How to improve relations with suppliers and build the Procurement function of the future
Table of Contents
In this episode of Supplier Experience Live, we circle back to Dr. Charlotte Anabelle de Brabandt, Head of IT Partner Management & Head of IT Governance US at ZF Group and Max Kent, CEO at Procure Services LTD.
The discussion focused on key findings from our recent Voice of the Supplier Survey and reactions to the results from an industry-insider perspective and a supplier point of view.
With Charlotte and Max, we discussed:
- Why suppliers find it challenging to do their best work for their biggest customers
- How relationships with suppliers can be strengthened
- How to avoid the pitfalls of bad procurement practices to improve your supplier relationships
- How to deal with the multitude of systems for completing various workflows
- How self-service and automation enhance supplier relations
- Questions to consider for your own supplier satisfaction survey
- How to separate yourself from other buyers and become customer-of-choice
- How the growing importance of the suppliers’ perspective will affect the evolution of the procurement function
Why do suppliers find it challenging to do their best work for their biggest customers?
One of the headline statistics to come from our recent Voice of the Supplier Survey was that 61% of suppliers said that they find it challenging to do their best work for their most important enterprise customer. This reveals the extent of productivity that is being lost. Suppliers point to problems around the number of systems in the technology environment and the complex nature of the relationship between a supplier and an enterprise. In the podcast, we first ask Max and Charlotte to unpack that statistic.
Two key supplier challenges: Complex technology landscape and lack of open communication
As Max explains, “First, there’s the integration and technology side of it. So, there are the expectations of the company that that supplier is working with in terms of how they integrate, and all the hurdles they’ve got to jump just to be able to supply the company in the way that they’ve laid out.”
“The other element is working with Procurement, where, especially in old school Procurement, it’s very much about, ‘don’t speak to the suppliers, don’t have a relationship, screw them down on price and make it difficult for them.’
There’s this disconnect between supplier and client, where actually it should be a partnership and key suppliers should be looked after and treated like royalty. Because without them that company is going to find it very difficult,” he continues.
Charlotte looks at the statistic from an industry perspective, as she explains, “I spent the last 15 years in Procurement, always playing this cat-and-mouse game and always being the ‘bad guy’ and trying to get more savings.
When my career started in automotive, every cent was counted. We had to bring in savings, even if the suppliers were close to tears. I had that on multiple occasions.”
COVID taught us the value of good supplier relationships
“Things have changed,” she says, adding, “I think COVID taught us to be more human. It’s not only about the numbers any longer. We saw that when I worked at Johnson & Johnson – and the way we worked together with our suppliers.”
COVID changed the dynamic of the relationship with suppliers. In Charlotte’s words, “There was a massive shift because suddenly the supplier was leading. If a supplier only had 100 masks or 100 filters, who are they going to give these products to? That buyer who squeezed them for every little cent or that buyer who was actually seeing them as a human, who listened to them, who listened to their ideas, who was there and who treated them as someone important?”
How to build a relationship with your suppliers
Communication and administration counted among some of the top pain points that suppliers highlighted in our Voice of the Supplier Survey. 60% of suppliers said they spend far too much time on administration tasks when serving their most important customer. 47% of suppliers said they struggle to get their inquiries solved. In the podcast, our conversation turned next to how we might solve these issues with communication.
Charlotte confirms: “The 60%, I think that very much resonates – when you have these autonomous check-ins and you expect the supplier to do this on a weekly basis, providing such status updates. I can imagine [from their perspective], they have this tedious onboarding of becoming a supplier, and then they have all these check-ins and all this admin, much of it just trying to reproduce information or to show results in different ways.”
“Then this 47%,” she continues. “Again, it’s about that whole communication around scope of the project, defining what it is that they would like to achieve. Clear communication on what the leadership expects. I know of many suppliers who have spent hours coming up with some tracking tool, some dashboard, only for the customer to say, ‘oh, well, we imagined it differently.’ So, this is where admin time can be reduced – by having clear communication upfront. Seeing suppliers as an important entity and not just one of many.”
Max continues, “I couldn’t agree with Charlotte more. It’s just brilliant to hear that. That’s how Procurement in 2023 is thinking. Because that’s the world I’m in – and it’s so different to how it used to be when I was a supplier.”
