Stepping into the role of Chief Procurement Officer (CPO) is both an honour and a challenge. The success of a CPO can significantly impact the organisation's bottom line, efficiency, and overall competitiveness. Recognising the importance of Supplier Management, a new CPO should prioritise a 100-day plan to review and strengthen these crucial relationships from the outset, aiming to position procurement as the "customer of choice".
Defining the role of Head of Supplier Management for your company
Written by Alan Day, Chairman and Founder
Defining the role “Head of Supplier Management” for your company In almost 20 years helping clients to make Supplier Management successful, we have learnt that it is crucial to get the right person for the head of Supplier Management role, but not only this, equally important is making sure you have set them up for success. Too often we have seen heads of Supplier Management appointed because they have done a good job managing one or two large complex relationships or been good at managing procurement systems and processes so it would seem a good fit to expand their role. In our experience, to make Supplier Management work in an organisation, it needs to be supported by a business change programme which is led by procurement but is not a procurement change programme. So how do you establish the role and the programme for a successful outcome? There are three areas that we recommend getting right: 1) The role description 2) The focus of the role 3) Defining success criteria and metrics The role description We analysed recent job postings for the positions of "Strategic Relationship Management Lead" and "Head of Supplier Relationship Management" and noted common themes across these positions such as: Responsibilities • Develop and implement supplier management strategies aligned with business objectives. • Lead and manage supplier management teams, fostering a culture of continuous improvement. • Establish and maintain strong relationships with strategic suppliers, driving collaboration, innovation, and value creation. • Monitor and measure supplier performance against key performance indicators (KPIs). • Drive continuous improvement initiatives across the organization. Continuous Improvement Initiatives: • Drive projects focusing on efficiency and effectiveness. • Collaborate with cross-functional teams to integrate supplier management and improvement initiatives into overall business strategies.
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Risk Management: • Identify and mitigate risks associated with supplier relationships. • Ensure compliance with relevant regulations and implement risk management strategies. Team Leadership: • Lead and develop supplier management teams, providing guidance and support. • Foster a high-performance culture within the teams. Stakeholder Collaboration: • Collaborate with internal stakeholders to align supplier management strategies with overall business goals. • Facilitate communication and collaboration between internal teams and suppliers. Whilst these descriptions do emphasise the strategic nature of supplier relationship management, continuous improvement, and collaboration with internal stakeholders, they overlook the need to create a change programme across the organisation and the skills required to move behaviours from current state to collaborate, nor is there a focus on positioning the organisation as a customer of choice with key suppliers. One of the most critical factors is finding an individual with high emotional intelligence, who can not only lead themselves to drive change but is also capable of choreographing a disparate stakeholder network using behavioural insight and agility. The above role descriptions are functional, and this leads us onto the second point about focus: Getting the right focus for the role Our 15 years of supplier management research has shown that to make supplier management work there are six key pillars that need to be defined and established in the organisation. They are listed in figure one, in ideal order of implementation, and all need to be established to make supplier management successful, you cannot just work on one or two pillars and expect the supplier management programme to work.
