Procurement organizations manage an often-complex web of relationships with suppliers and vendors, connecting with these external partners to resolve cost disputes, create or renew agreements, discuss, resolve operational issues, and ensure the business continues to procure the goods or services that they need to do their job at a fair price.
An inclusive procurement strategy proactively manages these supplier relationships to create long-term, strategic partnerships that can withstand the storm of market uncertainty and changing needs. By treating suppliers as valued partners, procurement can shift from an old outdated us-vs-them mentality and create immeasurable benefits on both sides of the aisle.
WHAT VALUE DO SUPPLIER RELATIONSHIPS PROVIDE?
Supplier relationships refer to the type of partnership that your organization has with external vendors of goods and services. This includes suppliers that have established contract agreements as well as suppliers that do not have an agreement but that the business cuts purchase orders to on a regular basis.
Historically, procurement organizations have viewed suppliers as rivals, or at best, cautious allies. This type of mindset has led to a culture of aggressive cost negotiations and an impetus to pit suppliers against each other to achieve price concessions at any cost. While this can lead to short-term gains, this adversarial mentality makes it more difficult to achieve lasting savings and creates a significant amount of unnecessary work for both procurement and for the supplier team.
By pursuing a conscious and ethical supplier relationship management program, you can begin to rebuild, repair, and improve existing supplier relationships and create a culture shift throughout the organization. This change creates savings in any market, provides service and quality benefits, reduces the day-to-day tactical work from procurement, and increases the respect from the people with whom you work on a day-to-day basis. All the tangible benefits aside, it’s also the right thing to do and will be noticed and appreciated by your suppliers.
THE DOWNSIDE OF SHORT-TERM THINKING
Let’s explore a hypothetical example of an organization that does not value their supplier relationships. Hamburgers R Us is a mature, established food company that has expanded rapidly throughout the US and their procurement organization has pushed for hard savings above all else.
This is just an example, but it is very common for procurement organizations to employ some or all these negative business strategies illustrated in this example ingrained into their organizational mindset. Recognizing these lingering negative factors is the first step to affecting real change.
STRENGTHENING SUPPLIER RELATIONSHIPS
Upon recognizing a need to improve your relationships with suppliers, there are several key next steps to influencing and implementing change:
By incorporating the above strategies, you can contribute to an inclusive procurement strategy and help create a procurement organization of the future.