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Sustainability and innovation come high up on the priorities of procurement executives today. So much so that Procurement Leaders’ CPO Planning Guide 2017 found that sustainability and corporate social responsibility had risen up CPOs’ 2017 agenda, usurping talent management and revenue generation from their place in the ranking, while innovation remained steadfast as the fourth most important priority.
It is clear that procurement teams are turning their attentions to these areas, which, ultimately, means turning attention to increased collaboration with its supply base and more partnership-led relationships between suppliers and buyers.
But for all these good intentions to connect with its supply base, procurement has apparently frequently failed to make the business accessible and attractive enough to its suppliers for them to want to collaborate in return.
New global research from 3M finds that less than half (43%) of suppliers feel fully empowered to collaborate with their partners, and a lack of customer incentives and openness has meant that half of suppliers admit they hold back from making strategic recommendations to buyers.
If procurement does not make itself approachable or attractive to its suppliers then it will find itself in a lonely place indeed. So what can procurement do if it wants to be a good partner and even a customer-of-choice?
A win for procurement doesn’t always mean a win for the supplier, but in the making of a happy collaborative partnership, there has to be some kind of carrot, some appealing factor. By offering incentives for good performance suppliers will feel rewarded and more motivated to collaborate with the business.
Incentives can take on many different forms, such as rewards for hitting targets. To keep the momentum going, expectations on suppliers should be escalated so that the bar continues to be raised and with it, the benefits or close partnership with the business also increases. Offering performance based payments is a popular approach when working with service provider agencies, such as offering rebates or bonuses directly to the staff delivering the projects.
But rewards don’t always have to take on a monetary value. Supplier awards can be another way to reward suppliers and show them that they are appreciated by procurement.
It would be foolish for executives to assume that suppliers will share their prized innovations with them while procurement continues to hide behind a panel of glass about its own and the wider organisation’s strategy.
Holding supplier days and events is one way to gather strategic suppliers in one room and break down barriers between the two parties. What many think of a supplier day is that the supplier should use it as an opportunity to try to impress the business and showcase their skills. But what some forward-thinking organisations are doing is using these events as platforms to share their own strategies to and impress the suppliers.
For example, beauty company Coty held a supplier day in which heads of various functions including procurement, finance and R&D took to the stage to share their strategies, plans for the future and how suppliers can become partners in these strategies. Being open with suppliers naturally leads them to become more open in return.
Focusing these tactics around strategic – and particularly – high risk suppliers will make ’collaboration’ move from a term procurement aims for, to a reality that it is acting out and using to drive innovation and sustainability into the organisation.
This article is a piece of independent writing by a member of Procurement Leaders’ content team.