Category Archives: Supplier Relationship Management

5 Tips to Help Prevent and Control Maverick Spend

A little innovation never hurt anyone. But whilst Maverick Spend may cause us to re-evaluate our processes, it can wreak havoc and cause long-lasting damage. Georg Roesch outlines 5 ways you can prevent it from happening and keep it under control.


Being a maverick isn’t all bad. Just look at Steve Jobs and Sir Richard Branson. Their outside-the-box ideas drove innovation and resulted in enormous successes. But for companies trying to manage spend (and let’s be honest, who isn’t?) rules-are-meant-to-be-broken behaviors such as maverick spend can wreak havoc on processes and, ultimately, your company’s bottom line. The upside is that it creates opportunities for procurement managers to re-evaluate processes, identify shortfalls and tighten spend gaps. But if left unchecked, it can – and will – end up costing your company money in the long run.

What is maverick spend?

Maverick spend is defined as buying from suppliers without following the company’s pre-established procurement policy. Purchasing goods or services out of contract or from non-preferred suppliers means that your company doesn’t benefit from the preferred supplier discounts that you worked hard to negotiate. Even worse, it can harm vendor relationships, affect future contract terms and open the door for underhanded business practices.

 So why do employees “go rogue” and, more importantly, how can you stop it?

Here are five tips to maverick-proof your procurement processes.

1. Identify maverick spend.

Spend visibility is key. After all, you can’t save or fix what you can’t see. Do you know how much maverick spend costs your company? Or the work areas and spend categories where non-conformity occurs? A thorough spend analysis can help you identify gaps across all spend data sources. From there, you can pinpoint the who, what and where and put an action plan into place.

2. Determine why maverick spend occurs.

Most employees don’t “go rogue” on purpose or with ill intent. They simply may not understand the procurement process. Or they may find it cumbersome and time consuming. eProcurement software can be intimidating, especially to employees who don’t use it regularly. Or they may see better prices elsewhere, not understanding the costs associated with invoice and payment processing or expense reimbursement.

Whatever the reason, regular efforts to explain the “why” and share the value can go a long way in gaining buy-in. Consider hosting (bring your own) lunch and learn sessions, recognising outstanding department or individual accomplishments, and providing a forum for employees to recommend vendors and give feedback.

3. Review the entire procurement process.

If you find your procurement process difficult, simplify with a more user-friendly solution. There are a lot of affordable and easy-to-use automated eProcurement options on the market.

The key is to find a solution that’s easy to use and all-inclusive (one that sees all direct and indirect spend) that integrates with your enterprise resource planning (ERP) system. This ensures that all employees have access to the right information at the right time.

4. Hold people accountable for their expenses.

While creating processes is your job, spend management is everyone’s responsibility. Every manager in your organisation should know exactly what’s being spent in his or her area, who’s spending it, and how much spend occurs outside of contract or supplier network.

If you have a coupon at home for Papa John’s pizza, you’re probably not going to order Domino’s and pay full price. While this is a simplistic example, the same holds true at work. It just may be that employees don’t know what discounts exist or aren’t being held accountable for purchase price variances.

5. Close the gaps in your procurement process.

Additional measures to consider to reign in maverick spend include:

  1. Limiting or eliminating P-card use to only certain vendors, merchant categories and / or dollar amounts. P-card usage can be difficult to monitor and measure which is why some companies are eliminating use altogether.
  2. Limiting who can set up new vendors. Do you have a well-defined process for onboarding new suppliers? If not, you should.
  3. C-level review of all non-contract or outside supplier network spend.

In the end, maverick spend and not playing by the procurement rules costs organizations BIG money. By digging deeper into the purchasing experience and the challenges and frustrations your employees encounter, you’ll better understand why maverick spend occurs, where it happens most often and, most importantly, what solutions you should implement to stop it.

Maverick spending is just one of the six challenges listed in our white paper on transparency in indirect spend. Read about the rest here.

Is Your Contract Rollout Turning Into A Psychodrama?

The critical moment between signing a contract and handing it over to the business seems like the perfect time to take the hands off the wheel and celebrate. But don’t pop that champagne just yet – this is a time for procurement pro’s to shine! Ensure you remain front and center for the contract roll out and implementation to make sure you deliver the value identified during the sourcing process!


