The Road to a Stronger Business is through Procurement
By Costas Xyloyiannis, supplier experience expert and CEO of HICX
When ESG rose to the top of the board agenda, leader needed to see how compliant and ready their businesses were across multiple areas. To gain this clarity, they sought a department that could capture, analyse and report on supplier information. Ideally, they wanted a single team that had worked with 100% of suppliers across the business – which didn’t exist.
What did exist was Procurement, a function that did worked with all suppliers, albeit in one area: transactions. So, management ended the search and tasked Chief Procurement Officers (CPOs) with this added job. To do it, CPOs quickly applied ‘point’ solutions, software that can deal with given use cases. Procurement soon learnt however that plugging these tools into established software (P2P and S2P suites) doesn’t work. The new and old tools simply don’t play well together and today, swapping between them is slow and painful.
The problem is that the whole supplier network also has a bad user experience (UX), which ultimately compromises the data they give. Leaders peering into the supply chain can’t see what’s happening through all this bad data – and their choices suffer for it.
How then, can management create a clear supply chain view and keep it that way? By making it easier for suppliers to work with their businesses.
Get to the heart of the problem.
First, leaders must understand how the digital environment impacts suppliers. According to recent research, for a supplier to serve one customer, they must navigate around eight different tools, each with a unique login. The time loss to these, often smaller, business is a concern. Another is that behind each password, many of these solutions will produce and store suppliers’ data.
So, the way in which each supplier works with the business, results in their data being stored in an average of eight databases. Viewed as a whole, the supplier’s data is unreliable; there are too many duplicates, gaps, errors and inconsistencies.
Now take this scenario and multiply it by hundreds-of-thousands of suppliers. The millions, billions, of data entries that result, disturbs the supply chain view and stops Procurement from automating workflows. The manual processes that remain make life hard for suppliers.
All considered, can procurement teams really expect to receive the best work from suppliers? What about trustworthy data? If “no”, then how will the function ever progress?
It has reached an evolutionary sticking point which is also holding back the business – and leaders have a choice: leave it be or find a way forward.
Balance the risks and rewards.
Encouragingly a reality exists within enterprises where suppliers and Procurement work together seamlessly as partners. Suppliers are happy, their work is good, their data is pure – and in this environment, Procurement can thrive. In addition to reaching traditional mandates, the function can also report better on ESG. Further, it can contribute opportunities in other areas such as diversity and inclusion, sustainability and product innovation.
Behind this eutopia, there is a movement which I like to think of this as “Supplier Experience Management”. As the name suggests, the idea is to manage an experience for suppliers, in which everyone is empowered to succeed – from the supplier base right through to the board.
As attractive as this environment is, the journey there is not easy or risk-free. The first challenge lies in people management: the entire business – from the board to every employee – will have to reform how it views suppliers. Next, Procurement will need to transform its digital setup. What this will take, is to radically rethink the architecture of the digital landscape, and then to embark on a rebuild. Expensive tools and teams will be needed to progress this plan, which raises the stakes. No doubt this is a momentous task.
But business leaders who refuse to stagnate, won’t be alone. A growing number of enterprises have followed this road and are enjoying the fruits. For example, in 2013 an early adopter, BAE Systems, started to manage supplier experience. This led their procurement team to remove process friction for suppliers and enabled them to consolidate data from 50,000 suppliers across North American. The “single source of truth” that resulted, was incredibly valuable to the broader business in 2020 when Covid-19 hit. When leaders needed it most, they had a clear and accurate view of the supply chain. This visibility, coupled with the zero-friction supplier environment they had established, meant that every department could respond to the crisis with agility.
The benefits of through supplier experience are being enjoyed by many other companies, including the likes of Mondelēz International, Baker Hughes, Lenovo and more. And in the last 18 months, a wave of globally recognised CPG brands such as Unilever, Mars and Heineken have also joined the supplier-centric movement.
Take inspiration from the pioneers and drive change.
Trailblazers of the supplier experience principle follow a proven method. Three steps stand out, by which the broader business, Procurement and all suppliers can achieve mutual success. For business leaders to reach this point, here’s a plan of action…
- First, work with the CPO to assemble a legion of loyal leaders. Their support will be invaluable. Attaining it however might push your persuasion skills. Some executives, particularly those who still view Procurement a transaction centre, will resist working with suppliers beyond the boundaries of cost savings. So, show them the value. Look at the virtues of “experience” management in other areas, such as with employees and customers. Can parallels be drawn to suppliers? Showcase the woes of a fractious supplier environment. What risks arise? Were major opportunities missed? Explore what a more harmonious setting will yield.
- Next, with the c-suite on board, it’s time to gain ground. The key move is to abolish 100% of the barrier to supplier success: friction. Before that, you need to know what all the process pain points are. Unearthing these insights will require curiosity. What do these obstacles look like to suppliers? How are they removed? Getting immersed in their world – caring, stepping into their shoes, doing surveys – is key.
- Now from this vantage point, work with Procurement to craft a friction-free digital environment. Other pioneers follow a data-first approach in which a central platform is used to consolidate, host and govern all supplier data. Once the landscape is engineered to prioritise master data, Procurement can automate. Apply routines for transactional jobs and then use the saved time to introduce digital workflows that make the supplier experience even better.
At this stage, the business has helped Procurement to digitally transform. In doing so, the function – and business – have gained two assets: a single source of truth in supplier data and a supplier network whose needs are better met.
It would be easy to stop at this point, but a crucial step remains. The supplier experience which has taken so much to improve, must be maintained. For this, we need human collaboration. Everyone who engages suppliers (most of the company) must view them as equal, valued partners in a shared ecosystem – and treat them as such.
With both interpersonal and operational barriers removed, the business can partner with all its suppliers. In this scenario suppliers are happier, and Procurement can deliver its mandates, the benefits of which extend well into the business.