How to Realize the Benefits of Supplier Centricity
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The benefits of supplier centricity
As Adam Brown, Procurement Strategy & Digital Transformation at Maersk puts it, “Procurement needs to play the role of enabler, ensuring that it asserts its role in ‘getting the data shaped up,’ and using its insight and expertise to understand the supplier experience in its entirety.”
This means buyers must focus on putting themselves in the shoes of their suppliers in order to understand and remove the painful friction points. Learn more about identifying friction from our recent article “How to Start Building the Optimal Supplier Experience.”
By incorporating the suppliers’ perspective, there are a number of benefits for the enterprise, including:
- Lower prices and better service
- Greater levels of collaboration
- Higher supplier engagement
- Better quality of data
- Lower levels of risk
- Higher levels of compliance
In our recent Voice of the Supplier Survey, 68% of suppliers say that they consider their largest or most important customer to also be a ‘customer-of-choice,’ a status which the survey shows is most likely to yield these benefits.
In this article we cover some key areas that really empower you to unlock the full benefits of a supplier-centric approach, including:
- Using supplier centricity to improve supplier engagement and data quality
- Approaching issues such as risk and compliance as a way of adding value to the relationship to provide mutual reward
- Ensuring supplier centricity can be achieved through ownership of the end-to-end supplier experience
- Leveraging these steps to become recognized as the customer-of-choice
How to use supplier centricity to improve supplier engagement & data quality
Stephane Sacherer, Director of Global Procure to Pay at Mondelez International, reminds us that even suppliers that represent small businesses need to keep their information up-to-date, however, obtaining good data is an ongoing challenge.
He sees supplier engagement as a key way of ensuring that all businesses are encouraged to constantly review how they are represented within a customer’s systems as well as providing additional information that may be required such as surveys on diversity, carbon footprint, or to provide details about their own suppliers, to name just a few examples.
In order to achieve this engagement, a supplier centric approach that offers valuable information to the supplier is vital. Stephane likens this method to a marketing campaign as he explains: “The supplier must repeatedly go to the tool. The objective is to have suppliers return, again and again. If this is not achieved, the data still becomes obsolete. Ways of encouraging this behavior include features such as invoice tracking and dashboards,” he adds.
As such, Mondelez has “set objectives, such as targets for number of visits per year and number of suppliers logging in to the system. In order to drive this higher, ways are being identified for bringing more and more value to the portal to make it a one-stop shop.”
In turn, more information can be used to segment suppliers and further refine and tailor their experience. It ensures that reasons for returning to the portal become more enticing, while information provided to them can be further enriched. Meanwhile, the key return for the enterprise is better quality, more accurate data, along with all the benefits that come with that.
Helping suppliers manage risk and compliance as a value add
In our recent Voice of the Supplier Survey, we saw that almost one quarter of suppliers said receiving relevant information from their most important customers was one of the top three factors in maintaining a good relationship.
When targeted information is shared in areas such as risk or compliance, the advantages of this becomes clear, as it helps suppliers to be better positioned to tackle challenges more generally, offering true value to suppliers’ businesses.
As Jerry Grable, Director, eBusiness at BAE Systems, explains, “Having good supplier data allows us to communicate more accurately with suppliers. Not only on BAE Systems requirements, but on new regulations that are coming out, or even when events occur – it gives them the ability to help them navigate through those, such as COVID, or weather events, or cybersecurity requirements. It’s the ability to communicate with them and help educate them, to help keep them compliant with everything that’s going on,” he adds.
This means that suppliers are better prepared, while the customer enjoys overall higher levels of compliance and lower levels of risk when working with them.
Supplier centricity requires ownership
The above examples require practical thinking on the side of the customer as it requires some focused effort in order to deliver. The most important task, therefore, as far as supplier experience is concerned is to have someone own the entire supplier experience and to have the mandate to own this and the outcomes.
As Costas Xyloyiannis, CEO of HICX explains, “The real challenge is, there is no owner of the supplier experience. Nobody has an end-to-end understanding of what the suppliers go through. That means, for a start, that organizations do not see that they have a supplier experience problem. And, if there is no ownership, there is no way that the problem can be fixed,” he says.
This chimes with a recent interview with McKinsey senior partner Harry Robinson, in which he states, “The academic research is really clear that when corporations launch transformations, roughly 70 percent fail.”
To avoid that in this case, ownership is key for securing transformational success.
How being recognized as the customer-of-choice impacts your relationship with suppliers
Leveraging these steps is an important component towards becoming recognized as a customer-of-choice, which our survey shows has significant benefits.
For example, although 50% of respondents in the Voice of Supplier Survey said that they would prioritize orders for their most important customer when low on stock or resource, the figure rises to 70% in the cases where the customer is specifically recognized as the customer-of-choice.
In today’s market, with increased risk to global supply chains, this difference is significant, especially as threats are most likely to increase.
When it comes to supply chain threats, our survey reveals some of the major concerns for suppliers over the next twelve months and where they would like to work collaboratively with customers to find solutions. For instance, 43% of suppliers expect to work collaboratively with their customers on driver shortages solutions and 42% on component or ingredient shortages over next 12 months. This compares to 29% who expect to work collaboratively on zero carbon initiatives.
These initiatives will certainly require greater collaboration and perhaps joint innovation in some cases.
However, the news is good here as well for those organizations who are seen as customer-of-choice. 70% of respondents said that they were likely to work with their customer-of-choice on such innovation projects, compared to 52% of those who did not consider the key customer to be customer-of-choice.
What are the first steps to take towards becoming a customer-of-choice?
Enterprises should put themselves in the shoes of the supplier and seek ways of acting as an enabling factor in suppliers’ everyday work, bearing in mind the following:
- First, it is crucial you empower the suppliers with up-to-date relevant data and information which ensures they come back for more
- Second, help the supplier with communication and provide resources and education that allows them to be ahead of trends or compliant with everything that is going on
- Third, ensure there is a clear mandate, or someone responsible, for owning the entire supplier experience, including the gathering of feedback from suppliers and prioritizing pain points that require more urgent attention
Following these steps will allow the buyer to realize the benefits of being supplier-centric and, ultimately, the customer-of-choice.