You’ve gone through the pain of a long, drawn out sourcing and negotiation process. You’re exhausted. The business agrees that you’ve selected the right supplier to award the business to. After all, they signed off on the decision…right???  Oh no. The ink isn’t even dry on the contract when the backstabbing and psychodrama begins!

5 contract implementation pitfalls

Read on to find out the top 5 reasons contract implementations go wrong and what you can do to get it back on track.  

1. Lost your true north

The supplier is delivering the services in accordance with the new contract, but the reactions seem mixed.  Some people are happy and some people are not. Key stakeholders are offering completely different views of how successful this project implementation has been.

  • Pitfall: The problem definition or opportunity statement was not correctly nailed down. 
  • Resolution: Facilitate a group meeting about the purpose and scope of the contract. Reset expectations about what the supplier has been contracted to provide. You may be able to get the supplier to make minor adjustments to appease some of the requests.
  • Tip: Ensure the focus is on resetting stakeholders back to the shared outcome and not individual desires or opinions.

2. People don’t like change, get in front of this

New people have come out of the woodwork that suddenly have an opinion about how things should have been structured or worse – who you should have chosen and they’re kicking up a fuss. Drama!

  • Pitfall: The wrong people were involved or the right people weren’t in the room.
  • Resolution: Most big project changes or contracts need a reference group or project team to help the implementation phase bed in for the first 6 months to a year. Offer to bring these people into the project team and get them involved with future reviews. It’s hard to complain if you’re part of the group….right? 
  • Tip: Make sure there is a solid communications and change management plan taking people along the journey and communicating the major project steps. Try to think of ways to involve end users to gain maximum chances of buy in e.g. trialing new furniture for a fit out project or sampling coffee for a new catering contract.

3. You specified the how

Things aren’t quite right and you can’t really put your finger on it. Things aren’t happening like you planned. The issues aren’t disappearing. Your managers aren’t as wowed as they were expecting and they’re starting to ask questions.

  • Pitfall: You got what you asked for and that’s the problem. Buyers can sometimes feel the need to define not only what they need, but also how the supplier should solve this problem.
  • Resolution: The market will respond to what you put out, so be careful what you ask for. Leave as much room as possible for suppliers to make their mark and do what they do best, which is to know their stuff and their industry. Ensure you leave room for creative solutions, suitable alternatives and innovation.
  • Tip: If you’re trying to solve a problem have you nailed down the right root issue? Try the five whys concept to ensure you buy what you really need

4. Contract Management, what’s that?

The project team disappear once the contract is signed, they high five each other as they head back to their day jobs and slap the documentation on the contract manager’s desk. You check in one month later and the contract isn’t working – complaints are rolling in from all fronts.

  • Pitfall: Often the time investment of managing a contract particularly at the mobilisation phase is not properly scoped out and/or other priorities creep in. 
  • Resolution: Ensure the project team sticks around for the all important start-up and that the contract manager is in the sourcing project from the beginning. You’d be surprised how often this simple action is not undertaken.
  • Tip: Keep the regular project meetings for the first three months of the contract. Ensure you try to realistically gauge how much time this contract will take to manage and get the right cover.

5. Different supplier but same result, what happened?

This contract was meant to deliver real changes, but a year or two in, it’s just the same service and results the last supplier gave. What happened to the agreement of innovation, ideas, incentives for high KPI scores and phase 2 of implementing a new system?

  • Pitfall: There are a few things that could be going on here: either the process asked for a whole lot of things the buyer wasn’t ready for, or didn’t have the commercial readiness to be able to realistically achieve; The supplier hasn’t been managed or given any clear direction; Protracted contract negotiations stifled innovation, goodwill and squeezed margins.
  • Resolution: Time for an honest 360 feedback meeting. Be clear on what you want and what you are able to achieve.
  • Tip: It’s great to have thirst and hunger to do things differently, but be careful not to over scope what you need or what the organisation is ready for. If you aren’t going to portion risk evenly then don’t enter into a pain / gain share model (for example).

Next time you’re part of a large project team or leading a procurement process that will result in a new supplier, make sure you think ahead and mitigate these potential pitfalls to ensure your next contract implementation ain’t no drama llama.

Getting Your SOW Right The First Time

The Statement of Work (SOW) is the heart of any contract – so ensure you get it right the first time, thanks to this expert guide by Lawrence Kane, COP-GOV, CSP, CSMP, CIAP


The Statement of Work (SOW) is the heart of your contract. It defines requirements and success factors for your supplier, describing what services, tasks, and/or resources must be delivered along with metrics that govern whether or not those obligations have been met successfully (such as acceptance criteria, Service Level Agreements, and the like).

