24 Jul 2020
Effective Supplier Management – Relationship Management Essentials
Written by James Cowley
The Return of the ‘R’
Today I bring to you Relationship Management, the final chapter of my series on the topic of ‘effective supplier management’ and in doing so will be sharing my views on a favoured topic of mine. I’ve really enjoyed putting pen to paper on an area that I feel passionate about and hopefully this has come through for you as the reader.
In the last few weeks I’ve talked about the key components that make up my four ‘golden pillars’ of supplier management, starting with Contract Management, then rolling into Performance Management and in my third instalment, I brought you Risk Management. In this final instalment I shall be giving my view on what some would term the ‘jewel in the crown’ – Relationship Management, often widely termed ‘SRM’ (Supplier Relationship Management).
In my view, I’ve saved the best until last and I make no apology for writing this article from the less cerebral side of my brain and from a more emotive disposition. Yes, there are technical skills to learn and harness, but I genuinely believe this is about how you, the procurement professional, can bring your personality, character and style to the fore with great effect.
The Pick of the Bunch
Why am I passionate about SRM and why do I think fostering your supplier relationships is so critical? It’s simple and I can sum it up in one word – people. Whilst we may live in an increasingly digital but in my experience people make things happen and I think this quote by Paul Odafe sums it up superbly:
“Money makes the world go round but people make the world go forward”
Without taking the time to develop good people relationships within your supply community, I personally don’t think you’ll ever truly see the quality of outcome you hope for. I hear a lot about supplier-led collaboration but without the drive, engagement and creativity of people, we’d be standing still.
The relationship aspect of supplier management really is the pick of the bunch for me and in the next few paragraphs I’ll be giving my view on why I place so much emphasis on it, so buckle up and let’s get stuck in.
What About Our Shiny Governance Model?
Some of you might understandably point me to their well-established supplier governance framework as the vehicle to get the best out of their supply base. To some extent they’d be right, and I would always recommend that you create a repeatable and strong framework when it comes to governing your relationships, but for me that’s not enough.
Rocking up to a monthly or quarterly meeting will tick the boxes and will absolutely be necessary to cover the ground I’ve referred to in my previous topics, but you have to ask yourself, are you just going through the motions? Getting the absolute maximum from your supply relationships and managing them truly effectively goes further than this in my view. It’s about really understanding the value you can jointly create, nurturing the personal relationships and creating an environment that creates energy and really gets people out of bed to be there. At the end of the day, you want the best outcomes for your business and just going through the motions won’t put you at the forefront of the supplier’s mind when it comes to the best they can offer or a front row seat in their proposition development.
Shouldn’t Suppliers Know Their Place?
Hopefully I’m preaching to the converted today and I know that many of my procurement network are progressive in their approach, but I do want to quickly cover off a point that I still come across from time to time.
On occasion I still hear the old adage, “we’re the customer aren’t we” or the “supplier should get back in their box” and when I do, I feel like I’m transported back to the 1990’s. Technically on the client side we (procurement) are the customer and yes, I too have high standards for my supply base, but in my experience it takes two to tango and if you want your suppliers to perform at the best then you have to be ready to play your part and offer your support to enable them to do so.
Embrace Technology and New Methods
I’ve talked lots so far about people and my belief that the personal aspect of supplier relationships is key, but I do also want to address the part that technology can play and how even the increasingly used term of ‘disruptive procurement’ needs focus from a relationship perspective.
The emergence of technologies such as robotic process automation (RPA) has in some instances replaced the activities of humans. Whilst this can feel harmful to individuals who are displaced, there are many instances where the introduction of such technology actually paves the way to allow us to focus on more value adding activities and in procurement, one of those can be supplier management. By taking some of the more mundane activities from what is often stretched resource, we can look to deploy those people (with the right support) in areas where hopefully they can deliver more strategic outputs. This could be SRM and using the space to spend more time and energy on developing those key relationships.
Another area I’m increasingly seeing referenced currently is the term ‘disruptive procurement’. It seems to be a more frequently discussed approach and this Kearney article does a great job of outlining the principles behind it. In simple terms, I see it as moving higher up the value chain and looking more deeply at how to drive benefit, but a key cornerstone to this is ‘supplier collaboration’ and how to work in tandem to drive tangible joint benefit for both organisations. This deeper integration won’t happen on its own and yet again highlights the need to develop your supply relationships to gain that competitive edge. There has to be the desire (supported by senior leadership) to progress down such a path, but once again the key driving factor will in my view be people and the relationships between those on either side.
It’s Not Always Plain Sailing
Managing suppliers is not always easy straightforward. There are times of course when difficult conversations are needed, whether that’s to show a supplier the RFP “exit door” or having to address a drop-in performance, but it’s how you do it that counts.