Issues with traditional procurement practices
Max goes on to explain how it sometimes even felt as if buyers were trained to ignore the suppliers to avoid ‘being sold to,’ while demands from the customer would be high. Max recalls his memories of reporting demands: “We’d get raw data files through, and we’d have to format them all. You would have templates where you could build reports for customers. But invariably, they’d never be in quite the right format. The larger customers, in fact, would say, ‘well, I need my reports to look a certain way because I’ve got to report back on this in a certain way. So, I need you to basically do the work for me.’ Some of those reports could take weeks to build.”
Worst of all, he adds, “A lot of the time, you’d hand them in, go to the review meeting and Procurement would say, ‘I didn’t even look at it, didn’t have the chance. Thanks for sending it in though.’ And you just think, ‘well what’s the point? There could have been so many other things I could have done for you that would actually improve the service we offer you.’ There’s only so much time we can spend working with each client,” Max stresses.
Suppliers just want to work together with you
Max points out that the approach suppliers crave is very simple, “Let’s work together. We could do so much more for you if we could just talk.”
Charlotte agrees, adding, “I spent my first 12 years in Procurement being in that demanding seat and always expecting. But then, in the last two years, I have been on the other side, actually, while working at Amazon. So, I’ve been receiving all these demands. And now, being back in the other seat again, I’m a lot more cautious when speaking with partners or with vendors.”
“I know the time that goes in – and that’s why, now, before kicking off any project, I have maybe one or two kick-off meetings on exactly what it is that I desire to achieve. What is the scope and what kind of communication are we expecting?”
As Max concludes, “That’s all suppliers want. They just want that two-way street where we can have a relationship.”
How to avoid the pitfalls of bad procurement practices to improve your supplier relationships
The panelists suggest two common pitfalls that must be avoided:
Pitfall one: avoiding real communication with your suppliers
Max explains, “I think suppliers always wanted to be more strategic. It’s not really rocket science. You (as in the customer) are generally buying 10 percent of, or only understand 10 percent of, what we (the supplier) do. We’d love to come in and tell you more about that.”
The common mistake is always thinking that the supplier is ‘out to sell you something.’ Max believes that, commonly, as soon as suppliers mention collaboration in this way, an organization is prone to putting up defenses, thinking that it’s a sales pitch. “That, I think, is the problem,” he concludes.
There seems to be a new wave of procurement specialists who are really changing this, thanks to an increased understanding of the supplier’s perspective. Max is happy to see this change in mindset. “You’ve got people that have been jumping between roles, and who now really understand how the two fit together – how the buy and sell relationship actually works. How that human interaction fits together. That’s when this starts to really work. I think the shift in mindset is happening. It’s great to see.”
Pitfall two: ‘one size fits all’ onboarding processes
Another common challenge is the onboarding process. All too often this has removed smaller scale suppliers from being able to compete for the same business as the bigger companies. Charlotte explains the trend of customer organizations restructuring their onboarding processes, according to the size and spend with a given supplier.
She continues, “Certain companies have actually restructured the onboarding process for a supplier. So, if the supplier has a certain amount of spend, then the whole system, the whole approach to onboarding becomes much simpler.”
How to improve your supplier relationships
In terms of improving relationships, the guests offer this advice:
Suppliers need your help
Charlotte says that, with the rising expectations of suppliers, buyers should help to guide new suppliers through the challenges. She continues, “We cannot just ask them, ‘what is your EcoVadis rating? What is your CDP rating?’” and other such questions.
“For all these statistics, we just need to really speak with the suppliers. Understand where the journey takes us. How much investment can we expect the supplier to make on our behalf?”
Furthermore, she adds, “We’ve seen a drastic amount of cyber security threats happening, more and more. If it’s a small, mid-sized company, we cannot necessarily expect them to have such a big allocated budget to have their own risk mitigation plan. So, we need to guide them. We need to help them. And that, of course, also stresses the change that’s required in terms of supplier onboarding.”
Open collaborative relationships are key
All these points underline the need for more open, collaborative relationships, as no one supplier can be perfect in all areas. Charlotte continues, “There is no solution and no system that works for everything. There is no perfect system for everybody that covers everything.
You need to communicate with suppliers in order to understand where they stand. How much risk experience do they have? If they don’t have a risk mitigation plan in place, do benchmarking with them and guide them.”
Max agrees and adds, “It almost feels like the larger companies have a duty of care to the smaller companies to help them get to be a supplier of choice.”
