Why Procurement Must Focus on Supplier Experience
High-performing procurement organisations leverage procurement-supportive technology to elevate and automate themselves out of tactical work and into positions where they can focus on strategy. But liberating staff from menial tasks also frees their time to focus on other valuable initiatives (areas that have perhaps taken a back step until now). One key area of focus involves building stronger supplier relationships.
In fact, now more than ever, the supplier experience matters. Fierce competition, supply chain risk and disruptive events in recent years have made organisations highly dependent on every supplier, not just a select and strategic few. This heavy reliance impacts many areas of procurement:
Costs
The costs associated with purchasing goods and services from suppliers represent a large chunk (frequently between 60% and 70%) of a company’s overall expenses. By improving your supplier management, you will be in a better position to secure the best deals and lower costs.
Quality
Suppliers are also the ones who make sure the products a company delivers to its customers are of high quality. If your suppliers maintain high standards, customers are more likely to be happy with the products, boosting your company’s reputation. If they don’t, you risk harming your company’s hard-won image.
Shortages and Delays
If your suppliers can’t deliver on time or don’t provide enough materials, you will face severe operational challenges, including production halts and unmet customer demands.
Sustainability
A substantial portion of your company’s environmental and social impact comes from your suppliers. If your suppliers aren’t following good sustainability practices, it will likely have a knock-on effect on your company’s reputation.
Technology
Suppliers often provide essential technologies that a company needs to operate. These technologies are usually hard to replace, so supporting your suppliers to be innovative and reliable will help your company stay ahead in technology and maintain its market position.
Time for Supplier Experience Management (SXM)
Given that companies and suppliers are intricately linked, your company cannot succeed if your suppliers are struggling. Still, creating and maintaining these relationships has never been easy, at least not when your strategy is outdated. The growing recognition of the importance of sound supplier relationships has led procurement professionals away from traditional Supplier Relationship Management (SRM) to a more holistic approach in what is called Supplier Experience Management (SXM).
To explain, SRM involves managing interactions with suppliers primarily to optimise costs and support the supply chain’s efficiency. The focus here is on the more operational aspects of supplier relationships, things like negotiating contracts, managing lead times, and evaluating supplier performance based on quantitative metrics.
On the other hand, SXM takes a far broader perspective with a goal of improving all aspects of the supplier experience. On top of SRM’s efforts, SXM might also include proactive communication, collaborative problem-solving, and building trust and loyalty so mutual value is deeply embedded in the relationships.
Becoming a Customer-of-Choice
To truly make SXM work and gain all the benefits of a robust supplier network, companies need to aspire to become a ‘Customer-of-Choice’ – a status achieved when suppliers prioritise your company over others due to the mutual value and strategic advantages you offer.
It first requires an adjustment in mindset. Rather than considering suppliers as third parties – siloed and separate entities – suppliers should be treated as an extension of the organisation. This allows companies to build an agile procurement function with stronger links to internal and external partners. Competitive advantages – such as better terms, access to innovation, and a more reliable supply chain – will naturally follow.
It’s also important to remember that the strategic management of supplier relationships is not just about procurement efficiency. It’s equally about quality, sustainability, risk mitigation, and technological innovations. It’s multifaceted and complex.
But get it right and your company will earn the title of Customer-of-Choice.
Digital Transformation and the Supplier Experience
When it comes to enhancing supplier experience, digital transformation plays an important role. New technologies not only alleviate workers from manual tasks, but also allow them to refocus on the supplier experience. Modern technology and solutions also provide procurement professionals with the tools needed to create those special relationships with suppliers.
In part two, ‘How to Build a Supplier-Centric Culture’, we will share the key strategies and technologies that you can put to work right now to strengthen the bonds with your own suppliers. Keep your eyes peeled for part two’s release.
