Supplier Experience Management in Practice
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SXM Webinar Series with Art of Procurement
This is the second webinar in a three-part Art of Procurement and HICX live series, hosted by Kelly Barner and all focused on the supplier experience. This webinar focuses on supplier experience management in practice, a combination of looking at what’s happening today and how Procurement can focus to be ready for tomorrow. For this discussion, we were joined by Costas Xyloyiannis, CEO of HICX and Adam Brown, Head of the Digital Garage at BT Sourced.
The internal view of Supplier Experience
The recent HICX Supplier Experience Survey found that 78% of procurement professionals think that their suppliers would rate them as excellent or best-in-class. Kelly begins by asking Costas for his observations around whether there is any disparity in terms of how Procurement would rate themselves versus how they’re actually doing, or how suppliers would rate them.
As Costas explains, “I think some of that comes out in the survey, but we’ve also experienced some of that being a supplier ourselves, working with very large organisations. A lot of them might think of best-in-class as a function, I think. So, ‘how much saving are we delivering,’ as opposed to a supplier rating. 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, but for the supplier, there are always a lot of different systems, a lot of communications, a lot of large documents which falls under the responsibility of the supplier to administer. The customer’s view is often: ‘Now we’ve shared all this wonderful information and you can go through and distil it; and you have to make sure that you adhere to it, that you comply to it, 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.”
Adam agrees, as he adds, “I was really surprised that 78% thought that they were excellent. I’m not so convinced, and I think it’s a case of perspective and so it could be, as Costas said, that they are rating themselves as a procurement function, or that they are considering their assessment for just that segment of the process that the procurement professional is actually involved in. When you widen this out, you’ve got everything from: ‘How do I, as a supplier, even first engage with a big company? How do I engage them? How do I contact them? Is there anywhere on the website that I can go to?’
Even going from that very first interaction, all the way through to the basic checks such as: ‘Do you have disqualified directors? Are you in a sanction country?’ With some suppliers you do the basic checks on the system, with others you’re doing emails, with others you still do phone calls. People are not necessarily involved in that – and view it as being just ‘a quick something.’
It’s not really until we’re dealing with the sourcing to contract part that Procurement really becomes strongly involved, and perhaps 78% are brilliant at that – and that would probably ring a little bit true to say: ‘You know what, as a procurement professional, I deal with my suppliers incredibly well.’”
However, as Adam continues to explain, the process moves into onboarding, which includes collecting all of the bank details and carrying out checks.
“That’s where I see the biggest pain points for suppliers. It’s the two extremes at either end of the overall end-to-end process, where you think, ‘Goodness me, why can’t every company just do it in the same way?’ The obvious one is the onboarding and the validation checks. Every customer in the world wants to do the same checks with their suppliers. You basically want to make sure your supplier is good, robust, sensible. We all have the same questions, but we all do it in different ways.”
Costas responds, saying, “I totally agree with the end-to-end part. Procurement is still often siloed, dealing with the onboard to transact part, but it’s when you think of the whole journey that things look different. A supplier might interact with the quality function, with the privacy function, for example. The organization may have a separate sustainability function. So, people are not generally looking at it from an end-to-end perspective and Procurement in most organisations doesn’t own the ‘end-to-end.’ They are looking at it in terms of their slice, but no-one’s looking at how it is from a company-wide perspective.”
Adam follows up with an analogy, “Procurement is really just taking care of the first three dates in the relationship – we’ve got a contract in place, we’ve been approved, we’ve uploaded all of our certificates to the right place – but, then, there is a whole marriage to come. Have I got a purchase order? Has the purchase order come in? Where do I send the invoice? How do I get paid? Who do I phone to chase up? You have all that side of it, without even considering just the operational day-to-day of how your supplier delivers goods or services.”
Evaluating the end-to-end relationship
Adam continues, “It will come as no surprise that we use some fantastic providers of great digital tech within our procurement function because my remit is to digitalise the procurement function. However, the choice I made very early on was that I didn’t want just the supplier relationship, I wanted that ‘full-on’ partnership. The level of honesty that I get from doing this means that feedback, for example, is brutal, but it is brilliant at the same time.”