How to deal with the multitude of systems you need to complete different workflows
This brought us on to the topic of technology and solutions. Max explains that the key area for buyers to focus on is figuring out how to help suppliers integrate with your systems during the onboarding process.
Complex integration requirements can remove the best suppliers from being able to compete for your business
He describes the severity of the issue for suppliers today. “There are all these systems. You have the big systems out there that say, ‘we are a one stop shop.’ But actually, behind the scenes, they are cobbled together by acquisitions and amalgamations.”
“But if you want to integrate, that’s somewhat different. You have to have a consultancy to fit the two together. The suppliers are sat in the middle of all this, going, ‘we just want to deliver the product to you, deliver the service and receive the purchase orders,’” he adds.
The nature of the technical landscape, combined with buyers demanding that suppliers integrate with them, means that smaller, niche players in the market are sometimes left out from being able to compete for that business.
Max says, “You could receive a tender or an application to quote for a piece of business. Within that tender application, you, as the supplier, and as part of the submission document, have to say that you can integrate (or have an integration) with that platform.
Now, for the bigger suppliers that’s probably a given, they probably already have that. For any other supplier – including one that might actually be the best fit for that project – they might not have that integration. And it precludes them from winning that business, when actually they would be the best choice, which is a real shame.”
New emerging technology aims to lower the friction for onboarding
There are new emerging technologies that aim to lower the cost of integrations and barrier to entry, but, according to Max, for some technologies, it’s still early days, so caution is needed.
“I saw some technologies around screen scraping and doing a non-integrated punch out. This basically scrapes the information and pulls that back into the purchase order system. That’s a something of a game changer because it’s a low friction, very cheap way of doing a punch out integration with a supplier.
Those technologies are getting more advanced and becoming more streamlined and efficient. I don’t think it’s quite there yet, but it’s certainly happening,” he explains.
How self-service and automation can help supplier relations
According to Charlotte, there is a growing trend of self-service marketplaces helping procurement specialists save time, which they are now able to spend improving communications with the supplier.
Citing examples, she says, “They’re also looking ahead to self-service marketplaces, autonomous negotiation, autonomous procurement, so that we will end up with certain categories (maybe MRO, maybe office supplies), where we don’t need to negotiate any longer.”
Automate the repeatable work to reposition Procurement back into a strategic role that also attracts new talent
Charlotte explains that, instead of doing the same activities over and over, as procurement specialists, “we can actually just have an autonomous marketplace in place, so that, when the limit is reached for some MRO elements, the system will autonomously reorder these goods for the best price.
This will help us, as a profession, as procurement professionals, move away from these tedious exercises of reordering towards actually making use of technology – and being able to reposition Procurement more as a strategic role.”
This comes at a critical time of talent shortage in the procurement industry.
Charlotte continues, “There’s a big talent crisis. We cannot find enough talent. Technology can actually help us overcome this talent crisis, to make use of our talents.”
What questions to put in your supplier satisfaction survey?
As the survey focused on the suppliers’ perspective, the question turned to what organizations should ask in order to receive the best feedback from suppliers.
Charlotte says to start the conversation with how to improve collaboration and highlights some key questions, including:
- Do the suppliers feel that they are being heard?
- Do they feel that they are creating impact as experts in their specific field?
- Do they get a chance to present their ideas to the buyer?
“These are really the low-hanging fruits in terms of how we can start asking suppliers about how well they are integrated in the procurement process,” she explains.
Recognize your best suppliers
Another way to boost your relationships with suppliers is by recognition.
Charlotte explains, “I know many companies who also have the ‘Top 100 Supplier’ awards. So maybe this is something – Have they been informed about the award? How can they win such an award?
Because this actually increases intrinsic motivation to be that supplier-of-choice and ask that customer-of-choice how we, as a supplier, can improve. It’s a give and take in this environment.”
How to separate yourself from other buyers and become the customer-of-choice
While satisfaction surveys are common in the procurement industry in terms of measuring how a supplier is performing against the customer’s expectations, our guests really think that there is a gap in the market for buyers to show proactivity towards becoming the customer-of-choice. This can be achieved by asking for feedback from suppliers on how they are performing as a customer.
Present your suppliers with a customer feedback survey and learn how you, the buyer, could improve
Max shares his thoughts on this concept, concluding, “I think that would be absolutely fantastic. I’ve never seen it before. Certainly, when I was a supplier, we used to send out satisfaction surveys all the time to the customer – every couple of months – and that was part of the SLA that we’d agreed that we’d have to send that around. It was brilliant, and crucial, feedback for us. But having it the other way round… Absolutely.”
