turning its attention to innovate.

New ways of engaging with suppliers, through self-service portals for instance, and ensuring supplier compliance through automated contract management, are key priorities.

But it’s equally about what suppliers can do for procurement. There’s a desire to find partners who can be a catalyst for innovation at the core of the organisation’s products and delivery.

Technological Investment

These priorities remain the focus into 2017 too. This means the future could see an even more supplier-focused innovation mind-set in the procurement function.

Adding weight to this, the two most commonly used procurement technologies are also heavily supplier-focused. 51 per cent of organisations favour supplier information management, while 49 er cent are looking to contract management systems.

And the most common technology investment planned for the coming 12 months is supplier relationship management (SRM) tools. Procurement is clearly doing more than talking the talk on supplier innovation.

Challenge of Involvement

The future looks promising in this regard but there are challenges ahead. Procurement sees the value of supplier focused innovation but it is not always in control of it.

84 per cent of respondents said they were currently involved in innovations around supply chain collaboration. However, less than half of these, 40 per cent, said that they were leading it. Although this figure rises to 50 per cent in the future, there’s still some way to go before procurement fully takes the reins of innovation.

Now that many procurement professionals have already achieved some of the more transactional and process based quick wins, it’s natural that we see more and more looking to strategic supplier management as the next frontier to conquer.

Building better relationships with the right suppliers, whether existing or new, is clearly uppermost in their thinking.

The Innovation 2016 research was conducted by Morar Consulting. The research involved 100 interviews to canvass the opinions of UK senior procurement professionals, working in small to large UK enterprises.

You can find out more about the research, and download the report, by visiting the Wax Digital website.

Emotional Intelligence in the Supply Chain

Emotional Intelligence can be a powerful tool for procurement in dealing with both internal customers and external suppliers.

There has been a lot of talk recently about the concept of emotional intelligence.

According to Wikipedia, it is defined as “the capacity of individuals to recognise their own, and other people’s emotions, to discriminate between different feelings, and label them appropriately, and to use emotional information to guide thinking and behaviour.”

The concept was pioneered in the middle of the 20th Century, but only popularised in the late 1990s. Following an increase in popularity, Emotional Intelligence was quickly moved across into the business world.

Developing Internal Relationships

Although they may not have known it as Emotional Intelligence, most procurement and supply chain professionals will have used its facets. This may have been fairly common, and both with internal customers, as well as with suppliers.

A good Supply Chain Manager must not only understand the motivation and needs of customers and suppliers. They must also develop strong and lasting relationships, based on mutual respect and trust.

With these relationships, over time (and assuming a good job is being done), internal customers will respect the manager’s role, relying on their decisions, and their judgement, in day-to-day work.

Gradually, the lines of thought from both sides will become aligned, potentially reaching a perfect strategic synchrony. If this happens, fewer explanations will be required for procurement to understand, and satisfy, internal customers’ needs.

Such coordination is the best example of the optimisation between these areas, resulting in great efficiency for a company.

Good Listeners

In addition to this, similar relationships should also be developed with suppliers. While keeping the primary company goals in minds, procurement should be able to guide the supplier approach in line with their organisation’s, and get them working in the same direction.

As Artur Osipyan explains in his excellent article, when dealing with suppliers, “you need to be a good listener to ensure you capture opportunities of doing things better and can connect the dots together.”

Companies must not impose their conditions, but look to build a partnership with the vendor, for both parties’ benefit (the famous win-win).

Perhaps the most critical use of Emotional Intelligence is where the internal customer demands and supplier offer fail to match up. It presents a situation where procurement needs to play ‘Good Cop-Bad Cop’ with both sides.

Using diplomacy and Emotional Intelligence will help create common ground for both parties, and transform this into a mutually beneficial relationship. This will also enable the parties to work together in the future.

Creating Mutual Wins

There are few things that create a stronger partnership than working together to overcome issues, and finding a satisfactory, and mutually acceptable, solution.

There are advantages to the so-called ‘cold negotiations’, where hardly any contact is made with suppliers prior to, and during, the process. However, any effective medium- to long-term strategy will need a foundation of common agreement, and understanding of mutual professional development.

