Chapter 12 : Addendum on Supplier Performance Management
The Future of Supplier Collaboration
Supplier Collaboration is not a new concept still, it pays to revisit and brush up the
importance attached to it in today’s circumstances. Every Sourcing or Procurement
manager should understand the sensitivities and merits around treating the
suppliers as key stakeholders for desirable success and accordingly align to nurture
the symbiotic partnership rather than living in ‘customer is the boss’ paradigm.
I would like to quote the phrase of David Rae, an eminent Procurement Leader,
“Procurement must start looking to suppliers for inspiration and new capability,
stop prescribing specifications and start tapping into the expertise of suppliers”.
Let’s understand the concept in 9 salient pointers –
1. Future of Procurement lies in Collaboration. It won’t be an exaggeration to
even say that the success of an organization lies in supplier collaboration.
Gone are the days when customers used to bully or exploit their suppliers.
Those who still do must understand that their days are numbered in the
fierce competition, frequent mergers and acquisitions and pace of
innovation and technological advancement.
No manufacturer or customer can do everything all by themselves. They
need to rely on their extended arms to create impact, remain in the fray and
command respect. Sooner one understands the importance of this, better
placed they would be.
2. Your Collective Power while enjoying Strong Supplier Relationship puts you
in an envious/advantageous position.
The relationship is always delicately poised but if nurtured, it turns out to be
an opportunity to create a niche for yourself. The mantra is to work towards
such synergies not with top 20 or top 50 suppliers, the game changer would
be to have this approach for all of your supplier base irrespective of their
size, importance and/or repute.
Apple iPhone, Tesla electric car, Amazon marketplace are a few examples
who are thriving largely on their supplier relationships.
3. Collaboration Creates a Win-Win in more ways than you can fathom!
Suppliers attitude towards you plays an important role. I still remember the
priority I used to get as an off-road vehicle manufacturer over a car
manufacturer when I used to chase a common supplier for an urgent
delivery. Even though our business with supplier was in single digit
percentage as compared to their significant double-digit, we used to get a
priority in the urgency sequence. I understood the power of nurturing
supplier relationship then! Not only that, the collaborative approach was
observed in supplier assigning his topmost priority to suggest innovative
ideas to improve productivity, be it through suggestions on material
alternatives, process alternatives or even a completely new value
engineering idea to boost sales as well as drive the cost down. Suppliers may
offer partnership to launch an entire end-to-end solution or actively work
along with your R&D engineers to co-design, investing into machineries to
co-manufacture sub-parts, and/or co-market a newly developed product
through their network. And such a collaborative mindset is becoming more
impactful, because once you start extending any of these collaboration
models to more and more suppliers, your capabilities as a business increase
by orders of magnitude. If one good supplier can enable your company to
build its brand, expand its reach, and establish its position as a market leader
– imagine the impact, when you work collaboratively with hundreds or
thousands of suppliers!
4. The Sustainability Angle -
Increasing focus on environment and social justice, with every passing day
has drawn the world towards Sustainable Development Goals, commonly
referred as SDGs in line with UN charter. Facing increasing demand for
sustainable products and production, companies are relying on suppliers to
answer this soon-becoming essential market requirement. “Lean and
Green”, “Responsible Procurement”, “ESG Frameworks”, “BRSR” (Business
Responsibility and Sustainability Report) Mandates released by SEBI are the
pointers for every business to either fall in line or invite punitive measures.
This gave a further impetus to collaboration with recycling value chains and
circular economy. A new set of suppliers is germinating very fast to assist you
in addressing your (till now) non-core subject of recycling, carbon-credits and
ESG compliances.
5. Suppliers are rapidly becoming Globally Known as they are spreading their
reach with Global Supply Chains opening up.
You are most certain to find many suppliers in your database who have
grown bigger and wider over time or already have a supply/marketing base
bigger than your own. On top of it, even their brand could be widely popular
and respected more. Such cases need collaborative marketing strategies to
look for symbiotic avenues if not immediately, then at least in mid to long
term. Who knows, riding on their back, you are able to establish yourself
much sooner and stronger than otherwise.is also respected. I need not refer
to the power of referral assuming that you guys in procurement know much
better!
Intel sticker on your branded laptops is the most relatable example on co-
marketing. Laptop brand with intel-powered sticker inside almost
instantaneously attracts consumer interest as it provides an assurance of
product behavior and longevity.
6. Even Suppliers are the Boss Today
Bigger suppliers, Widely-located suppliers, Innovatively-advanced suppliers
and Niche-product-monopoly suppliers are all the varieties that are quite
common today. The supplier is also in a position to select which customer
they would like to work with for a longer period or what customer brands
they would like to call out on their website, proudly displaying their logos.
Can you afford to mis-treat such suppliers? Collaboration is the only answer.
7. Complex Issues you are grappling with may find solution from your Supplier
Try to openly discuss your problems with your capable suppliers and 9 out of
10 chance that you would get a workable solution. Cost optimization,
mitigating operational risks or innovate to remain ahead of curve are a few
examples that have always been a survival-priority for any Procurement
Manager. Make V/s Buy decisions are always taken with the exhibition of
your belief and confidence towards your supplier’s capabilities.
8. Category Management Insights can be easily and faster-discovered if you
enjoy the affinity and warmth in your Suppliers’ Relationship.
Suppliers invariably have a better grasp of your sourcing categories than you
do simply because they are dealing with associated challenges and solving
them day-in and day-out. By leveraging the wisdom of your suppliers, tap
into that knowledge to gain a solid understanding of the product, go-to
market strategies, competitive landscape, substitutes available, emerging
trends, product diversification, new entrants and low-cost geographies that
may allow gains tapping into their surplus inventory reserves.
9. Maintaining Good Supplier Relationship can be Your Personal Stepping
Stone to Success
You as a Procurement manager like every other person have aspirations and
a capable and cordial supplier relationship can be a fuel to the fire in meeting
your aspirational goals. Work done by your supplier can easily be understood
as your effort by your senior leadership and such appreciations can hasten
up your career progression.
