Secrets of Supplier Relationship Management: Procurement Q&A
Everyone agrees procurement is an extremely complicated function. Between vendor selection, RFx events, procure to pay, and supplier management, it can feel daunting.
And because so many of our clients work within it, we want to provide more than just vendor management software & procurement software, which is why we're always looking for great content (like the peanut butter & jelly analogy) and helpful experts to make it easier.
So we were thrilled to discover Philip Ideson, Host of the brilliant Art of Procurement podcast.
A true Procurement Pro with a dizzying amount of experience, Ideson puts his expertise to good use moderating a popular podcast featuring various procurement thought leaders. (Stay tuned for RFP365's debut on the podcast, covering Request for Proposals and its varied issues).
His passion for the industry is palatable, and his episodes are fascinating (the titillating English accent doesn’t hurt either) so we decided to ask him for his top 5 vendor management best practices.
Q&A with Art of Procurement’s Philip Ideson
Q. Why is supplier collaboration important? How high of a priority should it be?
[PI] “Having worked on both sides of the table, both as a Buyer, and as a service provider, I strongly believe that our ability to build true win-win collaborative supplier relationships will be pivotal to evolving the procurement value proposition.
“As organizations become more and more dependent on third parties, our ability to integrate them into our business becomes a procurement competitive advantage.
“Those with collaborative relationships are more likely to enjoy ‘customer of choice’ status, benefits of which can involve access to supplier innovation, transparent pricing, and a partnership approach to the management of risk.
“The companies that 'win' in their marketplace will be those who build deeper relationships with their most strategic supplier partners to deliver outcomes greater than the sum of the two parts.
“It is important to note, however, that I would not advocate procurement organizations seek such relationships with all suppliers. Segmentation is required to determine which areas of spend would benefit most from this approach.”
Q. How can Purchasers set clear objectives and expectations for their vendors?
[PI] “It starts with an RFI or RFP, and then the SOW as the first stake in the ground in regards to objectives and expectations. However, things change. It’s not unusual for a long term agreement to be re-scoped more than once over the length of a multi-year contract.
"Ongoing communication is key.
“It’s important to continually ensure both parties are aligned on objectives and expectations both through a formal governance program, and also through ongoing informal discussions between the key contacts at both parties."
Q. What's the most common mistake you see Buyers make in how they relate and/or work with vendors? Why is it important to not make that mistake?
[PI] “The first is to call them a vendor. [Whoops. Well played Ideson.]
"Seriously though, I think the terminology of “vendor” brings a negative connotation of a buyer-seller relationship where the Buyer is firmly in charge.
'"This may be appropriate when you are buying a low cost commodity item, but not for those products or services where you want, or need, to build a more collaborative relationship.
"On that note, I think that the biggest mistake I see is when Buyers treat suppliers relationships as being one-way, rather than two-way.
"Sometimes this is out of necessity – there are too many fires to fight to be able to invest the time in building a two-way relationship, but it is also often out of choice, in an attempt to retain the position of power in the relationship.
"The fact is, your most important suppliers are likely going to be providing similar products or services to your competitors, therefore, by maintaining a one-sided relationship you are opening the door to those competitors to lever the supplier more successfully than you."
Q. General supplier management advice? Tips on being a "good customer?"
[PI] “First, recognize that a supplier usually cannot be successful without internal support. The primary reason I see engagements fail is a lack of backing. For instance, abandoning the supplier after the contract is signed, leaving them to implement and manage their services without giving any direction on navigating client needs, or in driving the change necessary for an engagement to be successful.
"To prevent such disregard, establish a strong governance process. Make sure it’s attended by the right level of people internally and it’s focused on strategic as well as operational activities.
"Secondly, use contracts as a framework or guide, only holding them to the letter as a last resort.
"If either the Buyer or Supplier is constantly referring to the contract (in an otherwise successful relationship), it's a an indicator of a one-way relationship."
Q. How can Procurement empower its vendors to deliver?
[PI] "Be there for your supplier.
"Foster a culture where they feel comfortable confiding in you – in problems they have, or risks they may foresee.
"Most supplier related problems can be mitigated with advance notice, but your supplier will only come to you when they feel like you are there to help them, rather than use the information against them."
5 things I learned from The Art of Procurement's Philip Ideson
- Supplier collaboration is pivotal to the future of procurement. Our success directly hinges on our partners' success, and investing in them increases our own prosperity.
- Setting expectations isn't a box you check once. In order for them to remain clear and relevant they need to be continually redefined, and both sides of the table need to be involved in the conversation.
- Suppliers are more than “vendors,” they’re partners. And if you won’t truly partner with them someone else will, and it will be your loss.
- Approach contract management holistically, and focus on the relationship.
- Supplier relationship management is just like any relationship, “shaming and blaming” your suppliers only shuts down critical communication.
Big cheers to Art of Procurement and Philip Ideson, thanks for letting us pick your brain!
Philip Ideson is the Host of the Art of Procurement podcast, where he interviews thought leaders who share strategies and tactics that help leaders elevate the role of procurement. Philip also provides procurement advisory and consulting services, and more information can be found at philipideson.com.
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