To achieve this foundation, procurement and supply chain managers will not use negotiation skills, but Emotional Intelligence. This can then create the first pillar of a professional relationship between the two companies that could produce plenty success in the future.

Why Supplier Discovery Must Become a More Agile Process

In order for procurement to remain strategic, manually intensive processes, such as supplier discovery, need to become more agile and intuitive.

Doesn’t it seem like procurement reaches a new strategic milestone every day? These are amazing times to work in this field. We’ve been pushing towards this point for so long! Now that we’re here, we need to make sure we keep up the momentum.

None of procurement’s less strategic work is going away anytime soon, so if we’re going to avoid being dragged back down, we need to look for opportunities to streamline our processes. Anything that takes procurement away from working with suppliers and stakeholders should be a prime target for change.

Streamlining Supplier Discovery

One of those processes – supplier discovery – is long overdue for a makeover. Given today’s time constraints and better places to invest effort, there is no reason for procurement to be limiting the potential of a sourcing project by web-surfing to find prospective suppliers.

As Chris Silva, former Senior Director of Sourcing & Procurement at Synageva BioPharma Corp., recently told us, “Initial due diligence varies significantly from hours to months, depending upon many factors including data availability on the supplier, the supplier’s availability and response, the availability/completeness of third party data, and the complexity and completeness of the requirements, to name a few.”

Not only is the process inefficient for the reasons Chris points out, there is not really a good way to know if you’re missing a prime supplier candidate. The Internet doesn’t usually reflect the perspectives and opinions of your colleagues, and despite how popular online reviews and feedback are for consumer purchases, they just haven’t caught on in the B2B world.

Teresa Fiore, Associate Director of Global Sourcing for Marketing and Sales at Boehringer Ingelheim USA Corporation, pointed out the need to synthesise multiple sources of information, saying that finding new suppliers is “a combination of our internal sourcing knowledge combined with our internal marketing clients’ knowledge.”

Pulling relevant information from these multiple sources without adding time to the process is the first challenge to be addressed when streamlining supplier discovery.

Supplier Discovery – The Real Story

In November, ProcureCon surveyed 40 procurement execs like Chris and Teresa to find out what they really think of supplier discovery. The results tell an interesting story about the role of knowledge management in procurement today:

  • 83 per cent of searches take one to six weeks (or more) to identify the right suppliers and contact information prior to running an RFP.
  • 78 per cent of respondents share supplier information with their internal partners in person, and 70 per cent share through email. Only 25 per cent said they use online portals.
  • 70 per cent of procurement and sourcing professionals report that the most credible source of supplier intelligence comes from their internal peers.
  • 62 per cent of the respondents indicated they have little satisfaction with the technology solutions they use to gather supplier information and manage category intelligence today.

Clearly, there are real challenges around finding suppliers and then managing the organisation’s knowledge about them. One to six weeks to identify qualified suppliers? That hardly meshes with procurement’s agile, responsive new brand.

If you can go to Procurious and search their members for skills and sharing activity, why shouldn’t the same be possible on the supplier side? It’s not as if the technology doesn’t exist. We just have to prioritise supplier discovery and knowledge management so that they get fixed – fast.

If you’re interested in learning more about the research, including quotes from follow up interviews done with industry leaders, click here to download and read the whitepaper: Improving Strategic Supplier Discovery Through Technology.

Stephany Lapierre is Founder and CEO at tealbook, intuitive platform that mutually benefits companies and their supply partners by improving access to instant and trusted supplier intelligence, discovery, and identification.

The Circular Economy Demands Procurement Collaboration

Faced with the dual challenge of sustainability and growth, businesses are looking to procurement collaboration to help.

Since the Global Financial Crisis in 2008, most established firms have reduced costs, focused their resources, and become more lean and efficient. Now, however, they face the challenge of how to grow. This will require the development and implementation of truly innovative products, services, and business models.

In this challenging economic climate, procurement professionals are being asked to do more with less. The efficiency of Procurement, as well as procurement collaboration, is now seen as a critical part of moving the business forward.

