Procurement has historically been viewed as a back office function of any given enterprise organisation, being tasked with quality, cost reduction, and above all, receiving all goods and services on time, in full. As we speed through the 2020s, however, procurement is moving into an expanded role, becoming both one of the most critical branches of the organisation, while also being one of the most difficult to navigate.
With companies facing obstacles at all angles, including supply chain disruptions, global conflicts, and a pandemic, procurement functions are additionally tasked with GHG emissions reductions to meet 2030 sustainability goals. As pressure mounts on procurement to meet challenges both newfound & traditional, novel approaches must be undertaken in order to manage any given company’s value chain successfully.
Supplier Collaboration has emerged as a priority for procurement functions in order to face the newfound challenges encountered today. Gartner, McKinsey, and a host of other leaders in research, consulting, and technology have found that collaboration with suppliers is key to achieving customer of choice status, cutting costs, getting to market quicker, ensuring products are delivered on time in full, outsourcing new innovation, and tackling mounting sustainability demands.
However, most enterprise organisations don’t know where or how to begin. Supplier Collaboration is, at its heart, a straightforward concept – building on traditional operational supplier relationship management practices with further strategic focus, improved collaboration, and mutual management of supplier relationships.
Yet many businesses struggle to achieve this collaboration systematically and at scale – pockets of excellence exist, but common barriers such as poor visibility over performance or difficulties managing numerous internal and external stakeholders limit the amount of value that can be driven.
Luckily, as the creators of the world’s leading Supplier Collaboration & Innovation solution, Vizibl is here to help you get started and to continue your successes over the short, medium, and long term so that Supplier Collaboration can deliver true value to your organisation as you pursue your programme over the coming days, weeks, months, and years.
Set an objective based on your strategic needs
Initially, it is vital that you strategically define what you want to achieve by collaborating with suppliers. Do you want to reduce scope 3 emissions? Create collaborations that accelerate access to supplier sourced innovation? Get first choice on products or services in times of supply chain disruptions?
Whatever you wish to achieve with your collaboration initiative, set a strategic goal before you begin. You may change it, add to it, or eventually move in a different direction entirely, but it is important to have a clear, strategic objective when starting, so you can remain focused on the end goal as you begin your collaboration.
Start your collaboration projects with value trackers aligned to your strategic needs
When it comes to the management of your value chain, action beats inaction every time. Simply start your collaboration projects! Perfection will rarely be attained on the first try, so instead of gathering endless data or trying to perfect your supplier collaboration strategy, simply engage your supply base and act!
Set up a meeting with a strategic supplier, or talk to multiple suppliers and set mutually beneficial goals that you’d like to achieve out of the relationship. Set daily, attainable objectives, and your collaboration journey will be well on its way in no time.
Once launched, it is important to align these initial projects with value trackers. Procurement is typically measured on cost savings and time savings, finding it notoriously difficult to measure things other than transactional metrics on the value it brings back to the business. However, as procurement gains importance and new responsibilities in the 2020s, the value it adds to the business must be tracked in correspondingly new ways.
Having already set your general objective for your collaborative projects and your supplier collaboration programme as a whole, it is vital that you narrow down and focus on your strategic needs. What do you strategically want out of each relationship with each individual supplier? Once this has been defined, align the KPIs you set against the performance of your strategic suppliers so that you can have a metric for success as you progress through your supplier collaboration programme. This will be the best way to track success, and it will all begin with simply starting your collaborative projects.
Identify innovation opportunities for those needs you can’t solve
With newfound, and infinitely complex, challenges in the 2020s, such as reducing scope 3 emissions, innovation is key to unlocking value & change at scale within any given organisation. Given supplier innovation is already partially pre-tested and pre-validated, there are few better places to source innovation than the supply base.
There are bound to be several needs and wants within your procurement function that seems like an impossible feat. However, with supplier innovation, your collaboration can lead to growth, new value streams, emissions reductions, and a faster track to customer of choice status.
Suppliers come armed with their own talent pool, a wealth and breadth of knowledge across competitor organisations, insights from other verticals, and an intimate understanding of local markets in an increasingly global landscape. Leading research and consulting firm McKinsey has found that supplier-sourced innovation is typically commercialised 40% faster than home-grown innovation, making it a crucial element of success for your short term supplier collaboration strategy.
Once your collaborative projects have begun, ask for new ideas. It is important that a level playing field is established, and that your strategic suppliers have a seat at the table just as much as the buyers in your organisation. Keep an open mind for new ideas, new approaches, and new strategies for your procurement process, and communicate the value that supplier innovation can bring to your organisation.
Read this complimentary research by Gartner on how supplier innovation can help reduce scope 3 emissions at scale.
What does ‘good’ look like? Define success
In any supplier collaboration journey, it is important to define what success will look like at the outset. It’s also important not to make your objectives too wide-ranging and difficult to measure. For example, a broader KPI (or lagging metric) would look like this: reduce value chain emissions by 50% by 2030. However, such daunting and complex deadlines can often lead to disappointment as you try new things and learn what is effective.
