By Supply Chain Management
Have your supplier relationships gone flat? Has the initial excitement fizzled out? 10 experts share their top tips to put the spark back into your partnerships.
Picture the scene: With the ink not yet dry on the contract, the enthusiastic purchaser and eager, hungry supplier get ready to celebrate the start of a burgeoning relationship. What could possibly go wrong? But leap forward a few years, and all is not well. Targets have been missed, innovation has stalled, and there’s an atmosphere of distrust between the two parties.
Sometimes, relationships with suppliers simply need freshening up, often as a result of team complacency or a divergence in either the vendors’ or buyers’ priorities or strategies.
These kinds of problems can lead to low satisfaction scoring or feedback and under- performance perceived by stakeholders or against key performance indicators, according to Sean Doyle, senior manager, strategy and procurement consulting, Accenture.
“A good SRM strategy should include indicators that pick these up early,” he adds. There are many other ways supply chain professionals can improve their partnerships. SM asked 10 SRM professionals what their tops tips are to freshen up their relations with suppliers.
1. Socialise with your suppliers
Don’t be afraid to socialise with your key partners. At LV= we’ve arranged joint events for charity. This encourages collaboration and this momentum can be built on back in the workplace to deliver opportunities to create value out of the relationship.
Getting to know and trust each other pays dividends, especially if you want to be the customer of choice. I believe you are more likely to go the extra mile for someone who you respect and trust.
Reflect on the current status quo – this will allow you to identify why the relationship needs refreshing – has complacency set in or is performance below par?
Another suggestion would be to invite all stakeholders and their counterparts at the supplier to a ‘WOE’ session. WOE is our shorthand for “What on Earth?” and I would be asking what can we do together to improve things. If properly facilitated, asking this question will provoke some interesting challenges. Be prepared to make changes within your own organisation though, as rarely does the blame rest solely in one camp. Commit to a joint action plan and ensure there is skin in the game for both parties.
Rachel Scarrett, head of GI Claims Supplier Management, LV=
2. Get your own house in order
If you have a relationship that’s got a little tired, or worse, is not performing, my advice is to do some serious navel gazing. This comes before starting to tighten up your contract management, introducing new supplier performance metrics or arranging for a third party to facilitate an interactive creative session between your organisations – all of which are among a broad range of strategic options available.
Before going to market or directly negotiating a category of spend, we would seek some form of internal sign-off from stakeholders and procurement management agreeing that the approach is sensible to get the best value out of the sourcing activity. The start of all great supplier management and innovation programmes requires an internally signed off supplier strategy or approach.
Why? Because quite simply poor performance from a supplier is most often a result of conflicting signals and messages coming from the customer organisation. Take some time out to reconsider some basics. Is the governance within your organisation clear – does the supplier know where they should take their direction (that is, explicitly written and behaviourally respected by all including your CEO)? Is there a clear guide path articulated internally about that area of supply – for example a technology roadmap, cost reduction initiatives, value improvements through new innovations, productivity improvements – that has buy-in and explicit agreement from interested and affected internal stakeholders?
Are there clear indicators agreed about what good looks like? For example, a clear supplier scorecard that has been agreed with those interested stakeholders as appropriately representative?
If the answer to all of these questions is “yes”, then all sorts of opportunities arise. For example, a 360-degree feedback loop could set the scene to enable open and honest debate and you could wait to see what that draws out. If the answer to any of them was “no”, then reorganising your own house could freshen up the relationship all by itself.
Allison Ford-Langstaff, director, Future Purchasing
3. Find motivated sponsors to establish a shared vision
When it comes to revitalising the relationship with a major or strategic supplier, it clearly depends upon where you are starting from. If there has been a degree of neglect by one or both parties then the key will be to find a motivated sponsor from the business and from the supplier. Bring the sponsors together to work through what it is that both parties see as important in the relationship and whether there is a shared vision of what could be.
If there is a meeting of minds on potential direction, taking a two-step approach to build momentum can work very well. Firstly, spend time with the joint teams getting their input into the vision and opportunities for improvement. Secondly, build some impetus by getting the joint teams collaborating on projects that can deliver quick wins and create momentum. Building momentum is greatly helped if the buyer and supplier can jointly celebrate and recognise the teams for those wins. This really helps to build trust and reinforce the collaborative behaviour the teams have demonstrated.
Chris Holmes, head of supplier performance and innovation, Novartis International
4. Focus on soft metrics rather than risk and hard costs
Good SRM is an activity that is undertaken with a supplier, it isn’t done to the supplier. With that – and the recognition that some humility goes a long way where relationships are concerned – when looking to freshen things up I’d engage the supplier and get their views on what would help.
Approach the supplier with the aim of improving the relationship itself, that is the interactions between teams with a focus more on soft metrics instead of the harder cost and risk-focused ones. This can create a more positive direction for both sides.
Get teams together and engage in team building, looking at joint awards submissions. At the least put time aside to focus on how both sides should behave with each other, which would be a good start to this.
Consider a supplier ‘charter’, a guideline document outlining how the supplier/customer will act both individually and together on these softer aspects. This has always worked well for me in the past. In a nutshell therefore, talk about it, work on the fun stuff as well as the work and focus on the personal side of the relationship if you want to make a difference.
Jamie Napper, managing director – global SRM, BNY Mellon
5. Demonstrate a link between the organisation’s mission and what the teams have been doing
It’s perhaps a statement of the obvious, but my tip would be to focus on the people. Evidence overwhelmingly supports the view that people are (by a country mile) the most important ingredient in any commercial relationship. There are so many ways to do it that I couldn’t squeeze them all into this piece, but here are a few.