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Figure 1: Six pillars of successful Supplier Management
We often see a newly appointed Head of Supplier Management come in and focus on the Governance pillar, specifically segmentation and process. The challenge with this is that they haven’t taken their stakeholders (procurement/category managers, operational, executive and suppliers) with them on their journey. They also haven’t defined success or how to measure it and often they haven’t defined what supplier management means for their business; or explored what strategic drivers and challenges will motivate engagement. It's also very common that development of supplier management processes and supplier segmentation is done without business stakeholder input, and often written in ‘procurement speak’ rather than talking in the business’s language making it understandable and relatable for the very busy executive or operational stakeholder. Another common trap many fall into is that of running pilots or jumping straight to set up regular meetings with suppliers. ‘We just have to get something going’ or ‘I need a pilot to prove create the business case’. The challenge with this activity is it isn’t underpinned by proper, robust and formal supplier management practices. For example, the pilots are usually done in isolation, it is often bespoke to one supplier and does not follow a structured process. No 360° feedback is captured, and vary rarely is any joint account planning undertaken, and people are not trained in supplier management. Yes, there will be improvement in that relationship, but is it sustainable and repeatable across all strategic suppliers and do you have a strategy with the rest of the suppliers? We think the core focus for the Head of Supplier Management role should be on change management and ‘selling’. Yes, you heard that correctly, selling. Selling supplier management to the procurement team, selling to operational and executive
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stakeholders and selling to suppliers on why your organisation should be a customer of choice for them. Any good sales person knows that being a good listener is a key behaviour for success. Starting with the executive stakeholders. You must start by understanding the business challenges they are seeking to resolve along with their aspirations for the business. Moving onto core business stakeholders who contribute to supplier management activity, listen to their views on what works well, and the potential opportunities. This can be a rich source for identifying sources of untapped value in the supplier relationship and is demonstrating an interest in what they think, which in turn builds trust, leading to greater internal stakeholder engagement. Finally, not forgetting to listen to the supplier stakeholders at each level of engagement, and involving them throughout the process, starting with formally understanding whether you are a customer of choice. This approach not only builds engagement, it demonstrates commitment and supports momentum when launching supplier management into the business. Our experience suggests many clients spend more time telling stakeholders and especially suppliers what is needed, rather than listening first, and then wonder why a collaborative programme doesn’t meet expectations. Key to success is getting supplier management so embedded into the culture and behaviours of the business that it becomes ‘just the way we do business’. The Head of Supplier Management is responsible for leading this change. They need to educate stakeholders on what supplier management means for their organisation, why they need to embrace it, invest in it and change behaviour to be more collaborative. The Head of Supplier Management must champion a positive supplier experience when dealing with your organisation and drive supplier loyalty. All things to support being a customer of choice. Defining success criteria and performance metrics Before we look at the individual’s performance it is worth highlighting There are two key measures that both the supplier management programme and the Head of Supplier Management must be measured on. 2) Progress towards the agreed future state In order to measure both of these items you need to know the starting point. At the start of supplier management activities, we strongly recommend that you conduct a Voice of the Supplier to measure your organisation's Customer of Choice rating. That is, 1) Improvement of customer of choice rating
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understanding what is important to your suppliers, how your organisation stacks up against these areas of importance versus your organisations key competitors. In parallel we recommend running a Supplier Management Diagnostic to look at current state versus the six pillars of supplier management, versus the desired or future state, creating a ‘roadmap’ for the change programme and giving you a point to measure progress against. In addition to being key measures, both serve as inputs into your supplier management value proposition and ‘sales pitch’. This value proposition should be aligned to your organisations key strategic themes, for example a FMCG client used their ESG target to drive supplier management performance. This meant a compelling story could be developed that galvanised both the business and the suppliers involved. Progress against this theme can and should be measured. For more specific measures, we believe the Head of Supplier Management and the supplier management measures should be aligned to progress against the six pillars. For example, taking the first pillar of value: Value: Determine what benefits will be tracked including monetary value so that the return from supplier management activity can be quantified. We know from the research that done well, supplier management should yield 3-6% over and above contracted value. When value is visibly delivered the case for continued investment writes itself. It is however a good idea to have a mix of quantifiable and non-quantifiable (customer of choice) measures as the relationship benefits are equally valuable. The research tells us that benefits are most available in the following areas:
• Access to scarce resource • Access to the supplier ‘A’ team • Preferential pricing
• Access to innovation first • Faster speed to market • Higher mitigation of supplier and supply chain risks
If you are serious about making supplier management successful in your organisation you need to get the right role definition, the right role focus and the right success criteria and metrics. Too often we see supplier management programmes fail because organisations have got this wrong. Talk to us if you would like to better understand the key steps you need to take to make your supplier management programme a great success.
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