Research confirms the new picture

Recent research by Oxford Economics for Ariba and SAP shows that more than two-thirds of senior procurement executives and employees say procurement is “becoming more collaborative with other parts of the business”. These figures are also valid for Responsible Procurement.

According to Procurement Leaders Research from 2012 on how procurement aligns with other functions on CSR topics, 33 per cent responded that, “there is an informal communication between procurement and other functions”. 47 per cent stated that there is formal communication between procurement and other functions.

The Supplier Coach

Procurement collaboration with the supplier is also key, though it is also critical for the process, and the sustainable outcome, that procurement acknowledges its role as a ‘supplier coach’. Typically procurement is responsible for the Supplier Relationship Management part of collaboration, although there is a need for a more open interpretation of the relationship.

The relationship should build on a joint relationship with win-win approach, where both parties will be engaged in driving the sustainable agenda on an equal basis.

As a coach, the procurement professional should:

  • Ensure that the supplier is motivated to work with the company’s agenda.
  • Ensure that the supplier continuously improves by providing input for improvement.
  • Promote the supplier’s interest within the company.
  • Ensure that the supplier has the strategic capabilities, or the willingness, to contribute to the company’s long-term growth.
  • Develop effective communications both internally and externally with the supplier.

Need for Business as ‘Unusual’ 

Typically, a supplier will encounter CSR at the very beginning of the relationship via the supplier selection and evaluation process, through the risk management process, or through the settling of the contract.

No business can escape the fact that global economic conditions, the status and future availability of affordable resources, energy supplies, and a growing global population are creating an ever more complex business environment.

The limitations and growing problems of the linear economic model, that has served organisations well for many decades, demands that ‘business as usual’ is unlikely to be a winning strategy in the future. The winning strategy lies within the circular economy.

The Circular Economy

The Ellen McArthur Foundation defines the circular economy as “one which is defined as an industrial system that is restorative or regenerative by design”, essentially replacing the end of life concept with restoration.

It shifts business towards the use of renewable energy, eliminates the use of toxic chemicals, which impair re-use and aims for the elimination of waste through intelligent design of materials, products, systems, technologies and business models. We could call it circular innovation.

Supply chains are getting more complex every day in terms of the number of involved partners and the quality and degree of interdependency between them. One of the predictions in relation to the integration of circular thinking, is that complexity will increase.

Businesses operate in a globalised world, where the volatility of markets, the speed of technological progress and the pace of change in the economic and business environments, will continue to rise rapidly. As a result product life cycles are getting shorter and market demands become more and more unpredictable.

Collaboration with all types of partners, and their willingness and ability to share their knowledge, will be crucial and key to a successful development and integration of circular thinking.  

Key Questions

The key question is how procurement can advance procurement collaboration with suppliers on circular thinking in an effective way? How can procurement ensure that the suppliers are willing and able to share their knowledge?

In many companies it is typically a challenge to include suppliers in the front end of the innovation process. Procurement teams are often disconnected from the functions they serve and the markets they engage with. They are not fluent in the nuances of the business and hence lack experience and authority.

Also in many companies, procurement are used to innovation being an internal capability. They are not used to working together with external partners on delivering it.

For procurement to be successful in these innovation oriented supply partnerships, I believe that it requires new models for relationship building and collaboration. It also requires procurement collaboration and integration across the whole organisation.

There is a great opportunity for Procurement to take a leading position within an organisation and transform the company approach from a linear economy to a circular economy. In order to do this, procurement has to facilitate the change of supply partnerships from a pure cost orientation, towards a strong focus on joint collaboration and innovation.

Four tips for working with SMBs from the experts

Procurious caught up with Ed Edwards, Audience Outreach Manager at THOMASNET.com, to discuss his organisation’s recommendations on connecting with small and medium-sized businesses.

ArtFamily/Shutterstock.com

THOMASNET.com knows that it’s tough to connect with SMBs. The product sourcing and supplier discovery platform has been in the business of connecting buyers and suppliers for no less than 118 years. Recently, though, their analysts have noticed a worrying trend. “We run sourcing events through the platform”, says Edwards. “We discovered that large Fortune 500 companies were only getting a 12% response rate when they issued a sourcing event to 100 suppliers. Further investigation revealed that SMBs are increasingly unwilling to engage, and buyers need to make more effort in this respect.”

