If someone asked you the question “what is ‘supplier collaboration’?”, how would you answer?
Purchase orders, invoices and contracts; many see process as central to understanding supplier collaboration. However, a growing number of procurement industry thought leaders see it as a means to driving innovation and growth. So which is it?
Think of supplier collaboration as a spectrum. A spectrum that considers everything from your typical day-to-day engagement to an innovation partnership. In a sense, everyone collaborates with suppliers.
But understanding what supplier collaboration could achieve is essential to any procurement organisation seeking to unlock greater value from their key relationships.
To help, we devised a supplier collaboration checklist to consider as part of a wider procurement strategy.
Chances are if you asked 5 people involved in a top tier supplier relationship what the vision and strategic objectives are for that relationship, you would get 5 different answers. This misalignment causes friction that blocks effective collaboration from happening.
But this can be put right in just a few steps:
- Agree to a partnership mission statement that sets the foundation for the relationship long-term
- Establish annual objectives for the relationship to give focus and relevancy to every project, taking into account what both sides of the relationship want to achieve
- Get consensus on project goals in advance and schedule monthly reviews of progress and performance to identify what works and what could be improved
- Schedule QBRs for a strategic sense check on performance. Review progress on the agreed annual objectives, keeping in mind your partnership mission statement
A proper governance structure is key to fostering a successful collaborative relationship. It involves developing a set of cohesive policies, processes and approval levels that act as the framework to your supplier partnership. Without this, collaboration efforts quickly stall.
To build a repeatable framework that enables both sides of the relationship to deliver:
- Know exactly who in your business (across all departments and geographies) works with suppliers and who those suppliers are; map this and store in a central location for anyone to quickly reference
- Establish approval and sign-off responsibilities on both sides of the relationship and disseminate to everyone before the project starts
- Agree to and articulate clear timelines for important project milestones
- Replace indirect hierarchical communication with direct engagement to improve issue resolution and information flows between teams
- Maintain a communication audit to expedite any problem solving where necessary
Good governance requires everyone involved in the relationship to be accountable for their part in building a successful collaborative relationship. From task management to issue resolution, it’s important to assign responsibilities right from the beginning. Failing to do so could plunge any well intentioned partnership into confusion and stagnation. Fast.
Here are some additional steps to make ownership watertight in your relationship:
- Document and share a people ownership map for every area of the relationship to provide clarity on task management and accelerate issue resolution
- Develop clear escalation processes to help resolve issues and avoid unnecessary delays to project progress
- Develop automated follow-up processes to resolve outstanding queries or tasks so unfinished actions don’t become blockers to collaboration
- Celebrate success and ensure everyone involved in the relationship is recognised for their successes and contributions
The basis of trust in any relationship is transparency and that certainly applies to supplier collaboration. Whilst operational metrics are important for measuring performance, they don’t tell the whole story about how the relationship is really working. Without that insight, the value contributed by any collaborative effort will quickly plateau.
But gaining real visibility into supplier partnerships can be achieved if you:
- Develop value trackers for every project to determine ROI for each relationship. This could include cost savings from new technology and innovation or sales generated from a new product launch
- Develop a single place where all stakeholders in the relationship can easily gauge value delivery and performance; this helps to make an ongoing business case internally for building a supplier partnership
- Measure relationship sentiment at regular intervals by using surveys to determine how people feel about the success, direction and management of the partnership
Few business processes are more critical to a company’s continued success than innovation. But it’s hard to do well.
The challenge of managing innovation comes from its broad reach, unpredictable nature and dispersed ownership. Sourcing innovation externally also introduces concerns around cost and legal ownership.
It’s therefore understandable that innovation isn’t a primary driver of supplier collaboration for most procurement organisations; supply chain cost cutting is a much greater focus.
But this can change through disciplined innovation management, project tracking and real-time analysis of supplier collaboration effectiveness:
- Build and manage an innovation pipeline of upcoming and ongoing innovation projects by priority to forecast potential value creation from the entire partnership
- Keep project progress up-to-date in a central location for everyone to track. Partners can quickly identify blockers, potential overlaps and work duplication
- Link all projects back to your partnership mission statement and annual relationship objectives before they commence
- Establish key revenue metrics to measure value delivery, beyond savings, from the partnership
A great strategy can quickly unravel without the right infrastructure in place. Technology is fundamental to the success of any supplier collaboration and innovation strategy, so selecting it’s vital to get this part right.
Every procurement team should consider the following when researching potential solutions:
- A deep, open API: this will bring your existing tech stack together to offer real-time data parity, more efficient and faster workflows, and better reporting and analytics for more informed decision making. But check how deep the “integration” will be as this definition varies!
- Effective collaboration: are projects managed across several impractical tools? Successful partnerships need a single place to manage all projects, workstreams and tasks with the ability to raise issues and communicate in real-time for consistent alignment. That way, everyone delivers.
- Value trackers: can you quantify the exact value delivered from your partnerships in real-time? Measuring ROI is vital to proving the value of your collaborative efforts; you may need to know this at short notice!
- Usability: is the tool easy to use and intuitive for new or existing users? Is data easy or difficult to surface? How much time is saved (or wasted) in using the platform? Does it encourage or discourage collaborative activity?
- Right fit: Is the solution designed with your specific supplier collaboration and innovation use case in mind or do you need to work around it?
- A solution such as Vizibl is uniquely designed to support the end-to-end innovation value chain from idea generation through to product launch
Supplier collaboration can be seen both as a process and a strategy; as a process, it’s any interaction between buyer and supplier; as a strategy, it’s about unlocking more value from every supplier relationship beyond basic cost cutting.
Procurement teams are best placed to deliver this to facilitate unique innovation, develop new competitive advantages and drive growth for the entire company through better supplier working relations. As businesses demand growth, it is the strategy of supplier collaboration, not just the process, that a growing number of organisations now embrace.