What Is Supplier Experience Management (SXM) and Why Is It Important?
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For far too long organizations have focused their efforts solely on cost savings and the transactional value they can squeeze out of their suppliers. This changed in 2020, as a result of a series of crises, and companies have instead shifted their focus on establishing true partnerships and driving value for all stakeholders through increased collaboration.
In a webinar on Putting Supplier Experience Management at the Forefront of Strategic Procurement, Procurement practitioners discussed how the COVID-19 pandemic made companies realize they have to start viewing different situations from the suppliers’ perspective and adopt a Supplier Experience Management (SXM) approach.
A supplier experience definition
The purpose of this article is to discuss a supplier experience definition, its benefits, and advantages, and to highlight the importance of adopting Supplier Experience Management (SXM). The article will cover:
- What is Supplier Experience Management?
- A mindset for establishing long-standing relationships
- The supplier’s view at the heart of supplier experience
- Supplier Experience Management and customer-of-choice
What is Supplier Experience Management (SXM)?
As defined in the Supplier Experience Survey, supplier experience refers to all the interactions that take place between an organization and its suppliers, which might be anything from best-in-class to average or poor.
Costas Xyloyiannis defines Supplier Experience Management as the practice of creating the conditions in which a buying organization and all of its suppliers can achieve mutual success together, with an emphasis on ‘all’.
This does not mean the ‘same’ experience for all – but it is the appropriate experience for all. As Kelly Barner of Buyers Meeting Point, explains, “There are multiple different supplier groups that we’re working with. We want to make sure each of them has a good supplier experience, but it may not be exactly the same experience that they are having in working with us. It involves balancing automation with the human side of the relationship. It is a tricky one, especially at scale, for Procurement to manage.”
The other differentiator of SXM is that it is concerned with looking at procurement and supply chain processes from the supplier’s perspective. The ultimate objective of Supplier Experience Management is mutual success, with suppliers recognized as being an extension of the enterprise and part of the ecosystem. That is the foundation of SXM, which best-in-class organizations are starting to realize and adopt.
Adam Brown, Head of Digital Garage at BT Sourced, in a webinar on Supplier Experience Management in Practice states his reasons for adopting SXM, commenting “I didn’t want just the supplier relationship. I wanted that ‘full on’ partnership and that level of honesty that I get from there, which is brutal but it’s brilliant at the same time.”
A mindset for establishing long-standing relationships
Organizations also must move away from the idea of viewing their suppliers as KPIs and metrics to be measured on and start viewing them as collaborators and true partners for the mutual benefit of all parties. Instead, as Adam Brown explains, companies should ask themselves ‘How can I measure the quality of the relationship itself?’ and ‘Are we aligned in working towards a common goal?’
This type of mindset will ultimately save time, effort and resources for everyone, which leads to increased profits and a long-standing relationship. The importance of long-standing relationships were brought into sharp focus as the events of 2020 revealed just how dependent on their suppliers organizations really are.
Costas believes, “COVID really showed the dependency and, I’d say, the fragility of large corporations and their supply chains. People saw how something unexpected, somewhere, could just make these massive organizations suddenly come to a standstill. So, it presented really immediate and urgent challenges for them around risks, agility, visibility, resilience and they had to adapt to support rapidly changing priorities. I think the interesting thing is also that it’s challenged the traditional mantra of savings and it’s accelerated the need to be looking at things like real partnership, customer of choice, supplier experience, risk and resilience.”
The supplier’s view at the heart of supplier experience
When scenarios are not considered from the supplier’s perspective, the quality of the experience can suffer. Some examples include, however, are not limited to:
- Suppliers bearing the burden of having to interact with multiple supplier facing systems (instead of a single supplier experience management system)
- Not knowing who to contact in times of crises
- Taking on the responsibility of adhering to, complying with and updating documents, policies and procedures.
“If you put it from the supplier’s perspective, I think there’s a lot of burden which is actually put on the supplier, whether they know it, or not. It’s not on purpose. The customer’s view is often: ‘Now we’ve shared all this wonderful information, you can go through it and distil it; and you have to make sure that you adhere to it, that you comply to it and that you update it.’ So, it creates this huge burden to assimilate, understand and figure out exactly what you need to do as a supplier. The look of this is quite different, therefore, from the supplier’s point of view, than what would be said internally,” Costas highlighted.
While suppliers are often left to their own devices with little offer of help or assistance in the face of mounting administrative burdens, on the flip side they are consistently asked for discounts or to lower the price of their products and services. It is true that suppliers do not want to lose any customers, especially if they are a large company, but there is a point at which a relationship is no longer profitable for them, and this can lead to difficult conversations and frustrations.
Amy Fong of Everest Group, expresses her views on cost savings in a webinar on Elevating Supplier Experience, “I really think it always does start with cost and how we measure savings and all of that, it’s never going to go away. But I think we’ve been struggling for the last ten years or so to move beyond cost and deliver other types of value. What I think is a little challenging about this, besides getting the CFO to change our scorecard, is that what value means is different in different situations.”
Additionally, organizations frequently do not realize that a ‘one-size-fits-all’ approach is not compatible with all suppliers. This ‘one-size-fits all’ approach is one of the main areas where inefficiencies and bad experiences are created. It is not realistic to expect a small local business to be able to adhere to the same requirements as a big multi-million-earning corporation. Expectations must align for both parties.
Supplier Experience Management and customer-of-choice
The best suppliers are in demand, they have a choice, and it is important for companies to ensure that they are the ones being chosen. The resources are far from infinite and suppliers will have to prioritize at times. A supplier will always choose customers who are easy to work with, rather than those who have unrealistic demands and expectations but give the bare minimum in return.
“There’s no denying the reality that resources are finite. However, you look at it, you are going to have to prioritize. I always say that the same way as best employees are always in demand, the best suppliers will always have a choice,” Costas concludes.
From a customers’ perspective, to be a customer-of-choice means to be receiving the best from the suppliers. However, many organizations do not actually know how to become a customer-of-choice. This may be due to a combination of various different reasons:
- They are struggling to prioritize this internally within their corporate culture
- They are using the traditional Supplier Relationship Management (SRM) approach which focuses on only the top strategic suppliers
- No-one has ownership of the end-to-end experience
Adam Brown warns, “They struggle with this, especially within the big corporates, where they’ve got such a separation between Procurement and the operational side of the business, such as the running of contracts. They are never going to get one person to look at it and be that supplier champion, and to champion that Supplier Experience Management end-to-end”.
Some ways of ensuring all suppliers have a great experience include:
- Make the onboarding process frictionless
- Make the data management easy
- Automate and self-service aspects for which it works
- Make it easy to communicate
- Do not make the supplier do duplicate work
- Make it financially viable for them
- Make time to build that partnership (!)
Costas believes that, “Supplier Experience Management is about accepting this shift around seeing all suppliers as true partners and then focusing on doing whatever we can do to set them up for success.”
The benefits suppliers can bring manifest themselves in various ways and can include:
- Fastest response times
- On-time delivery
- Access to the best resources
- Correct quantity
- First access to ideas or new innovation
The objectives of Supplier Experience Management, benefits and advantages, frameworks and associated challenges are thoroughly discussed in the Ultimate Guide to Supplier Relationship Management & Supplier Experience Management in Practice.
This article is based on Chapter 1, What Is Supplier Experience Management and Why Is It Important?, in our Preparing for Supplier Experience Management whitepaper.