ENGAGEMENT
Maximising supplier relationships
How to do it
If you’re not sure if your key suppliers consider you a customer of choice, the first quick and straightforward action you can take is to ask them for feedback. Avoid directly asking ‘Am I your customer of choice?’ (You’ll only ever get one answer) and instead probe their real perceptions more skilfully. This is done by too few companies, but the majority who are considered leaders in supplier relationship management do it. A good ‘Voice of the Supplier’ survey will examine different aspects of the relationship to tease out the genuine picture, overcome any unconscious bias and identify the priority action areas. Once you have this baseline, the next step is to work out the changes you need to make. At this stage, ignoring the feedback is not really an option because failure to act on the results will only demotivate suppliers and have an even more negative impact on your customer of choice status. Ask the questions, analyse the responses and understand what you can change and what you can’t. Remember, relatively small changes can make a huge difference to suppliers and send a very positive message about you as a company. The more committed you are, the more you can achieve.
Approach 1 High criticality, High Collaborative Relationship Devolpment and Value creation, Customer of Choice Priority Approach 2 High Criticality, Medium Collaborative Performance, Cost and Risk Management Focus, Customer of Choice Priority Approach 3 Medium Criticality, Low Collaborative, Performance, Cost and Risk Management
Approach
High
1
Tier 1
2
Tier 2
Treatment Strategies
3
Tier 3
4
Tier 4
Approach 4 Low Criticality, Low
Collaborative, Compliance and Transactional Efficiency Focus
Automate
Time & Resource
Low
One way to initiate and embed behavioural and cultural change is to look at your supplier management treatment strategies. If your approach to supplier management is reasonably mature you will have completed a supplier segmentation exercise and placed your suppliers in three or four groups. Group 1 covers your most strategic and critical suppliers and should contain the fewest in number. These are the providers with whom you wish to be really well aligned and working with collaboratively as a customer of choice. However, bear in mind that while they may be strategic to you, you may not necessarily be strategic to them. This is where what you do to become a customer of choice is even more vital so you can stand out from the crowd. Your suppliers in group 2 (which may contain three to four times as many as in group 1) will also be key to your business but the focus may be more on performance and risk management, while still striving to be a customer of choice. By their nature, groups 1 and 2 require more frequent contact and interaction and behaviour is crucial to creating and maintaining effective and productive relationships. It’s therefore important that the supplier management
treatment strategies defined for these groups include adopting the requisite behaviours to be seen as a customer of choice. Incidentally, almost 75% of companies that have developed treatment strategies include guidance on behaviours. Groups 3 and 4 are typically much larger and will be less critical to the business. Interactions with these suppliers are likely to be more process- based and less impacted by behaviour. However, they too deserve fair and reasonable treatment. The figure above serves to illustrate that the more strategic and critical a supplier relationship is to your business, the more impact demonstrating good customer of choice behaviour will have, together with other strategies designed to maximise value from the relationship. To be able to access the best products, machines, goods, services and talent – all of which can contribute to your business’s competitive advantage, operational performance, top and bottom line growth – you need to be a customer of choice. To find out more about how to conduct a Voice of the Supplier study and develop the right behaviour to become
After the Japanese tsunami in 2011 there were severe shortages of automotive microprocessors and other electronic components. When production was being re-instated– incidentally with the help of a number of major customers – it was never declared how the initial limited supplies were allocated, but there were certainly winners and losers. Covid-19 replicates this on a much larger scale. The companies that will have done better – who would have had continued access to products in short supply for example – were most likely those who acted and behaved in a way that made them a customer of choice. Certainly this year’s case studies are rich with examples of suppliers supporting procurement at this time because of the relationships they’ve established with them.
Change is typically required in three key areas:
1. Within procurement and supply chain – to address processes and make changes to address concerns. 2. Outside of procurement – suppliers rely on finance systems, reliable payment performance, the speedy resolution of IT issues, panning and forecasting data and so forth that are outside of procurement’s purview. These too, will need to be tackled. 3. Behaviour and culture – this is likely to be the toughest challenge as it clearly involves people and needs to be consistent and sustained.
A customer of choice is a company that, as a result of its supplier management practices and behaviours, consistently secures preferential treatment from suppliers that often extend beyond contractual obligations. State of Flux Chairman, Alan Day
The impact of the Covid-19 pandemic
demonstrates precisely why you should aim to be a customer of choice for your most important suppliers.
a customer of choice, email enquiries@stateofflux.co.uk
42 STATE OF FLUX
2020 GLOBAL SRM RESEARCH REPORT
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