If someone asked you the question “what is ‘supplier collaboration’?”, how would you answer? Purchase orders, invoices and contracts; many see process as central to understanding supplier collaboration. However, a growing number of procurement industry thought leaders see it as a means to driving innovation and growth. So which is it?
Think of supplier collaboration as a spectrum. A spectrum that considers everything from your typical day-to-day engagement to an innovation partnership. In a sense, everyone collaborates with suppliers.
But understanding what supplier collaboration could achieve is essential to any procurement organisation seeking to unlock greater value from their key relationships.
To help, we devised a supplier collaboration checklist for you to consider as part of your wider procurement strategy.
Chances are if you asked 5 people involved in a top tier supplier relationship what the vision and strategic objectives are for that relationship, you would get 5 different answers. This misalignment causes friction that blocks effective collaboration from happening.
But this can be put right in just a few steps:
A proper governance structure is key to fostering a successful collaborative relationship. It involves developing a set of cohesive policies, processes and approval levels that act as the framework to your supplier partnership. Without this, collaboration efforts quickly stall.
To build a repeatable framework that enables both sides of the relationship to deliver:
Good governance requires everyone involved in the relationship to be accountable for their part in building a successful collaborative relationship. From task management to issue resolution, it’s important to assign responsibilities right from the beginning. Failing to do so could plunge any well intentioned partnership into confusion and stagnation. Fast.
Here are some additional steps to make ownership watertight in your relationship:
The basis of trust in any relationship is transparency and that certainly applies to supplier collaboration. Whilst operational metrics are important for measuring performance, they don’t tell the whole story about how the relationship is really working. Without that insight, the value contributed by any collaborative effort will quickly plateau.
But gaining real visibility into supplier partnerships can be achieved if you:
Few business processes are more critical to a company’s continued success than innovation. But it’s hard to do well.
The challenge of managing innovation comes from its broad reach, unpredictable nature and dispersed ownership. Sourcing innovation externally also introduces concerns around cost and legal ownership.
It’s therefore understandable that innovation isn’t a primary driver of supplier collaboration for most procurement organisations; supply chain cost cutting is a much greater focus.
But this can change through disciplined innovation management, project tracking and real-time analysis of supplier collaboration effectiveness:
A great strategy can quickly unravel without the right infrastructure in place. Technology is fundamental to the success of any supplier collaboration and innovation strategy, so selecting it’s vital to get this part right.
Every procurement team should consider the following when researching potential solutions:
Supplier collaboration can be seen both as a process and a strategy; as a process, it’s any interaction between buyer and supplier; as a strategy, it’s about unlocking more value from every supplier relationship beyond basic cost cutting.
Procurement teams are best placed to deliver this to facilitate unique innovation, develop new competitive advantages and drive growth for the entire company through better supplier working relations. As businesses demand growth, it is the strategy of supplier collaboration, not just the process, that a growing number of organisations now embrace.
Published October 2019.