Delivering Strategic Transformation Through Supplier Experience
Table of Contents
The pandemic has put supply chain resilience firmly at the top of the agenda. One of the most notable outcomes has been the recognition that, for meaningful change to persist, the way in which enterprises interact with their suppliers has to be revamped, with supplier-centricity and supplier experience as the focus.
The challenges of the post-pandemic world mean that traditional, largely one-directional ways of working with suppliers are no longer sufficient to support the levels of supplier engagement required to promote the collaboration and partnership that will be needed in the future.
In this webinar, we join Niko Nurmi, Executive Advisor at Procurement Leaders, as he discusses these challenges and how to overcome them – with Carmen Erhardt, Director of Corporate Purchasing and Head of Global Processes, Operations and Digitalization at Henkel; and Anthony Payne, CMO at HICX.
The webinar covers:
- What it means to adopt a supplier experience approach
- The differences between personalization and segmentation and how it relates to suppliers
- The importance of creating supplier-centric experiences and journey maps from a supplier’s perspective
- How to provide a “delightful, easy-to-use way for suppliers to interact with a company’s procurement systems”
A supplier experience approach
Niko starts by asking Anthony what is meant by adopting a ‘supplier experience’ approach. Anthony explains that there are two lenses through which supplier experience may be considered: theoretical and practical.
From a theoretical point of view, Anthony describes Supplier Experience Management (SXM) as a philosophy or movement which is, “based on the recognition that in a highly uncertain and dynamic world, where resilience in the supply chain is now arguably just as important as efficiency, we can no longer think in terms of a zero sum game between the buying organization and supplier, where for a company to win, its suppliers have to lose.”
From a practical perspective, Anthony explains, “For us, this means removing friction from every aspect of the relationship and for 100% of your suppliers – including also the smallest and least strategic – in the knowledge that doing so will reduce your suppliers’ costs to serve you. You’ll have greater control and visibility through massively improved data and you’ll position yourself to be customer-of-choice for the largest possible number of your suppliers.”
“This could be as simple as dynamically customizing your onboarding form to only ask the relevant questions for each supplier or providing invoice payment status visibility or even just adding a phone number for supplier enquiries to your correspondence,” he adds.
Carmen agrees, highlighting an urgent need for a supplier-centric approach, as she continues, “You also need to consider speed. How much time do you have to get the data from the supplier? Can you really afford to chase the supplier again and again for data, or is there a simple way to make that happen?”
Use of Segmentation in Supplier Experience Management
Niko turns the conversation to segmentation, asking Anthony how this relates to supplier experience and Supplier Experience Management (SXM).
“As a marketer I love questions about segmentation – it’s essentially page one of the ‘marketing textbook.’ But, although it’s central to marketing, it’s also core to what most people in most functions do every day, just with different levels of formality or sophistication,” he says.
Anthony suggests two areas in which segmentation, in any function, is useful: resource allocation and experience optimization.
Starting with resource allocation, Anthony explains, “Breaking our audience into smaller groups enables us to prioritize how much time and money we invest in them for a given desired outcome. For example, very few businesses treat absolutely every customer as equal. They recognize that some customers are more likely to spend more money, and require more resources in terms of account management, promotions, advertising or acquisition strategies to be allocated to these.
The same is true of employees – many organizations have programs which ‘over-invest’ in individuals showing the most potential.
And the same is true of suppliers. Procurement teams have been using segmentation, such as the Kraljic Matrix, to make decisions about which strategies to use for many years – and this is essentially a resource allocation exercise,” he concludes.
Anthony points out that, while the traditional segmentation used in Procurement based on risk of supply and the business importance of what the supplier provides continues to be valid, many organizations are evolving the model to address emerging pressures, as he continues, “Even a small supplier of an easily-replaced item that is not strategic can present a risk if they are breaking rules, if they are non-compliant, or conducting practices that could lead to negative PR. On the other hand, the same supplier could be the source of new innovation, or contribute to an ESG target, so the matrix needs to evolve to accommodate these additional variables.”
