Supplier Experience Management
By Hugo Britt | November 4, 2021
Happy supplier, happy life. Is that how the old saying goes?
Buying organizations depend on their supply base for high-quality products and services, reliability, and innovation. So when a procurement team subjects a supplier to a negative experience, there can be major repercussions for both parties.
Failure to nurture respectful, transparent, meaningful and collaborative buyer-supplier relationships also increases supply chain risk, as the outbreak of COVID-19 so clearly demonstrated. As suppliers across the globe scrambled to deliver goods and services on time and keep up with demand, they had no option but to be selective about where and how their limited resources were allocated.
In these tumultuous and unpredictable times, organizations must ensure they become a customer of choice, which is why many procurement teams are beginning to prioritize supplier experience management.
The difference between supplier relationship management (SRM) and supplier experience management
SRM and supplier experience management activities share an end-goal, which is to drive maximum value from the buyer-supplier partnership.
While both apply strategic procurement processes and are advantageous in their own ways, the former primarily focuses on measuring supplier performance while the latter looks to assess and enhance the overall relationship between buyer and supplier.
Supplier Relationship Management
SRM activities typically include performance-related KPIs, compliance assessments, and formal negotiation processes. It’s vital that procurement teams implement processes such as these to mitigate risk, drive cost savings, and accurately measure and compare their suppliers’ performance.
However, incorporating additional measures associated with supplier experience management will undoubtedly unlock a new kind of value.
Supplier Experience Management
Supplier segmentation and preferred supplier programs, for example, necessarily dictate how procurement teams allocate their SRM activities and resources. It makes complete sense to devote additional time and resources to a company’s biggest suppliers, particularly if they are also single-source or high-risk.
The purpose of supplier experience management, on the other hand, is to ensure the entire supply base receives fair treatment when it comes to factors such as contract and payment terms, effective onboarding, conflict resolution, transparent communication, and the working partnership.
The increased communication and collaboration that comes with supplier experience management helps ensure that both parties are openly sharing important information, in agreement on their objectives, and working towards a common goal.
By establishing greater trust and respect between buyer and supplier, the latter is far more likely to accommodate changing demands and be compliant with the buying organization’s preferred procurement processes.
Using supplier experience management to become a customer of choice
Procurement teams are largely driven to implement supplier experience management activities to ensure they become a customer of choice. Sam Singer, and Jay Anderson from Rapid Packaging share insight into the topic in Episode 35 of The Sourcing Hero podcast.
Both agree that developing meaningful relationships and enhancing the supplier experience is of the utmost importance. This extends to finding suppliers whose values align with the buying organization.
“You should be looking for suppliers that are a good ‘fit’ for your organization because you want to have common values and common cultures,” Sam says. “The only way [to work well together] is to be very transparent about your processes, your expectations, and so on. Pick somebody that fits you.”
Value beyond cost savings
Sam has noticed that when rising stars in the procurement world first break into the profession, they are eager to make their mark via a significant cost savings. “They do this by driving the supplier to provide discounts on products and services, which isn’t really where the value is. It makes the relationship a bit challenging.”
It’s far better, he explains, when newly hired procurement professionals acknowledge and respect the length of time a supplier has spent working with their organization. “My advice [to buyers] is that the first thing you should do is go out to the floor and talk to your operators and talk to your plant supervisors about what challenges they face and what drives them nuts.”
More often than not, Sam will see an RFP come through for a mid-size or large organization and it’s clear that the purchasing department has very little understanding of how the product is being used or the buyer-supplier relationship.
Jay agrees, urging all procurement teams to reach out to the experts. “We have numerous employees that have multiple years of experience, so reach out to them.”
Take advantage of supplier expertise
Fairness is also crucial when it comes to buyer-supplier relationships. “I think it should be fair for both the supplier and for the customer,” says Sam. He describes his relationship with one customer who has implemented a quarterly continuous improvement process requiring all vendors to pitch ideas about how to improve their business processes and drive value. “It doesn’t have to be product related – more often, it’s operationally focused.
When we work with this customer they have a lot of respect for the expertise we bring to the table and we have a lot of respect for the fact that they’re open to listening.
“We’ve worked with them for over 25 years, we make a very good margin, and they are very happy. So to me you want to have a mutually beneficial relationship.”
Want to partner with a supplier like Rapid Packaging? Contact Una to learn how working with the right suppliers builds relationships that are beneficial to all parties involved.