It is costly to change a SOW once set in place not only because your negotiating leverage is reduced after contract signing but also because any modifications can drive operational, financial, legal, and reputational risks for both parties. Unfortunately unresolved disputes harm the relationship and may even end up in court, so it is imperative to get your SOW right the first time.

A quality SOW will be distinctive for each type of contracting relationship (such as supplemental staffing, managed services, outsourcing, or Vested outsourcing) and will vary substantially depending on the type of work acquired (such as labor, hardware, software, services, etc.). The document itself tends to have some background information that levels the playing field for non-incumbents during the bid process along with your requirements for such things as request fulfilment, governance, implementation, transition, innovation, transformation, technology, operations, knowledge management, business continuity, incident management, security, performance management, information protection, change management, etc.

All SOWs should be aligned with your sourcing strategy so that you’re buying the right things (and retaining the appropriate functions). SLAs and other metrics must be reasoned, reasonable, and achievable so that you’re paying for a solution that meets your business need without costly over- or under-engineering.

Since the people who negotiate the deal often change roles and/or companies before the contract expires or is terminated it is important that the original intent is clear regardless of who reads the document. That means using clear, unambiguous language and enforceable terminology.

Choose your verbs carefully. “Shall” is a requirement the supplier must follow whereas “will” shows intent, “may” is optional, and “expect” is aspirational. I may expect to win the lottery, for instance, but that’s unlikely to happen unless I buy a ticket and probably not even then… As you can see, grammar matters in contracts. To reinforce that point, there’s a huge difference between the following three sentences:

  • Lets eat grandma.
  • Let’s eat, grandma.
  • “Let’s eat,” Grandma.

To delve a little deeper, proven practices vary with the type work you need to buy. The following are some tips for assuring first time quality when writing your SOW for supplemental staffing, managed services, outsourcing, and Vested outsourcing deals:

Supplemental Staffing is used to acquire qualified workforce from a supplier. This is “pay-for-effort” work, so onboarding and off-boarding processes must be predetermined and followed, and integration with retained efforts well thought out. For supplemental staffing SOWs:

  • Focus on job descriptions and daily management
  • Normalise requirements with industry benchmarks, describing any certifications or bona fide occupational qualifications necessary
  • Include badging, background checks, and other vetting requirements and processes that help assure the supplier employees will be capable, competent, and appropriate
  • Clearly specify any non-labor elements provided by both parties (supplier and buyer)
  • Describe how and where the work will be performed, establishing governance for daily management

Managed Services contracts are used to put a performance agreement in place with a supplier. This is “pay-for-unit-of-service” work, so clarity in service obligations and performance levels is essential. For managed services SOWs:

  • Focus on transactions, business rules, measurable objectives, and acceptance criteria
  • Levy only minimal requirements for interoperability or security to the extent feasible so that your supplier can do what they’re best at (which is why you hired them after all)
  • Specify any export controls, legal, security, or badging requirements that apply to supplier’s on- or offsite personnel
  • Describe the “what,” and also the “how” where necessary
  • Develop clearly defined and measurable outcomes (but not too many) to set SLAs and other key metrics
  • Optimize cost/service trade-offs
  • Establish governance for oversight

Outsourcing is a long term, results-oriented business relationship with a supplier. This is “pay-for-result” work, so deliverables must be closely aligned with business needs. For outsourcing SOWs:

  • Focus on business outcomes and most significant service levels
  • Facilitate supplier’s ability to do what they’re best at by not over-prescribing obligations, levying only minimal requirements for interoperability or security
  • Specify any export controls, legal, security, or badging requirements that apply to supplier’s on- or offsite personnel
  • Describe outcomes, not transactions, focusing on the “what,” not the “how”
  • Identify inputs, outputs, and interfaces, and develop clearly defined and measurable service levels (but not too many) to set SLAs
  • Optimize cost/service trade-offs
  • Establish governance for insight more than oversight

Vested Outsourcing is a long term business relationship with jointly designed solutions to a business imperative. This is “pay-for-outcome (solution)” work, so innovation is mandatory. For Vested outsourcing SOWs:

