Webinar Notes: Farming Supplier Relationships: Learn to Drive Value More Effectively

This week’s webinar notes are from an October 29^th event hosted by Sourcing Interests Group and presented by David Jungling from Denali Sourcing Services. If you are interested in the content, but aren’t a member of SIG, Denali also recently published a whitepaper on the topic, which can be downloaded here.

I always enjoy finding a new way of considering the common, ongoing challenges we face in procurement, and this event offered just that. Jungling offered up an organizational model that distinguishes between hunters (or the people who sign new contracts) and farmers (or the people who nurture and support existing contracts or categories in the long term). The key difference is perspective on time. Are current activities expected to lead directly to results (hunting) or is there a willingness to take a longer-term approach to managing a category?

Traditionally, procurement professionals have been hunters. Action oriented, they prioritized going out to find solutions so they could negotiate contracts, and hand the relationship back to the business owners.

Procurement ‘farmers’ need to stay involved in a contract or category long after the handoff would have taken place. Category management or knowledge building becomes a key activity, particularly in interactions with suppliers as they are considered the most likely source of innovation.

While headcount constraints and operational realities have required procurement to hand off categories in the past, building supplier relationships is becoming increasingly important. It is not realistic to think that procurement can build a relationship with suppliers during the bidding process, hand it over to business owners after a contract is signed, and then seamlessly take it back when issues arise or a contract term expires. Suppliers will build relationships with someone in the organization, the opportunity is procurement’s to lose.

As with other supplier relationship management approaches, segmentation is necessary, as the entire supply base cannot be managed at a ‘farming’ depth. Where it is applied, procurement will need to be far more involved after the contract is signed and remain so for the entire term. In addition to reallocating time and projects, each procurement team needs to strike the right balance of farmers and hunters. Execution is no less important just because an effort takes place more gradually or over a longer span of time.

Denali’s recommendations for managing talent include determining whether each team member is a hunter or farmer and then allowing him or her to use those strengths. Whenever more work is taken on there are organizational considerations that require tough decisions. Purposefully determine what will be executed in house or by a central team versus being outsourced or handled through alternate resources.

Does your organization farm or hunt, or have you managed to strike a balance between the two? Join the conversation be commenting here or on Twitter: @BuyersMeetPoint.