Citing an onboarding example, Adam recalls feedback from one supplier in particular, explaining, “We really received some honesty there, just the loops, the craziness, the multitude of touchpoints. That was really eye-opening – and it’s the small things that count and can really start to make the difference, right from that initial touchpoint of the external website that you have for suppliers: What does it actually say? Is it up to date? Is it meaningful? Does it tell you, fundamentally, where to go for help and what you need to do to solve your problems? Or is it just a website that says all suppliers are to send an email? I got educated very, very quickly.”
Challenges with gaining supplier feedback
Costas reminds us that often this type of candid feedback is difficult to obtain and that these conversations will not necessarily be easy, but that it is valuable to consider objective measurements as well, in order to supplement the organization’s view of the supplier experience, as he explains, “Some companies are doing this. They are measuring, for example, percentage of invoices paid on time. Or the percentage of activities that suppliers can do on a self-service basis, because that makes a big difference. Imagine for example, banking, which we all know as consumers. How much easier is it now, with the advent of online banking and self-service, versus having to go into a branch? It’s night and day.
So, we want to see the push for more objective measures around this. Are you paying on time? How many touchpoints are there and how quickly do you respond to inquiries from the supplier? There are a lot of areas, industry by industry, to consider, which people don’t realize post the establishment of the relationship. For example, a tax exemption certificate, because you will pay fines as a supplier if you don’t have that. When you look at all these different touchpoints, it often goes far beyond the areas which Procurement might be aware of.”
Adam believes that it requires a fundamental mindset change, akin to Net Promoter Scores used to measure sales performance, citing a quotation from several CPOs: “Procurement is the sales force of the bottom line. We are selling our ability to buy stuff. We want to be the customer of choice because that means that we are truly partnering to be that customer that everybody wants to work with. That means we’re going to get the best deals, the best flexibility and the best working relationship, throughout the duration, with all the trust that comes with that.”
He continues to explain how realising this forms a major part of his role as digital transformation leader. “I’m thinking about how do I make things simpler, how do I make them better, not just for our procurement people, but for everybody, for the suppliers as well. It should be embedded within whatever you are doing. Fundamentally, even if you’re not doing a big transformation in the company, you’re always tweaking dials, you are always making improvements, you are still transforming as you go forward. Otherwise, you’re just going to be static, and nothing will ever change.
The biggest investment of any company, is the people. I don’t know any companies that employ people to create PowerPoints and create Excel spreadsheets. You hire people because they are fantastic negotiators, or they’re incredible salespeople or they’re brilliant project managers or they’re fantastically talented designers. You hire people for their mental capability. It needs to come to come together and change the mindset.”
Costas provides another analogy, adding, “We also take the idea of employee experience, when thinking about supplier experience, which is much the same philosophy. You want employees to work harder, to do better and give you their best. Originally, that wasn’t the mentality. It was: ‘Be happy to have a job’. Then companies realized that by putting a gym in the office or giving employees healthy food or other such measures, it meant that employees would spend more time in the office and be more efficient. It’s the same philosophy. It is selfishly for the benefit of the organization in the end, of course, but you can do it with a in a win-win approach. That’s the way we see it.”
Differentiating SRM and SXM
In the webinar, the panel addresses a common misconception that Supplier Experience Management (SXM) is an extension of Supplier Relationship Management.
Costas explains, “SRM and SXM are actually completely different in nature. If you think of SRM, you’ll know, as a supplier, that if you’re on the receiving end of these kind of scorecards, it’s because you’re important enough for the customer to bother – but that’s the thing. SRM tends to be for the few that are the important, strategic suppliers. These are not measures pertaining to the relationship. They are all very one-sided. If you’re delivering goods, it’s all about on time delivery, quality, service. It tends to be all the things which you may not be getting right as a supplier. SXM, on the other hand, is more around creating a one-to-one approach with every supplier.”
“It’s clear you’re not going to manage the flower shop around the corner the same way as you are going to manage Cisco, but Supplier Experience Management is figuring out the way to do it for all,” he adds.