  • Must be linked to a shared vision (often outlined in a statement of objectives instead of a traditional SOW)
  • Focus on innovative solutions to your business imperatives
  • Requires extensive “open-book” collaboration to design an affordable solution that simultaneously meets both buyer’s business needs and supplier’s objectives
  • Solution taxonomy includes processes managed by both parties to show an end-to-end view
  • Uses flexible Statements of Objectives rather than a traditional SOW and architect the details together
  • Guard against constraining the scope too tightly, allowing supplier to accept all work scope (and risks) that are not core to the buyer’s business
  • Develop clearly defined and measurable outcomes, focusing on the “what,” not the “how”
  • Establish a governance for joint insight, not oversight

It can take 4 to 6 months to write a quality SOW (and associated SLAs and other key metrics), but the end result is worth it. For example, the US Air Force saved 50% by specifying that their floors must be clean, free of scuff marks and dirt, and have a uniformly glossy finish, rather than requiring that their contractor strip and re-wax their floors weekly. Seems obvious, perhaps, but this simple example shows why good, clear requirements matter.

Putting it into action… Let’s pretend, for a moment, that you are a busy professional and need someone to cut your lawn rather than doing it yourself. Here are three possible ways of writing the SOW to buy a lawn-cutting service:

  • bad SOW would be,
    “Cut my grass.”
  • better SOW would be,
    “Supplier shall cut my grass to a height of 1” and trim along the walkways once a week between the hours of 10:00 AM and 6:00 PM local time.”
  • The best SOW would be,
    “Supplier shall provide care and maintenance for the lawn at [address], including all fertilization, weeding, trimming, edging, thatching, and debris removal necessary to keep it healthy per American Lawn Care Industry organic lawn care standards. Supplier shall assure that the height of the lawn remains between 1” and 2” at all times, there are no bare patches, and that it does not overlap curbs or walkways or spread into flowerbeds. Supplier shall perform all work that creates noise levels over 100 decibels between the hours of 10:00 AM and 6:00 PM local time. All Supplier employees shall pass a criminal background check and conform to OSHA safety standards while on the job site. Supplier shall provide all tools, equipment, and ingredients necessary to perform the work. Buyer will provide water, power, garden hose, and sprinklers.”

It takes time and effort to get it right, but the better the SOW you write the more likely you are to receive all the value you expect when engaging with a supplier. Ultimately an investment in first time quality leads to a better, more affordable outcome.

This article was originally published on LinkedIn and is reproduced here with kind permission.

Ace Your Next Negotiation – Uncover Your Suppliers’ Secrets

Ever been to a therapist and felt like they’ve read you like a book? Uncover their secrets in this article and harness your own superpowers. Got a big meeting or negotiation coming up? Learn how your adversaries and your team tick to make sure you stay in control.


My partner has a superpower. 

When he opens the front door to a stranger he can tell what kind of day they’ve had, how they feel about themselves and what they think of him. He’s a therapist, and honing these skills day after day through years of human interaction have saved him (and his clients)  hours of questions and warm up chit chat. 

He can cut straight to the chase and use their shared time in the most effective way that meets their needs. 

They often feel relieved, understood and grateful that they don’t have to take the first step of opening up and being vulnerable.

It gives him a steer on what tone he needs to take, what topics they may need to explore and what the weather is like in their emotional forecast.

A therapist has an arsenal of tools ready to deploy – this super quick scanning ability means he’s on the front foot and taking charge before he’s even said hello.

Master your own superpowers

The good news for procurement and supply chain pros around the world is that these skills can be learned. We’ve all seen the TedTalks and infographics reminding us of how much we communicate nonverbally through posture, eye contact and even vibes. A therapist’s superpower helps to demonstrate how much untapped potential there is in the way we hold ourselves and once you learn the signs, you can feel like a mind reader.

Imagine walking into a negotiation clocking every single person in the room  based on the seats they’ve chosen to sit in, the set of their jaw, their gaze (fixed, nervous, darting around) and the colours they’re wearing. This includes your own team as well, it can help show who might need a bit of support, who’s at risk of spilling the beans and who might be the over-sharer. 

Having the best negotiation plan in the history of procurement does not mitigate against the might of the ever unpredictable human being. We’re people, not machines and that means we can be unpredictable but paradoxically we will often have a billboard above our heads announcing our inner emotional state.  We just need to learn to read the signs.

