Not to be confused with operational collaboration (such as a supplier checking in with a buying organisation on the payment status of an invoice), Supplier Collaboration focuses the relationship on collaborative goals, interactions, and activities that deliver strategic value to both the buying and the selling organisation.
What is the difference between Supplier Relationship Management and Supplier Collaboration?
Supplier Relationship Management (SRM), in Vizibl terms, forms the foundations of great relationships. Good SRM encompasses establishing the relationship, establishing an organisation tree structure, and uncovering all stakeholders. These steps in turn enable both sides of the relationship to build a shared vision and a joint business plan in addition to understanding how the relationship has performed in the past, and how it is performing today. These activities form the foundations of accountable, structured, and highly aligned relationships – characteristic of robust SRM.
Supplier Collaboration leverages this alignment created by SRM to take the relationship to the next stage; the SRM groundwork supports the creation of highly collaborative, goal-oriented relationships. Supplier Collaboration moves the relationship from ‘static’ — usually focused around retrospectively monitoring performance and compliance — to ‘active’ relationships. ‘Active relationships’ denotes activity on shared projects, robust tracking of relationship value, and continuous instances of collaborative interaction.
Though commonly mistaken for one another, Supplier Relationship Management (SRM) works in conjunction with Supplier Collaboration. When combined, the result is a relationship that is highly aligned and deeply collaborative. Together, they promote the customer of choice status required to gain priority access to Supplier Innovation.
Supplier Collaboration goals & benefits
The primary goal of every Supplier relationship manager or key supplier manager (KSM) is to manage a set of strategic supplier relationships effectively to deliver value to their organisation. Supporting this management with close collaboration has myriad benefits for both the procurement team and the wider organisation. The ones we hear from customers most often are:
Becoming “Customer of Choice”
Customer of choice status grants privileged access to a supplier – their best people, smartest ideas, preferential pricing, their latest innovations, and priority access to their capacity in times of scarcity or shortage of supply. One-sided relationships undermine the potential for achieving customer of choice status, while close collaboration supports mutually beneficial outcomes.
Aligned, collaborative relationships that further ESG initiatives
The majority of an organisation’s impact on the planet and its people sits in the supply chain. Whether it’s the goal is reducing scope 3 carbon emissions, boosting supplier diversity, ensuring a fair living wage or maintaining child labour free supply chains, Supplier Collaboration enables organisations to address this impact. By forming trusting, aligned, and collaborative relationships with key suppliers, the buying organisation positions themselves to deliver more effectively on supply chain ESG and sustainability initiatives.
Premium access to innovation
Whether it’s finding alternative solutions in bottleneck categories, uncovering new and innovative ways to reduce scope 3 carbon emissions, developing novel processes to uncover further efficiencies, or driving new product introduction and opportunities for growth, Supplier Collaboration provides the groundwork for innovation to flourish.
Other benefits of Supplier Collaboration include:
- Cost management and quality improvements
- Better risk management and resilience
- More responsive and better-performing relationships
- Increased quality and competitiveness
Building a Supplier Collaboration programme
Launching a Supplier Collaboration strategy can be complex. Here are initial steps that organisations can take on their collaborative journey with suppliers.
Define the goals and scope of your Supplier Collaboration strategy
- Define your objectives:
Having a clear brief can be the difference between the success or the failure of a project, so it is critical that the goals and objectives are well defined at the start of the programme and are tied to the corporate strategy of the business.
- Define the timeframe:
Trusted, active relationships take time to build, especially if you’re moving the supplier from a combative relationship to a collaborative relationship. Expecting enterprise-wide changes in your ability to meet your sustainability goals simply may not be realistic over a short time frame, for example.
Align your business and key stakeholders around the strategy
- Establish people & communication strategy:
Create your stakeholder matrix and define your communication strategy — your goal here should be to ensure every stakeholder understands the benefits of supplier collaboration, the value it will deliver to your organisation, and what is expected in terms of resources, time and commitment.
- Seek executive sponsorship:
Get early buy-in from your key internal stakeholders — both inside of the procurement leadership team and across your wider organisation. Depending on your goals, you may need to include colleagues from supply chain, sustainability, R&D, and commercial functions to ensure internal alignment.
- Don’t expect an immediate step change:
Appreciate that this may take a change management approach in order to embed the practice into both an organisation and into the belief systems of the team executing the strategy.