Adam agrees, saying, “If you really get into what’s going on with traditional SRM, you end up with spend management, risk management, performance management, management of the actual activities that you’re doing, whatever that happens to be. None of the relationship aspect. All of those are measurable. We have systems at BT for all of that. We have a spend management platform, risk management platform, performance management platform, we have all of these things. But none of that is to do with the actual relationship. The experience is every bit as much about people as it is about the systems and the tools.
I haven’t yet come across something that can measure the quality of that the actual relationship itself. Also, of great importance is the question around whether are we all synchronised in what we’re trying to achieve, or are we diverging with what we’re trying to do together? It’s a complex thing,” he adds.
Data at the core of SXM
As the HICX survey revealed, despite rating themselves highly for the quality of the experience provided to suppliers, enterprises would give themselves at best an average 6 out of 10 for the quality of their data. The panel discussed the question of whether, if the data that enterprises have is currently 60% at best, are data and technology going to be a hindrance to being able to come up with a strategy to create a better supplier experience.
Costas states, “At the core of SXM, actually, is a data topic. This is the true benefit for large organisations, who want to solve the massive data challenge which they have today. At the end of the day, without data, you cannot be efficient. The philosophy here is that better experiences create better data. In turn, better data creates better experiences.
The large driver for a lot of people to get into SXM is to fix this data problem – and it is a journey. But, you cannot fix the experience if you don’t have that foundation. That’s part of the problem with the experience, namely lots of systems, owned by many different functions which don’t talk to each other, and the supplier having to interact with all of these. In this case, data is going to be a massive hindrance to actually achieving those objectives of creating one-to-one experiences and creating the efficiency that you want from that experience. For both your own organisation and the suppliers.”
Costas reiterates the reason why supplier experience – and making it easy for suppliers to share and update data – is so important, as he continues, “Who do you depend on for a lot of the different corporate initiatives that are being put into place? Everyone is now constantly surveying their suppliers, or asking them for reporting on diversity spend, or carbon footprint, or information on the suppliers’ suppliers – all these types of things. So, if you do not sort out the feedback mechanisms for them, it creates inefficiencies all round. So, it does go hand in hand. It is all about finding a way to have the processes in place in which your data gets better and better, taking us back to the central point: better experience means better data, better data means better experience. And, over time, you’re creating great data, driven by the suppliers, across all of your systems.”
The central role of Procurement
Adam explains how he feels that Procurement is in the best position to drive these concepts. As he reminds us, “Procurement does not own the supplier in its life cycle, but it is the ultimate escalation point. If something is going wrong, it will arrive back with the contract. So, I think Procurement is a good point to start, because you have the bricks of the relationship rooted in the contract. It is rooted in that that conversation that was had between Procurement and the supplier at the beginning. Let’s remember, a contract is nothing more than documented evidence of the conversation that was had on any agreements that may be being breached.”
He goes on to explain that Procurement needs to play the role of enabler, ensuring that it asserts its role in ‘getting the data shaped up,’ and using its insight and expertise to understand the supplier experience in its entirety.
Costas agrees, adding, “Some organizations are now coming up with roles for Head of Supplier Experience within Procurement. It’s great to actually see certain industries now coming up with these titles.”
Adam has some advice for making sure this can be a success. “Don’t think yourself as a ‘procurement person.’ Think about yourself as a salesperson. You are selling your ability to buy something from a supplier. Sell your ability to buy. Because, fundamentally, you want that supplier (and what is supplied), and you want it to be cheaper, faster, better, or whatever. So, change the mindset from this point. That’s what starts leading one to think about the experience the supplier is having and how that could be incredible. It has to be from there.”
Costas adds, “We can converse about how easy or difficult certain things are, but ultimately you need to create the mandate and have someone to own that. Of course, in order to do that in a large organization, you need to show that there is a huge business case there, as well. These are the points at which you need to start. You have to have that mandate, you need to show that there is something fundamentally beneficial for the organization to start looking at enabling its suppliers to do their best work. Someone has to own the problem in order to fix it.”
Adam concludes the discussion with some final advice. “Don’t lose perspective on this. I think this is a very strategic play. This is a very long-term strategic procurement play that we’re talking about here. We, as procurement professionals, still need to be driving value, so where’s the next area to drive the value from? It is focusing on relationships. And there may even be some innovation coming at that point, who knows?”