Experiment in your everyday life

Start practicing in your daily life by observing people around you. Look at how people hold themselves, their posture, their eyes, their energy levels, their expression when they’re talking to someone else. You can do this in the lift, on the bus, in conversation with a loved one and when you’re walking down the street. Observing people is not the same as judging, don’t make this mistake. It’s important that you are approaching this exercise from a place of detachment, objectivity and kindness.

David Attenborough ain’t got nothing on you

Once you’ve narrated your own nature documentary about humans you’ve stared at on the bus, then progress to unpack what they’re telling you nonverbally. Start to think about what the expressions might mean, what they could be communicating and what this means for you.

ActionMeaningStrategy
Posture: slouching, or intensely concentrating – furrowed brow, arms crossedLook at the symbol beneath the gestures. Slouching conveys being relaxed but too relaxed comes across as unreliable. Concentrating can come across as angry which can put you in the box of “unapproachable” Arms crossed means the person is not buying in to what you’re saying or they feel defensiveThe slouchy person can’t be relied on to win people over when the razzle dazzle is needed but would be good to talk to before you do a presentation to make sure you’re feeling relaxed

Speech
Fast talking and being overly friendly may indicate someone that feels the need to have everyone like them.A people pleaser can be great for assisting with establishing connections and winning people over but they may not be best placed to head to head on the details or key issues.

The ultimate survival guide (we got you)

Follow these neutral gestures and postures to ensure you’re the cool, calm and collected procurement pro at all times.

  1. Always sit up straight.
  1. Relax your face and voice. A tip is to take a big breath, smile, put your tongue behind your top two teeth (and keeping your mouth closed) exhale gently but firmly, it’s a great way to calm yourself down on the spot.
  1. If you’re a fidgeter, then restrict yourself to only one item on the table.
  1. Maintain direct, but relaxed eye contact. If you smile it will soften your gaze.
  1. Be comfortable in silence and don’t feel the need to fill the space.

Level up and feel the power!

Got a huge presentation or meeting to nail? Then lock in these two strategies from Forbes:

  1. Power priming. Think of a past event where you were successful, recall this event and spend time in that feeling. Soaking yourself in this feeling means you can recall it when you need to.
  1. Power pose. There is a lot of research that shows if you strike a particular pose like standing with your legs and arms wide open for 2 minutes, it will stimulate the hormone linked to power and dominance (testosterone).

Follow our body language hacks to ensure your negotiation or big event goes down as a winner.

Do you have any tried-and-true strategies? Comment below!

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. 



Hide or take action

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.

3 Ways to Improve Your Supply Chain Risk Management Strategy

We can’t just get our own house in order. We need to help our suppliers’ suppliers if we want a truly resilient supply chain. Procurious gets expert advice from riskmethods’ Bill DeMartino


How can companies of any size manage the huge number of risks in any supply chain?

Procurious Founder Tania Seary recently sat down with Bill DeMartino, Managing Director of North America at riskmethods, to find out about risk and the future of procurement.



Become resilient or lose credibility

The word of the moment is definitely resilience. But where do you start?

Bill says it’s a process. Not long ago, most organisations were hunting for better information to react faster as threats emerged.

“So this is what I would really categorise as being reactive,” Bill explains. “We want to get better at reacting to events (which is a fantastic place to start by the way) and what I would think of as the journey to resilience.”

The pandemic obviously changed many companies’ perceptions of their own resilience.

Yet he points to data that we’ve seen a 300% increase in disruptions of all kinds over the past three years.

“That means that for organisations who weren’t before acting the mandate is clear; this is the responsibility of supply chain leaders,” says Bill.

“If they are unable to deliver on this responsibility, they’re going to be losing credibility within the organisation.”

The good news is senior management is recognising the importance of proactive supply chain risk management, which will likely lead to more funding.

Treat suppliers better

So we’re all after resilience. But what does that actually look like?

It starts with a shift in the way companies treat and manage suppliers, Bill explains.

“I think we’re on the precipice of moving into what I would call the era of collaboration,” Bill says. 

“Traditionally, we’ve seen working with most of our suppliers in kind of a generic manner and we treat a few of them very specially. 

“But I think that collaboration needs to extend to a broader set of enterprises and so that continuum will continue to be a major transformation element.”

From reactive to transformative

Changing the way we see supplier relationships is a good step, but it’s only the start. 

Once an organisation can react quickly and be more resilient, it’s time to transform. That’s why the most mature and forward-looking organisations are overhauling their processes right now.