Drive supplier engagement
- Establish your supplier communication strategy:
Gaining supplier buy-in is critical for the programme to be successful. Ensuring your communication strategy includes the segments of suppliers that you’ll bring into the programme is crucial for your collaboration strategy to be successful. A clear goal of the programme should be to clearly articulate ‘what’s in this for the supplier’ and why they should commit time, effort and valuable resources to working with your organisation.
- Consider a supplier day:
Many Vizibl customers choose to kick off by running a virtual supplier day to gain this alignment and buy-in. You can find out more about how to run a successful supplier day here.
Scale the programme
- Conduct regular reviews:
Establish frequent business reviews in order to drive consistent engagement with your strategic suppliers. These sessions should also encompass businesswide objectives rather than centring on operational performance concerns.
- Privilege consistency:
It may sound obvious, but Supplier Collaboration is a joint venture. Make sure you remain transparent and consistent in your messaging in order to build long-lasting and nurtured trust, and set clear expectations that the same consistency is expected in return. Avoid focusing any conversations exclusively on price, compliance, and quality to ensure the dynamic remains collaborative.
- Continue to build connections:
Allow your supplier collaboration strategy to scale by including a broader cohort of suppliers in surveys, networks, and summits, expanding beyond only strategic suppliers to reach and interact with your entire supply base
- Use data and technology solutions as enablers:
The number of touch points and the quantity of data required for robust Supplier Collaboration at scale can quickly become unmanageable. Make careful choices about your procurement technology stack to ensure access to the data and processes that support wider collaboration efforts.
World-leading research and advisory firm Gartner dive into a lot more detail across a set of 5 research reports published in 2021, which Gartner customers can find here:
- Follow Gartner’s 4-Step Framework to Implement an Effective Supplier Collaboration Strategy.
- The Journey to Effective Supplier Collaboration: Step 1 — Strategy Design.
- The Journey to Effective Supplier Collaboration: Step 2 — Internal Stakeholder Alignment.
- The Journey to Effective Supplier Collaboration: Step 3 — Strategy Launch
- The Journey to Effective Supplier Collaboration: Step 4 — Governance and Scaling
Author: Miguel Cossio
Supplier Collaboration challenges
Like any other business practice, Supplier Collaboration comes with its own set of unique challenges.
Lack of senior leadership sponsorship
Supplier Collaboration, in practice, defines how procurement orchestrates the relationship between the business and its suppliers. The strategy must be supported by the organisation’s leadership, articulated by the leadership team, and driven systematically throughout the organisation top-down.
Typically insufficient time is given to truly embed the programme into the everyday working practises of the procurement organisation. For instance, if your shared goal is to achieve net-zero on Scope 3 emissions by 2030, running a programme for a year will simply not suffice to achieve this goal. Trusted relationships take time to nurture, and not all will work. Give yourself plenty of time to ensure success. We recommend that you commit to a minimum of a 3 year programme.
Lack of change management
Taking a truly collaborative approach to Supplier relationships means a mindset shift from combative relationships to collaborative ones. Goals and KPIs must be changed, and processes, tools, and behaviours must be adjusted to account for new ways of working.
Other challenges may include:
- Lack of systematic governance,
- Lack of strategic, visionary, ambitious goals,
- Lack of alignment and clear KPIs,
- Lack of supplier buy-in.
Supplier Collaboration solutions
Though most organisations engage in some form of Supplier Collaboration, siloed offline ways of working in documents, presentations, and spreadsheets hinder these efforts.
Not only that, they limit the possibility for systematic governance and impede the ability to scale your efforts beyond a handful of suppliers, meaning success happens at a slow pace and on a small scale.
When evaluating supplier collaboration software, you should keep the following capabilities in mind:
- Clear goal setting functionality and the ability to build collaborative, project based programmes, on a central platform, that are centred around these mutual objectives.
- A centralised platform for all activity, accessible to both the buying organisation, suppliers, and wider business partners, with the ability to bring any stakeholder into the project or relationship.
- Out-of-the-box and customisable dashboards and analytics to manage, track and report on your progress and performance
Vizibl’s Supplier Collaboration Workspace is the place where smart, progressive procurement organisations go to power active, collaborative and valuable relationships systematically and at scale.
Learn more at https://www.vizibl.co/platform/supplier-collaboration-workspace or contact us today!
What is Supplier Relationship Management?