This week’s featured webinar was a Procurement Leaders Thought Leaders event on the topic of supplier relationship management. Innovation with suppliers is a critical component of competitive advantage, but in order to turn potential into performance procurement needs a plan. In this webinar, we heard from Hubwoo, BMO Harris Bankcorp, and P&G about supplier segmentation, key success factors, and achieving innovation.
Of all the topics covered in the webinar, by far the most interesting was how to balance the need to forge collaborative partners with suppliers, and the need to manage or reduce prices. How can you partner with someone while also ‘haggling’ over the details. All three panelists had very different, and very interesting, perspectives.
VP, Global Product Supply Purchases at P&G
The question assumes that cost management discussions are likely to be adversarial. In relationships with strategic suppliers, a long-term perspective is more effective than short-term focus. In this larger context, costs are only a part of the overall relationship. The other important distinction is that managing cost and price are not the same thing. Working together to manage costs allows for discussions around efficiency rather than margin. Both sides should set parameters for mutual future growth, with shared responsibility for making that growth happen. Every value proposition should be look at in terms of how it affects the customer experience.
VP, Procurement & Strategic Sourcing at BMO Harris Bankcorp
It is important to align your objectives with what you are trying to achieve. When considering incumbent suppliers, the focus should be on operational excellence. Many companies enter into strategic relationships in order to bring about innovation and gain a competitive advantage. Sometimes innovation IS cost management. For instance, when prices can not be reduced further, buyers and suppliers can work together to better allocate funds and resources. Chris used the example of a pie that is of fixed size, alluding to the collaborative negotiation strategy of growing the ‘pie’ rather than just dividing it. Finding mutual efficiencies in current processes is a way of getting more from the same size pie.
CEO of Hubwoo
Collaboration in a business context often taken place online just like individual collaboration or networking. Companies using supplier networks to manage and innovate with their supply base often fall into the trap of being defined by the role of ‘buyer’ when in reality, all companies are both buyers and suppliers. Work to get away from the stereotypes associated with the roles of buyers and suppliers and interact as companies instead, focusing on both top and bottom line improvement. Innovation often takes an entire organization – such as with the example of efficiency gained through automation. Supplier relationships, like all relationships are based on trust and a high degree of open communication.