• Remind people what the original objectives were/are, a reminder of the journey – the challenges that have been faced, the achievements that have been made, even the opportunities that have been missed.
• Demonstrate a clear link between what the teams have been doing and an organisation’s mission, on all sides. It doesn’t do any harm to illustrate senior recognition and support of this point too. Review the way in which the people engage and communicate, for example, does it facilitate meaningful discussion or prevent it with formality and point-scoring?
• Spend time understanding personal objectives, that is, is the client incentivised to reduce costs while the account executive is incentivised to increase revenue or perhaps margin? If there are glaring gaps then consider what should be done about that.
• Lastly, look forward. It’s great to look back and learn lessons but it is much better to have an honest look at the future, the challenges and opportunities, learn lessons from the past and to work out a winning strategy.
Dave Wyer, senior supplier development manager, BBC
6. Run information days and communication improvement programmes at each other’s sites
Long-term supplier relationships are the backbone of any good service or product delivery, but the most important thing is not the duration, but the trust and mutual benefit that comes from that engagement; profit for one, cost saving for another.
To keep the relationship alive and fresh there are a few key things to consider. Like any long-term relationship, it is give and take, understanding the needs of the other party, why those needs are as they are and what can be done to serve them.
Consider running an information day at each other’s site. Use it to inform, educate and develop brand awareness, the power of the brand is immense for both buyer and seller alike. Look to collaborate on joint product developments, because a buyer working on the development of a product means it can more closely meet my needs and allows me to keep up-to-date with industry changes.
Set up a mutual communication improvement programme, each looking at the other’s way of dealing with the relationship and seeing what can be improved. This can sometimes be hard to achieve, however the benefits can be seen across all areas and it demonstrates a real trust of each other.
Duncan Stirling, head of service supplier management and service improvement, Global Health, BT Global Services
7. Find out ‘what the world looks like’ from the supplier’s point of view
Most approaches to managing suppliers tend to start with the contract and then introduce a mixture of performance and relationship management depending on how the supplier has been segmented, for example as strategic or tactical.
However there is one thing that remains common to all supplier relationships and that is the element of personal interaction between the supplier manager and the account manager. This relationship is critical.
My top tip is to get face-to-face with strategic and tier one suppliers on a regular basis to hold both operational and strategic discussions. Too often supplier meetings are relegated to being held over the phone or by email. When this happens, the potential value delivery of SRM, is reduced.
I have recently become the manager of a multi-million pound portfolio of over 20 suppliers and the most valuable thing for me has been meeting my account managers to discover ‘what the world looks like’ from their perspective. These meetings have quickly enabled me to find out where quick-win operational improvements can be made as well as identify those suppliers who can offer real innovation opportunities.
Philip Halanen, supply chain relationship executive, British Airways
8. Examine the governance that oversees the relationship
The key word in the acronym SRM is the “relationship” so it will be necessary to re-examine the governance that oversees it. What do I mean?
• Have the right accountability in terms of having someone on the hook, with clear measurable objectives and accountability defined in their role profile, both in the supplier and the customer organisations.
• Ensure all the correct interfaces exist at all appropriate levels, and that the people at those interfaces actively and regularly meet with purpose, for example for strategic discussions or operational discussions. Not every relationship needs a board member sponsor, though.
• Get the right level of process in place for the relationship in order to add value to the customer. This includes working out how continuous improvement and innovation can be created, assessed and shared objectively.
• Regularly measure the relationship, both for the supplier and the customer. It should have an appropriate mix of objective and subjective elements.
Not every relationship needs a heavy – or indeed any – formal governance (a common mistake, unfortunately) but doing this in conjunction with the supplier, and getting buy-in from both organisations, will reap dividends in the future.
Beth Wallace, owner and director, Wallace Consulting
9. Encourage innovation from suppliers
Upgrading a supplier relationship often involves an extension of value generation, behind cost reduction. In addition to the traditional service level agreement measures – such as service, quality and cost – we want to start encouraging innovative ideas from suppliers. Many companies are already making this change and talking about supplier innovation.
Unfortunately several of them fall into two typical pitfalls. Firstly, the process to evaluate ideas is slow and this often leads to rejection of the idea. Secondly, even when a very good idea is retained, some procurement departments tend to take a win-lose approach. The procurement departments that generate most innovative ideas from suppliers are the ones that have developed effective internal processes so that the suppliers’ ideas can be quickly evaluated and with a high success rate. Then they focus on enlarging the pie in the deal, so that both parties can be happy.
Giuseppe Conti, associate director procurement, Merck
10. Think carefully before bringing in a new team to freshen up the relationship
The important thing when freshening up a business relationship is to understand the starting point. It sounds obvious, but often a new team introduced to ‘freshen up’ an existing relationship can find itself in the same old situation just a few months later – simply because the business-critical issues impeding the relationship were not understood and addressed.
So begin by seeking a genuine and common understanding of the key issues. Then be innovative in finding ways to address them.
Showing respect for the goals and objectives of both the customer and the supplier is absolutely key, even where disagreement prevails.
If new teams are formed from both sides to rebuild the relationship, then time should be invested to find out more details about the background and experience of the supplier team and to build up the rapport.
Knowledge and cultural differences need to be considered and accommodated.
When both teams communicate and work together to focus on developing the relationships, both are then less likely to challenge each other, and changes needed to improve the relationship are more likely to be accepted.