Why Is Supplier Experience Now Such a Key Priority?
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The era of Supplier Experience is here
Accelerated by recent global events and propelled by today’s need to fundamentally change the way in which organizations interact with their suppliers, there is a realization in the industry that the enterprise-supplier relationship cannot be treated as a zero-sum game.
Suppliers as an extension of the organization
Instead, it is now widely accepted that all suppliers should be seen as an extension of the organization.
Good suppliers require nurturing in the same way as good employees and the relationship is a partnership. The best suppliers will increasingly have a choice in terms of who they serve and who they choose not to serve as they will be in demand, especially as disruptive events increase, and depleting resources become more constrained than ever before. We took the opportunity at World Procurement Congress 2022 to ask leading practitioners and supplier experience experts for their thoughts on what this means for how we work with suppliers and the importance of understanding the suppliers’ perspective.
Suppliers’ Perspective: Why it Matters?
Caption: Adam Brown, Procurement Strategy & Transformation, Maersk; Carmen Erhardt, Head of Digitalization, Henkel; Anthony Payne CMO, HICX; Ragnar Lorentzen, CCO, HICX; Nils Andersson, Senior Manager – Head of Strategic Sourcing Process, Orkla; and Aleks Hajdas PTP Program Lead, JTI share their views on Supplier Experience
The power of a best-in-class supplier experience
Offering a best-in-class supplier experience, therefore, is the key weapon in securing that golden position of ‘customer-of-choice,’ which is crucial for creating new value-add opportunities and maintaining competitiveness.
The reasons behind the trends being witnessed are manifold, as are the benefits. Specific drivers include a need to mitigate risk in the age of ‘VUCA’; relentless consumer pressure in areas such as sustainability and diversity; the tightening of the regulatory framework; and the move from pure cost savings to value added activities in Procurement. As highlighted in the video above, a focus on Supplier Experience provides a substantial part of the answer to each of these growing challenges, while also unlocking further value for the business.
The impact of Volatility, uncertainty, complexity, and ambiguity (VUCA)
We are living in an age of increasing volatility, uncertainty, complexity and ambiguity. At a macro level we have, until recently, enjoyed a long period of globalization and high availability of resources. In turn, this has led to high levels of interconnectedness and dependence between organizations, as well as abundant choice for the buyer, whether consumer or business. However, as globalization increasingly becomes replaced by protectionism in many parts of the world, and resources are becoming more constrained, the level of volatility and uncertainty in what is already a complex environment looks set to increase. Furthermore, failure to tackle data quality issues created in the past will hamper the ability to obtain full visibility, thus creating even more ambiguity.
Under such conditions, supply markets are clearly weighted in favor of supplier power and thus the fight is on, not only to secure supply but to develop a flexible and resilient ecosystem optimized to bring differentiated solutions to the end customer. Deep value chain collaboration is needed to enable this and suppliers, of course, make up the essential fabric.
It is this rebalancing of the supplier-customer relationship that is fueling the race to become customer-of-choice. The way in which we pursue this objective will likely be similar to both how we fight to win new customers for our products and services, and how we pursue the goal of becoming employee-of-choice in the talent market.
Consequently, there is a significant uptick in market demand from large enterprises wishing to establish a single enterprise supplier gateway to improve the supplier experience and reduce friction. Whilst there are many ways to architect such a solution, two common themes exist:
- A need to provide a single access point to speed up onboarding, provide payment visibility and self-maintain master data; and
- A need for a single access point to improve the experience for suppliers as they manage end-to-end workflows across the entire ProcureTech landscape of their customer, facilitate collaboration and drive innovation.
Consumer pressure and the importance of protecting the brand
Leading enterprises recognize that they are more dependent than ever on the success of their suppliers to achieve corporate ambitions in areas such as demonstrating commitment to sustainable, environmentally-friendly practices and supporting diversity.
In the same way that data quality is dictated by the adage of ‘what goes in is what comes out,’ the same is true of a brand. What suppliers bring to an organization is also what constitutes the brand. It has become a key part of how consumers today are evaluating the brands with which they interact, and expectations here are rising fast.
Suppliers are the source of truth for the information needed to assess levels of compliance or risk in these areas and therefore supplier engagement will be crucial for ensuring information and data can be collected and maintained successfully for these purposes.
By offering a best-in-class supplier experience, supplier engagement will also follow, making it a critical component in tracking levels of compliance based on the data – and for being able to demonstrate real commitment to the increasing number of objectives, while facilitating maintenance of brand image.
The tightening of the regulatory framework
The regulatory environment is also tightening, not only in areas such as sustainability and diversity, but also around many other issues, such as conflict minerals, hazardous substances, waste materials and chemicals.
Again, all of these areas demand an exceptional level of engagement from suppliers in order to collect and maintain the data relating to these topics, but not all regulations are applicable to all suppliers in all jurisdictions.
Commenting on these pressures, Costas Xyloyiannis, CEO, HICX explains, “What we’re seeing is that you need lots of different segmentations. On top of factors such as geographical location, there’s a risk segmentation of your suppliers, there’s sustainability, there’s innovation. There are many combinations and permutations out there in terms of how you will manage all these different aspects and we think that’s going to be key for the future – to drive a lot of these things in a very automated way. The result is, a lot of personalization and tailoring as part of the supplier experience.”
From pure cost savings to value add
Companies continue to place a higher and higher administrative burden on their suppliers in the form of information requests, self-certification, form-filling and more. This results in higher costs for the supplier as must devote more staff time to addressing these requests and this in turn inevitably leads to costs being passed on to the customer.
Meanwhile, Supplier Relationship Management (SRM) initiatives are often introduced with much fanfare and excitement over potential collaboration on topics such as product innovation, whereas what matters most to suppliers is in fact the need to ‘unkink’ existing processes to make it easier for them to do business with their customers. Removing friction from core supplier / customer interactions is crucial to unlocking more ambitious collaboration streams, as it frees up resource that would otherwise be directed towards transactional and operational aspects of the relationship.
To what extent do enterprises and suppliers agree on what constituents a great supplier experience?
In recent ‘HICX Supplier Experience Community’ sessions, this has become a vibrant topic, as it has been acknowledged that the supplier, despite being the most important stakeholder in the supplier experience equation from a user experience perspective, is frequently not represented.
It is therefore encouraging to see several ‘Voice of the Supplier’ studies being planned, a fairly recent practice, but one that offers significant opportunity.
To this end, HICX recently completed its own ‘Voice of the Supplier’ survey, to delve into all aspects of the supplier experience, from data management and communications channels through to attitudes towards innovation, collaboration and partnership.
The survey results provide some guidance on what to evaluate when starting to consider the suppliers’ perspective, which requires thought in at least four areas:
- How to put oneself in the shoes of all suppliers
- How to approach different aspects of the supplier experience from the suppliers’ perspective and reduce friction
- What to measure in terms of ‘supplier satisfaction’
- The importance of establishing feedback loops