Navigating Supplier Collaboration: Short, Medium & Long-Term Wins
Written by Sarah Clarke, Head of Marketing, Vizibl
CDP’s disclosure scores, announced in December 2022, showed a large uptick in the number of responding companies on the previous year (41%) and strong performances from many familiar names. However, despite the obvious progress made on encouraging corporates to measure and manage their environmental impacts, more than 29,500 businesses with market capitalisations of US$24.5 trillion received failing grades from CDP last year, for either declining to respond to disclosure requests from their clients and investors, or for responding with insufficient details.
With sustainability efforts now seen as a priority for stakeholders, it is imperative that all large businesses successfully deliver on sustainability targets. The good news is that procurement teams can take a leading role in ensuring this happens.
Procurement has historically been viewed as a back-office function, tasked with quality, cost reduction, and receiving all goods and services on time, but it’s moving into an expanded role – and as a result of new challenges, supplier sustainability through collaboration and innovation is emerging as a priority.
Yet, most enterprise organisations don’t know where or how to begin, with many businesses struggling to achieve collaboration systematically and at scale. However, the development of short, medium, and long-term goals can certainly help:
Short term:
Set an objective based on your strategic needs and align it with value trackers
Initially, it is vital that you define what you want to achieve by collaborating with suppliers and setting a strategic goal before you begin. This means you have a benchmark of achievement as you begin your collaboration.
Once launched, it’s important to align your collaboration project with value trackers. Procurement is typically measured on cost and time savings, finding it notoriously difficult to measure things other than transactional metrics on the value it brings back to the business. As procurement gains importance and new responsibilities, the value it adds to the business must be tracked in correspondingly new ways.
Having set a general objective for your collaborative projects and supplier collaboration programme, it is vital that you narrow down and focus on your strategic needs. Once 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.
Identify innovation opportunities
Innovation is key to unlocking value and change at scale within any organisation and there are few better places to source innovation than the supply base. Through 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.
It is important to ensure that your business keeps an open mind to new ideas, new approaches, and new strategies for your procurement process, alongside communicating the value that supplier innovation can bring to your organisation.
Define success
For supplier collaboration projects to develop, it is vital to define what success will look like at the outset and to ensure that your objectives aren’t too wide-ranging and difficult to measure. Daunting and complex deadlines can often lead to disappointment as you try new things and learn what is effective.
To begin with, it is best practice to define smaller successes. Set leading metrics that you would like to accomplish throughout your supplier collaboration programme, and regularly check up on them. These definitions 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.
Medium term:
Segment your supply base
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.
Start by defining a small number of your most strategic suppliers and begin your collaborative & innovative projects with them. 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 begin to scale your projects more broadly.
Standardise your processes
By standardising your processes, it will be easier to define what success looks like for your supplier collaboration journey. 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.
Long term:
Define your motivational attitude
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 and complex element of supplier collaboration. Motivation and 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 your team and suppliers at all levels are important to understand if any frustrations or doubts are being experienced. A positive, understanding approach is crucial to getting the most out of your supplier relationships.
Communicate and be transparent
Communication is another aspect of supplier collaboration that needs to be continuously monitored and adjusted. The best communicative practice for 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.
To ensure long term success for your collaborative projects, it is also crucial to be open with your suppliers and to not withhold key information. 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 and communication are the fastest ways to become customer of choice. Be honest, open, and communicative with your suppliers to define success for both sides of the relationship, so that you can work towards your goals together.
Supplier collaboration takes time and isn’t easy. It is a complex approach to managing your suppliers, but mature enterprise organisations have already seen vast benefits in profit, resilience, and sustainability. Navigating different stages of a supplier collaboration journey will require nuanced approaches, but if carefully monitored and nurtured, this will ensure that your programme drives value back to your business.
