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How to turn Suppliers into Allies

Are you a forward-thinking procurement and supply professional who genuinely believes that strong supplier relationships are a competitive advantage for your business? If your answer is yes, then this article is for you.

It’s no secret – strong supplier relationships pay off well beyond price-based benefits. Be it through improved service levels, mutually aligned and efficient processes, preferential access to the best supplier resources or goods in short supply, sharing of technology, insights, and innovation – to name a few. In fact, one study found that non-price based benefits are on average 4-5 times higher than price-based concessions.

Investing in your supplier relationships is good business during good times. During challenging times (like the COVID-19 pandemic), your supplier relationships can quickly become an existential differentiator. As a supplier, who are you most likely to prioritize when demand exceeds supply and go the extra mile for when times are tough – your preferred or non-preferred customers?

Consequently, many of our leading procurement and supply-chain customers have been asking us how they can gain the ‘SRM edge’ – to achieve preferred customer status and turn their suppliers into allies.

We think the most promising answer is to borrow generously from the highly data-driven practice of customer experience management (CX), applying some of the proven CX practices to drive mutual business value and improve relationships with suppliers. We call this Supplier Experience Management (SXM).

Traditional SRM programs are often limited by internal resource constraints and hence focus predominately on the most strategic supplier relationships. While this makes good sense from a cost-benefit perspective, they often fail to identify and capitalize on improvement opportunities within the broader supplier base. Not dissimilar to the common conundrum of how to efficiently and effectively manage tail spend.

In turn, data-driven Supplier Experience Management is all about continuous listening, analyzing data in context to derive actionable insights and prioritizing improvement opportunities that maximize impact.

Let’s look at one example use-case: Supplier RFP participation. In order to derive results from your sourcing events you need suppliers to participate. Your internal data may tell you that RFP participation has declined for a certain category or region, negatively impacting your sourcing outcomes. In order to improve RFP participation you need to first identify the causal drivers – the ‘why’ – that drive RFP participation, including your own performance and the importance to your suppliers. With such insights you can then prioritize the most impactful topics to improve RFP participation.

Driver%20Analysis

Driver Analysis

This is just one of the countless use cases for SXM. So how do you get started? Depending on where you are on your SRM journey, a logical starting point for Supplier Experience Management is to capture a relationship baseline through a supplier-relational or voice-of-the-supplier analysis. The emphasis here is on ‘analysis’, with the intention to go well beyond a simple supplier survey by adding contextual information and sentiment to your analysis.

Contextual information can be added through operational or segmentation data e.g. supplier location, supplier tier, spend, and category. This enables you to enrich your survey results and derive far deeper insights compared to non-enriched survey data. However, the true treasures of valuable and actionable feedback are often hidden in ‘free-text’ survey responses. While it is easy to capture free-text responses, they are infinitely harder to analyze without the right technology.

Sentiment%20Analysis

Sentiment Analysis

Advanced natural language processing technology can trawl through 1,000s of supplier responses to unearth common themes, evaluate sentiment, and identify causal relationships.

Armed with such insights – a data-rich view of strengths and actionable improvement opportunities – you will have laid a solid foundation for your Supplier Experience Management program. This will allow you to prioritize and action improvements that truly make a difference, and to start turning your Suppliers into Allies.

In my next blog post, I will explore how to capture continuous and holistic experience data, and additional use cases for the many ‘moments that matter’ along the end-to-end supplier journey.

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