Why SMBs are important to you

Ignoring SMBs means turning your back on half of the potential supply base – in the US, 49% of manufacturers have between 5-99 employees. According to Edwards, the trend towards supplier consolidation is a false economy. “More supplier choices means less dependency, and therefore less risk”, he says.

It makes sense to source regionally from SMBs. THOMASNET.com’s research shows that 41% of organisations always prefer a local source, while 57% generally prefer a regional source. The further away your source becomes, the more risk and cost are introduced into the supply chain. Edwards explains that when things go wrong, you need to be able to respond quickly and creatively. “Local and regional SMBs can do things better with less resources at a lower cost”, he says. “They’ve got the advantage of being nimble and innovative.”

Working with SMBs is also one of the best ways to reduce costs, as there’s a strong correlation between the size of a company and the average payroll. A US manufacturer with 5–9 employees, for example, has an average payroll of $36,313 per employee, while a manufacturer with 500+ employees pays an average of $61,150. “If you only work with large suppliers, you’re going to be paying for their higher overheads”, says Edwards. “More bureaucracy equals more cost and less innovation – and more people equals more bureaucracy.”

Understand where SMBs are coming from

Small and medium-sized businesses often have an owner-proprietor and operate with limited resources. They generally need to be cautious in investing time and energy in pursuing new business, while running their existing operation. Common concerns held by SMBs around engaging with large buyers are:

  1. Can I fulfil the order?
  2. Am I wasting time bidding on an opportunity with very little chance of winning?
  3. What happens to my other business if I become beholden to a large company?
  4. What if the new opportunity becomes 50% of my business and it dries up?

Four recommendations for improving your relationships with SMBs

THOMASNET.com has worked with suppliers and buyers to create a list of best-practice recommendations for working with SMBs:

  1. Be transparent throughout the process to convey that winning your business is possible.
  • Outline your process upfront
  • Provide a timeline with milestones
  • Be specific regarding vendor selection criteria
  • Divulge who the decision makers are (if not by name, by role)
  • Convey number of suppliers under consideration
  • Provide case studies of similar relationships you have built with SMBs
  • Divulge why you are looking for a new supplier
  • Be specific regarding quantities.
  1. Simplify your process to increase the likelihood that more SMBs participate.
  • Only ask for information that is critical to the specific supplier qualification process
  • Break lengthy supplier questionnaires into smaller chunks.
  1. Humanise your process to build trust and reduce downstream confusion.
  • Leverage phone communication early in process
  • Provide specific Procurement and Engineering contacts
  • Provide feedback
    • Communicate timeline and process changes
    • Let suppliers know if they have been eliminated from consideration along the way
    • Let them know why they were eliminated.
  1. Consider shortening payment terms and offering financing to minimise your risk and ensure your suppliers have sufficient working capital.
  • Create a special program with reasonable payment terms for SMBs
  • Consider adopting a Supply Chain Finance Solution (reverse factoring).

“We’ve become very efficient at communicating in the 21st century”, says Edwards. “But at the end of the day, decisions are made when people connect with each other. That’s why I can’t stress enough the importance of humanising the procurement process if you want to connect with SMBs.”

ED EDWARDSEd Edwards enjoys educating procurement and engineering professionals on how to use THOMASNET.com’s Supplier Discovery and Product Sourcing platform to streamline and improve their work. As part of this mission, he provides customized training to organizations’ engineering and sourcing teams at their offices and online. Ed and his colleagues work together to listen to the challenges facing buyers, and help them address those issues as well as new opportunities.

THOMASNET.com exists specifically to help you find, evaluate, compare and contact suppliers for what you need, where and when you need it. Access 700,000+ North American suppliers in 67,000+ categories – create your free user account today.

*Update: Check out THOMASNET.com’s new eBook The ABC’s Of Making The Shortlist, written to help you shore up any shortcomings that may prevent you from making buyers’ shortlists and put you in position to win more business.