If suppliers are treated as part of the team, rather than punching bags, it can actually help to accelerate procurement’s ability to add value.
When you are hiring employees, do you focus just on the salary negotiations? With the only goal being to get the lowest cost talent? No, because we know the value we are going to receive from that individual is through many years of ideas, quality work and the leadership they provide to others.
The price negotiation is a point in time, while the relationship is the multiplier.
The same holds true with suppliers.
As you look across our supply base, procurement has a range of suppliers from “high potential” to “needs improvement”. As we do with top performing teams, procurement has the opportunity to cultivate high potential suppliers through exposure, stretch assignments, and trust.
There is also an opportunity to manage up or out the “needs improvement” suppliers by developing their capabilities and giving them the opportunity to improve. Through this approach, procurement now has the ability to discuss with their new-found talent how to creatively reduce total cost of ownership, to solve problems, and to provide innovative solutions.
When trusted are offered development opportunities, suppliers will go above and beyond for the customer. They assign their best people on the account. They look for ways to improve the relationship, reduce costs, and proactively call out risks. And, in times of short supply, will serve their preferred customer of choice first.
Through one change in perspective, one change in a relationship, procurement achieves lower TCO, lower risk, more innovation, and a reliable supply chain – this is the key to delivering value.
The Next Big Idea in Procurement
Procurement is on the brink of significant change, as are many more areas of our lives. There will be many big ideas that brilliant procurement professionals implement into their organisations to support the advancements in technology, the new expectations of talent, and techniques to add value well beyond cost. These are exciting times to lead, inspire, and create within procurement.
Each year a small group of influential procurement thought leaders gather in Chicago for the Procurious Big Ideas Summit. Participants are inspired and take back many big ideas for their personal growth as well for their organisations.
While technology advancements often receive a lot of focus, perhaps the biggest shift within procurement is the expectation to move beyond cost to becoming value providers. Procurement is being challenged to find new ways to reduce risk, increase sustainability, to help solve complex business problems, to increase revenue, to generate new innovations, to become an internal consultant to their stakeholders to obtain the best out of every investment.
This expectation is becoming more pronounced and will allow procurement to analyse how they measure success, the skills their talent need, and even what technology they might need to deploy.
Those organisations who make this change exceptionally well will also realise that their suppliers offer a limitless capability to accelerate procurements’ ability to add value. When suppliers are treated as an extension of the supply chain, as part of the team, the relationship with suppliers also moves beyond cost. In fact, one could argue that becoming a customer of choice to suppliers is the key to unleashing value, reducing risk, increasing innovation, and achieving agility within the supply chain.
Leading the Supply Base
An idea is just an idea until it is implemented, so how do procurement organisations get started with this change? Below are some low investment ways to start this journey.
- Toss out outdated segmentations – Start looking at the supply base like one would talent. Understand high potential suppliers, remain in role, and need improvement suppliers. This does not need to be complicated nor does this need to be scientific. Without putting much effort into this, the top performers and the lowest performers could be listed. Start there.
- Offer development programmes – As one would with their internal talent, offer programmes that will help suppliers operate with excellence. These programmes can even be supplier funded, but it shows suppliers that procurement cares about their success. It develops a relationship where it is understood that procurement is only as good as their suppliers. When suppliers perform at their best, procurement, suppliers, and the communities around them all benefit.
- Think differently about procurement’s role – When procurement starts thinking about their role as a hiring manager to suppliers, it creates a change within every interaction. Set the expectation that a procurement manager’s role is to lead their team of suppliers to success. This will have downstream impacts around measurements and skills needed but starting here will start the cultural change needed for success.
Procurement is on the move. These are indeed exciting times to renew the spirit of what procurement is all about. Let’s not be overwhelmed and paralysed by the amount of opportunity. The best thing to do now is to start. Start taking the small steps that will create big change and the next big ideas.
As the Big Ideas Summit Chicago facilitator, Amanda Prochaska will be harnessing the biggest and brightest ideas presented. You don’t need to be “in the room where it happens” – you can register as a digital delegate and get up-skilled and uplifted from the comfort of your own desk. Register now by clicking here.