“Transformation is not just enough for me to figure out how to be reactive, but I really need to think more proactively on how I can change the elements and the way that I think about the category,” says Bill. 

These advanced organisations are asking how well they understand category risk exposure. And how they can incentivise people to act on the risks they uncover.  

“So it’s really more of a holistic approach to risk resilience,” says Bill.

Automation frees up resources

The other hot topic is automation. Bill says it’s incredible how much of our supply chain can be automated. 

“Supply chain folks are just automating everything that they can and it’s crazy,” says Bill.

“We’re trying to automate all the AP functions, we’re trying to automate all the contract functions, and now we’re actually moving up into the next level and trying to automate the analysis in the diagnosis of the data and the information and insights in those systems.”

“[W]ith this automation we’re able to free up the scarce resources and get our folks to focus on some of the proactive resilience and collaboration efforts they really need for the organisation to thrive,” says Bill.

Risk management in today’s environment

What does great risk management look like today? 

Bill narrows it down to three priorities:

1) Change jobs descriptions and incentives. You need to think about culture change. 

2) Put in place technology that can standardise processes, then measure them.

3) Manage your people well. Ensure that staff are actually following those processes in the way you expect.

“That’s the shift in the maturation that we’re seeing from our customers.  Before, they would just get the information.  Now they are working out how to best utilise that information and become proactive in their risk approach,” says Bill.

Minimise risk, no matter company size

You might be thinking, “That’s all well and good, but I work for an SME. How does that work for a smaller company like mine?”

And it’s true. You may not have the resources or capability at the moment with everything going on, says Bill.

“A lot of smaller organisations are so busy just keeping the business going, no one is taking the time to take a look back and actually think about what it’s going to be in three to five years out,” says Bill.

“They’re  just worrying about survival today.” 

Even if your organisation is small, you’ll likely notice a rising interest in risk management – whether it’s from your customers and executive team. 

“Customers are asking them, potentially assessing them and looking to measure them in terms of their risk preparedness so that’s definitely helping [put risk management on the agenda],” Bill says.

“We are also starting to see a really strong sense of awakening from [senior leaders] and with the idea of a supply network.

“[They’re] thinking it’s not just enough for me to take care of my house, but I need my suppliers to also do the same for theirs.”

What can you do?

So whether risk management is at the top of your agenda already, or it’s just starting to gain importance, Bill suggests three key areas to get your house in order.

1) Using technology to manage risk: “There is an enormous amount of information that’s out there and the largest challenge that organisations have is how to filter through that information and uncover specific and relevant insights.” 

2) Make risk information visible: Can people in your organisation easily find information about risk? 

“We’ve seen a lot of folks who create risk scorecards or risk audits, and that information gets locked away somewhere,” says Bill. 

Instead, he suggests putting that information on your employees’ phones and laptops so they can easily access it when they’re talking to suppliers.

3) Integrate: The final step is to embed all of that risk information and data into other company systems.

As a supply chain professional, Bill says you should ask, “How can I integrate the technology and make it something that really impacts the way that we work?”

Going forward

Now that risk management is firmly on the agenda, you can use it to get ahead in your career. 

Bill predicts the most valuable procurement professionals in the future will be able to manage risk in two ways.

The first is artificial intelligence. Companies will need people who can use AI to spot patterns in suppliers to predict future events. 

“For example, if a supplier shutters a plant and fires the CFO, I could predict a bankruptcy is coming and reorganise my supplier geography to avoid disruption,” says Bill. 

“We can utilise artificial intelligence techniques to start doing pattern recognition and help folks better predict – never with 100% accuracy – but better predict what may be coming down the pipe for them.”

The second is to make suggestions on the best way to react if a threat actually comes to fruition. 

“There’s a number of different approaches that we’ve seen utilised to respond to an event, so we can bring all that information together and present to the individual in a way that allows them to very quickly assess their options, make decisions, and run.”

Bill DeMartino, Managing Director of North America for riskmethods, can be heard in the webcast series The Future Of Supply Chain Now.

How can you limit supply chain disruption and proactively plan for market shifts? Check out this IBM report to find out.

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.

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

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


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

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

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

‘A stuck in the nineties’ approach

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

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

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

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

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

Why doesn’t this approach work? 

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

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

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

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

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

What’s the alternative? 

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

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

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

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

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

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

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