Using segmentation to drive experience
The second reason we segment, Anthony explains, “is for what one might call ‘experiential’ reasons. In other words, how do we adjust the experience that the supplier receives based on their characteristics? This is a much newer phenomenon but it’s one we know that some of the most forward-thinking organizations are addressing.”
It is in this area where there is currently much opportunity. “As consumers, we are all used to a world of increasingly personalized content and experiences, whether it’s via recommendation engines or highly targeted adverts based on browsing history, and the vast amount of information that brands can access about us,” he says, adding that the same could be true for suppliers. “The technology is available to enable a supplier to access your portal in their chosen language, to see their preferred currency, to see the compliance and risk information relevant only to them, or to access important transactional information at the click of a button. This is in spite of an organization perhaps having 18 different ERPs, two P2P suites and a dozen other best-of-breed applications which might need to be accessed in order to serve the supplier.”
“If you combine this with intelligent self-service so that the supplier can express their own preferences – just like I can choose the language on the website of a multi-national brand – you can deliver what feels to the supplier like a one-to-one experience, just for them, and that removes friction.”
Carmen agrees with the vision but notes the additional complexity involved in supplier relationship management compared to a consumer marketing equivalent, “There isn’t only one person involved with the supplier. There is the accounts payable (A/P) clerk, the key account manager, the salesperson and so on.”
Carmen adds that there are certainly different aspects that you could look at when you segment suppliers and it is important to consider where the highest amount of demand lies. For instance, it might be the number of enquiries into A/P regarding invoice status, or it could be certificate management, or updating master data. Equally, Carmen reminds us that direct suppliers have different requirements from indirect suppliers, so there are a number of different ways to approach segmentation depending on business needs.
It is becoming increasingly urgent, as Carmen stresses the importance of achieving supplier engagement due to data requirements, as more data than ever is now needed to be provided by suppliers, with more use cases emerging every day.
“We also see that we spend a lot of resource communicating with our suppliers,” she adds. “In some cases, we have a ticketing tool but this is separate from the supplier portal and there is a tremendous amount of email communication which is not linked to the supplier data, which means communications can be missed. These will increasingly be the use cases that we will bring into the remit of the portal,” she explains.
Anthony points out that similar issues have long been faced in customer-facing environments, which is exciting because it means that there is a blueprint for how these challenges have been addressed in other areas.
Identifying a starting point
Niko asks the panel about how a supplier-centric view can be approached in practical terms.
Anthony suggests starting by putting yourself in the shoes of the supplier and evaluating what it is like to engage with your organization based on various different scenarios. He advises, “Maybe take on a number of different personas to represent different suppliers – what if I were a core strategic supplier, what if I were a tail-spend supplier? What is it like accessing information in different languages? How easy is it for me to change bank account information or find out payment status?”
Relating it to the customer-facing comparison, he adds, “We all think we know what it’s like on the other side of the table, but almost all of us will be surprised, or even a little shocked, to find out what it’s actually like to use these systems in practice.”
Carmen agrees that it is valuable to review the supplier experience, as there are different roles to consider on the supplier side and different portals in use that are required to service the end-to-end relationship with a supplier for its entire lifecycle. She adds, “What I think is interesting in this context is to start measuring what you’re demanding from suppliers. For example, one metric would be to count the clicks – how many clicks does a supplier need to make to do business with you?” This is an important aspect of being a customer-of-choice, so, as Carmen points out, there is an important business case behind this metric to bear in mind as well.
As well as undertaking an evaluation yourself, Anthony adds, “I think another good place to start is to ask suppliers directly for feedback. Sometimes we may not like what we hear, but if we truly want to know how to improve and to measure the experience, then setting our own benchmark and looking at ways to improve it makes sense.”