According to Max, one problem has always been that the supplier might be too afraid to even suggest anything of the sort, due to the lack of a proper relationship. He explains, “It was always felt, certainly when I was a supplier, that you would never ever ask a customer that question. Because the relationship wasn’t there.
Even with the largest contracts, every review was more, ‘have we got through it? Are they going to kick us out, or not? Have we done anything wrong?’ There is a real opportunity out there for buyers to switch that around, asking for feedback about themselves.”
A few sample questions from Max that he thinks suppliers would like to hear from buyers include:
- Have we, as a customer, treated you, as a supplier, correctly?
- Have we done the right things?
- Could we do better?
Ask for benchmarking with other customers and seek ways to get better
Charlotte develops this point from an industry perspective, as she asks, “What does the best survey look like? Could we get some sort of templates, and do some sort of benchmarking, to see how other organizations are going about it?”
Max agrees and points out, “You, as a buyer, wouldn’t know and they (the supplier) might turn around to you and say, ‘well, actually we work with this other company and they treat us a lot better, but it’s only for these certain things.’
There could only be three or four things that you need to change and, actually, the relationship is as good as those with other people. But you wouldn’t know that unless you asked.”
Encourage honest feedback with the sole purpose of improving the relationship without ramifications
You would be forgiven for thinking that suppliers might be afraid to open up, even when presented with a survey to give such feedback to the customer. The main concern, of course, being upsetting the key buyer and losing the business.
However, according to Max, suppliers are much more willing to give honest feedback than you might think. As he affirms, “They’re just dying to be asked that question. Putting my supplier hat on, you can’t wait to have those strategic conversations with your clients.”
Charlotte agrees. “I think over the last two, three years, we’ve gone through a whole tremendous revolution of how we communicate and how this profession has had to restructure itself.
I mean ‘supply chain management’ is in everybody’s mouth right now. So, I agree with Max, they’re dying to be asked that question,” she says.
How listening to the supplier’s perspective will affect the evolution of the procurement function
Procurement will become a very attractive place with talent wanting to join
On the topic of change taking place in Procurement, Charlotte starts with a passionate response. “It is a place of fairness, where people are being heard and listened to. I think this will be the most incredible, fascinating, and interesting function any talent would want to join.”
This is why she is excited about the current developments and changes, especially in such areas as communication within the industry. “That’s why I think, if we open up that whole door of speaking to our suppliers, letting the experts have a voice, having great technology integrations happening within your organization, having marketplaces autonomously being implemented, having all of that in place, all this will trigger talents wanting to join the profession and to be a part of the change for the future.”
Procurement as a multifaceted strategic role
Max shares the sentiment, adding, “I know that everyone on LinkedIn at the moment is talking about, ‘Procurement is not just cost savings.’ There is cost savings, it is an integral part of it, and it has to be. But there is so much more when you look at it from the way Charlotte puts it across.
All of those great things that it does offer, beyond just the transactional process. The technology side of it, the integration. How this all fits together and how it affects all of the organization – and touches all the people within it.”
He adds, “Procurement is one of those roles that feeds into every other department. Everyone’s got something to say about it and it can affect everyone positively or negatively.
The more positive it could be, the better. I think that can all come through collaboration with suppliers and that understanding of who are we working with and what the good things are that they bring to us. Let’s optimize that and bring out more of it.”
Procurement will continue to have an even greater impact
Charlotte concludes, “In this way, we can open doors for talents to create impact. You’ll have more intrinsic motivation, more passion behind the profession – and that’s what we need.”
Summary: Open communication, good relationships and new technologies will change the game for Procurement
Suppliers have always been keen on having more strategic conversations with their customers. Thanks to new emerging technologies that automate a lot of the repetitive tasks that the procurement function used to do, buyers should have more time to spend with their suppliers, having conversations that improve the relationship.
To take advantage of this, it is key to maintain an open collaboration between suppliers and buyers.
Ask for feedback on how you, as a customer, can improve in order to become the customer-of-choice.
Look for emerging technologies that solve business issues and work with your suppliers during the onboarding process. Bring those niche providers, who have the best solutions for you, along on the journey.
By taking these steps, you can be sure of not only benefitting from becoming customer-of-choice, but also from being seen as an attractive employer for new talents to want to join.