On a personal note, I haven’t always found people relationships easy. I’m not for instance someone who loves to strike up lots of new conversations with people I don’t know at a party and have in the past kept myself to myself at networking events. I have however learnt that it doesn’t hurt to try and when it comes to working with suppliers I firmly believe that if you put the hard work in and treat others with respect then you’ll more often than not find that it leads to better results.
In practical terms we simply can’t run a SRM program for all suppliers, it therefore means our focus should be directed towards those areas that we feel will make the biggest impact and to the supplier relationships that present that best opportunity for development, be it product, cultural fit, commercials or a combination of all three. However, I would always recommend that you provide feedback and a clear rationale to those suppliers who aren’t successful or those that you don’t feel are required at a particular point in time. If nothing else, it at least allows them to be better positioned for the future and will gain you far more respect than not responding at all.
My Tips for Success
So, when it comes to getting the best from your supply base, there are a number of ways in which you can address this, many of the points should be used in conjunction with each other. Over time I have developed an approach that works for me and that won’t necessarily be the right recipe for everyone. Experience has helped me learn from my mistakes, but I genuinely feel that the majority of suppliers that work with me, day in day out, would attest to “feeling respected” and valued. Below I’ve outlined my recipe for success:
Firm, but fair. Developing positive relationships with your suppliers isn’t just about being nice. I’m a big believer in high standards and doing everything to the best of your ability and that goes for my expectations of suppliers too. I believe suppliers need to feel respected, taking a balanced view and understanding the role of both parties is important. In my experience a key component of a supplier’s ‘failure’ can often be actions or processes on the client side of the fence. So essentially make sure your own house is in order first.
Get to know their culture. This is an often overlooked factor and is increasingly important in a world where we look to collaborate more. Getting underneath the skin of the type of organisation you’re working with is really useful. Look to understand their drivers, their practices and the company ethos to ensure it is aligned to your own or where you’d like to be.
Visit their facilities. Pre-pandemic, this was easier than it is currently, particularly for international travel, but when possible, get out to your suppliers and I would urge you to get a good feel for the operations and working environment. This will go hand in hand with Point 2 above and is likely to also form part of your governance framework, but it’s not done enough. Travel budgets are frequently challenged, but if you can create a solid business case it will be worth the investment in my view.
Understand their drivers. Of course supplier account directors will often be remunerated by sales, but by understanding what company environment they have to work in, processes they have to follow and their overall company drivers will help you navigate through sometimes choppy waters and understand why they may be asking for a particular commitment.
Get to know your opposite number. This is crucial for me and where the magic really starts. Having the right people matrix at relevant levels of each organisation is always a good practice to put in place but working hard to develop that personal relationship with your opposite number does in my experience, make things happen. Not everyone immediately gets along like a house on fire, but by working hard at it, being respectful and personable will help move it along the ‘warmth scale’
Be prepared to share. We naturally have to respect the IP and confidentiality of our respective companies and it’s not always appropriate to share information at a particular time. Where possible though I would share relevant information that will ultimately allow your supplier to understand what you’re trying to achieve, both project-wise and company-wise. If you’re in technology for instance share things such as your product roadmap or maybe relevant parts of enterprise architecture roadmap. This sort of information will give the supplier a better view of where they fit, but also where they and their products may be able to help in other areas to deliver incremental benefit.
Look at how you can jointly bring benefit to each other. This moves into the ‘disruptive procurement’ territory and of course won’t be relevant for every type of supply relationship, but for those strategic ones, things such as joint business planning sessions, opportunities for joint marketing and involvement in product updates can really set the relationship apart from your supplier’s other clients.
There may be some that I’ve missed and feedback on what you’ve found works well for you would be really interesting to hear either directly or via e.g. the comments section on LinkedIn. The areas I’ve talked about have tended to work well for me and have stood me in good stead over the years. Does money make the world go round? Maybe it does, but as our friend Mr Paul Utho said: “Money makes the world go round but people make the world go forward”
Time for an Encore?
As mentioned, this is the final instalment of what has been a really enjoyable series to write. Working with and managing suppliers has always been a passion of mine and hopefully this has shone.
Whilst this may be the last in this particular series, I can confirm that it’s not the last article that you’ll see from me. At Marriage-Stanley & Associates we’re passionate about providing insight and bringing real meaning to what we do and if you feel some of this would be helpful to your business, please feel free to contact me on 07834 452333 or contact us via this link.
Principal Associate, Marriage-Stanley & Associates
24 Jul 2020
Effective Supplier Management – Relationship Management Essentials
by James Cowley
9 Jul 2020
Effective Supplier Management – Risk Management Essentials
by James Cowley