Another area to consider is measuring how the supplier would rate the performance of the customer organization, in a reversal of the usual supplier performance management concept. As Anthony explains, “By holding themselves more accountable for the things that matter to suppliers, companies can identify those areas which will have a meaningful impact on the supplier and in turn start to drive some of the benefits we talked about at the start, like access to supply during times of constraint, favorable pricing because the cost to serve is lowered, or greater and more willing participation in your corporate initiatives.”
Carmen says that she would start by measuring the platforms and channels that are used to approach suppliers, in particular how they perform in conjunction with questions such as how long certain processes take, such as onboarding. “You can then set targets to drive down these averages,” she adds.
She also advises taking stock of how many questions the supplier is being asked to respond to and trying to reduce this by removing duplicates, as she explains, “If you really go through it, end-to-end, from the supplier’s perspective, you will think ‘you asked me this already, why are you asking this again?’” It is a useful exercise as it reveals inconsistencies in processes which, once removed, creates efficiencies for both sides.
Crafting a superior supplier experience: The role of technology
Niko asks Carmen to address what she expects from technology vendors in helping to create superior supplier experiences and where she expects technology to help.
Carmen explains that she is focused on the benefits that technology can offer. “What I expect – as a benefit from the technology – is that I have touchless transactional processes with no manual interactions as a best case and integrated communication with the supplier which can also be archived. And data. Data is the requisite for the future. You want to have one set of data. No inconsistencies, no double entries of data, no missing data – and this is what I would expect from the technology moving forward.”
Carmen says that, once these foundations are in place, you can begin to consider other solutions, such as artificial intelligence. It is possible to pivot away from a reactive mode to a proactive, predictive mode to address issues such as, ‘Am I seeing changing patterns with my suppliers? Is that normal, or should that be on the watch list for me? Does this impact the collaboration with my supplier moving forward?’”
“I believe that, if you don’t start making these changes, you will have tremendous costs in gathering data and you will miss a lot of opportunities,” she adds, as well as being “less able to take quick decisions” when the necessity arises.
On the subject of cost and return on investment, Anthony points out that there are some direct and indirect savings to bear in mind. “On the direct side, you have savings as a result of shortening supplier onboarding processes from weeks, if not months, down to a matter of days, because as well as shortening the time, you reduce the number of people involved, you reduce the number of feedback loops and cycles. So, there is a very hard cost saving and headcount equivalent in taking out the number of people that have to be involved. Another great example is, ‘how many times do you take calls into your A/P department on invoice payment status?’ There is an opportunity here to reduce those calls – suppliers want to self-serve in most cases. If you make that easy, there is a helpdesk cost saving.” Examples such as these – driven by process efficiencies, accurate data and improved or automated workflows – exist across the business, he explains.
“I think also there is an indirect opportunity, underpinned by data,” he continues. “Poor supplier data is an inhibitor to Procurement’s favourite subject of ‘how do we reduce spend?’ If you don’t know who your suppliers are in a given capacity, doing activities such as spend analysis, for example, is much harder. It’s difficult to say ‘By fixing data, we will reduce spend by x-million, but it is obvious that, if you don’t have that visibility, then realizing those savings is going to be extremely difficult.”
“I think both of those can go into a hard numbers-based business case, which is in turn supported by the view that receiving preferential treatment from your suppliers, being customer-of-choice, is just good business sense,” he adds.
Supplier Experience and Customer-of-Choice
When thinking about supplier experience, Carmen asks, “How often do you raise enquiries with your bank? You’ll find it’s not very often because bank accounts are digitally very clear – I know what to do.” She compares this to the common experience of a supplier and says the bank account example is an experience that the industry should strive towards and take inspiration from.
It may not be the determining factor for why a supplier chooses to work with one customer over another, however it aligns very neatly in supporting a supplier’s objectives of earning money with you and, crucially, being able to do more orders with you, she concludes.
Supplier experience and Supplier Experience Management (SXM) are topics increasingly gaining traction within Procurement & Supply Chain. To find out why we at HICX care, and why you should care about it as well, check out our dedicated SXM webpage.