Define smaller successes to begin with. What would you like to accomplish on your first day, your first week, or your first year? Set leading metrics that you would like to accomplish through your supplier collaboration programme, and regularly check up on them. These definitions of success can be from the number of strategic suppliers you are collaborating with, all the way to tracking metrics on savings, sustainability, or customer of choice status.
Before launching into this quick win, the mindset you should have when pursuing your programme is progress over perfection. You will rarely get it right on the right time, so don’t be harsh on yourself or your team if you don’t immediately see your defined successes come to fruition – try to improve each day, and soon enough, you will be meeting (and hopefully exceeding!) your initial definitions of success as they mature with your programme.
Segment your supply base
Define your strategic suppliers. Enterprise organisations tend to have thousands of suppliers, each of varying importance and strategic need, making it a daunting task to collaborate with each one.
Scaling is a crucial element of supplier collaboration. Although working with a small number of strategic suppliers, once identified, can make a large impact on your organisation, working upstream to scale your supplier collaboration programme will evolve your procurement function and unlock value from all angles.
To start with, define a small number of your most strategic suppliers, and begin your collaborative & innovative projects with them. And, as you learn and further define success within your collaborative processes, you can begin to identify different tiers of suppliers based on their importance to your business and profitability, and begin to scale your projects more broadly.
Standardise your processes
By standardising your processes, you will be able to more easily define what success looks like for your supplier collaboration journey.
Ask yourself — what are your processes? Do you have QBRs? Which suppliers are strategic? Who within your organisation will be involved on which projects? Do you have standardised KPIs? Who is setting your KPIs, and how transparent are they to your entire team? Remember that collaboration with suppliers must begin with a collaborative mindset, so begin by working closely and transparently with your internal team, at all levels.
Clear, documented processes are the most straightforward way to track success and establish routines in the medium term of your supplier collaboration strategy.
Find and define your motivational attitude
Vizibl’s team of Supplier Collaboration experts & thought leaders find that motivation is a key aspect that should be a long term consideration when establishing, starting, executing, and eventually scaling your Supplier Collaboration programme. It is an aspect of collaboration that should always be considered, even for the most mature collaboration programmes.
Although it seems like a simple mental step, it is a vitally important & often complex element of Supplier Collaboration. Motivation & attitude must be monitored both with suppliers and internally to make sure that everyone is in the best mindset possible to deliver mutual value. Frequent check ups with both your team and suppliers at all levels are important to understand if any frustrations or doubts are being experienced.
Before, during, & after collaborating with your suppliers, ask yourself: why am I doing this? What is driving me to take a more collaborative approach within my supply base?
A positive, understanding approach is crucial to getting the most out of your supplier relationships. Keep an open mind, and seek to remain optimistic as you execute & scale your Supplier Collaboration strategy.
Communicate often and well
Communication is central to effective collaboration.
Whether it is launching your programme with a Supplier Day, a yearly review, QBR, bi-monthly check up, or a daily informal chat with a supplier, communication is a crucial aspect of a successful supplier collaboration programme.
Communication is another aspect of Supplier Collaboration that needs to be continuously monitored and adjusted. Begin by figuring out the most beneficial way to communicate with your suppliers. Are the meetings positive? Is there any animosity? Any frustration or doubts?
The best communicative practice for beginning, executing, and scaling in the long term is to speak clearly, openly, and positively along your journey. This is a vital component of achieving customer of choice status with your strategic suppliers, who will respond better to buyers who have communicated with them clearly and regularly throughout the relationship. It can also lead to innovative value streams, and simply a better working relationship with your supply chain stakeholders.
Communication should also be carried out internally so that everyone is aligned and kept up to date with all key information and events. Communication is truly key in order to be collaboratively successful with suppliers and your team. Continuously adjust and monitor the communication types and frequency both internally and externally, and mutual value will soon be realised.
Transparency is the final way to ensure success in the long term for your collaborative projects.
It’s important not to withhold key information from your suppliers throughout the course of your relationships. Traditionally, procurement held an oppositional relationship with suppliers, withholding key business information lest it put the perpetual cost savings in jeopardy.
In the current business climate, this is no longer an option. Transparency & communication is the fastest way to become customer of choice. Be honest, be open, and be communicative with your suppliers in order to define success for both sides of the relationship, so that you can work towards your goals together.
Supplier Collaboration takes time. It is a complex and novel approach to managing your suppliers, but mature enterprise organisations have already seen vast benefits in profit, resilience, and sustainability. Different stages of your Supplier Collaboration journeys will require different focuses, but if carefully monitored and nurtured as you begin, execute, and scale your programme, you will ensure that your programme drives value back to your business.
Learn more about how the Vizibl platform can help facilitate all of these best practices and more.