As Chief Procurement Officers (CPOs) know all too well, how and what you communicate during the sourcing process sets the stage for the resulting supplier relationship. And while that relationship may never become a true marriage of equals, there are several things that sourcing and supply management professionals can do to get things started on the right foot. This article highlights seven important strategies and tactics that procurement organizations can use to drive savings while also maintaining and improving key supplier relationships.
Part Four: Clear Communication
It is one of the procurement industry’s dirty little secrets that some buyers and sourcing professionals run sourcing projects even though they have predetermined which supplier (generally the incumbent) will win the award. Unfortunately for these buyers, suppliers can usually sense when the playing field is not level and as a result, spend much less time focusing on the opportunity and delivering their best bids. Retaining an incumbent is frequently viewed as a ‘low-risk’ strategy but in this age of innovation and heightened competition, market leadership is difficult to sustain, so failing to consider new sources of supply is actually quite-often a high-risk strategy. Take, for example, the consumer electronics market where industry leadership can completely change within a three or five year window and one-time market share leaders can quickly find themselves on the brink of bankruptcy. Be forewarned that similar shifts are pervasive in most supply markets, even if the speed of change varies.
One way to ensure that teams are fairly engaging the best potential qualified bidders/suppliers in the process is to standardize and centralize supplier communication during the bid process, and, in particular, do a much better job in supplier communication upfront. Clear, upfront communication helps level the playing field and as a result, is more likely to engage and attract the highest-value suppliers. Once the right suppliers are engaged, the sourcing team must work to ensure that the RFx (industry term used to describe buyer requests for information/proposal /quote/etc. from suppliers) process flows smoothly. They can greatly aid their cause by clearly explaining their bid process requirements and providing detailed specifications for the category being sourced. Remember, when suppliers lack clarity and details for a bid opportunity, they will mitigate the “risk of the unknown” by submitting less aggressive bids.
Clear and upfront communication with suppliers is a bedrock element of effective procurement-supplier relationships, and managing supplier relations and performance. Chief Procurement Officers cannot reasonably expect to ignore their suppliers and expect to do better than they did the year before. Even if they are unhappy or unsatisfied with a supplier or their entire supplier base, it behooves CPOs to engage their suppliers to address their concerns and see if they can bring solutions to the procurement teams’ challenges and issues.
Seven Keys to Better Sourcing and Supplier Management, Part Three: Tighter Specifications
Seven Keys to Better Sourcing and Supplier Management, Part Two: Early Engagement
Seven Keys to Better Sourcing and Supplier Management, Part One: Know Your Spend
What Will Take CPOs and Procurement Organizations to the “Next Level?” Early Engagement
Tagged in: Chief Procurement Officer, CPO, Process, Source-to-Settle, Sourcing, Strategy, Supplier Performance Management, Supplier Relationship Management, Suppliers, Supply Risk