EXTENDED ENTERPRISE SUMMARY OF INSIGHTS
2023 GLOBAL SRM RESEARCH REPORT
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Before long, and enticed by the opportunity for savings, companies began to outsource more internal operations and, in some cases, those that extended to customer interaction, such as call centres. However, it was rare that these relationships were particularly integrated, and a lack of effective supplier management and a collaborative approach started to undermine the model’s success, resulting in adverse publicity and some high-profile reversals of the strategy. Despite these setbacks, it has never gone away, and companies continue to place many critical aspects of their business, including many customer-facing aspects, in suppliers’ hands. These relationships are now being recognised for the value they can bring and re-imagined as part of a more progressive approach to supplier management. The term adopted in ‘extended enterprise’ suggests more of an eco-system of businesses along the supply chain sharing strategic alignment, creating synergies and driving value. In our research this year, we have asked a number of questions to reveal current attitudes and practices relating to suppliers as part of an extended enterprise. We find that a large proportion of companies already have suppliers that are a vital component of their customer value proposition. Almost 70% of companies report that up to half of the people engaged with products or services for their end customers are employed by suppliers. Companies recognise the importance of a positive supplier experience, with almost half of the respondents reporting gathering feedback and tracking how they are perceived as customers. Suppliers are hungry for information, and the leading supplier management companies satisfy this need most effectively. Leaders are far more likely to share product, service and technology roadmaps and relationship strategies.
It is acknowledged that suppliers are, or at least should be, part of the extended enterprise. When asked, ‘Should suppliers be considered part of your extended enterprise?’ the answer was an overwhelming ‘yes’ (98%). However, less than half report that their suppliers are currently regarded and operating as such. While the benefits of treating suppliers as part of the extended enterprise are being identified and that collectively they will contribute to improved end customer experience, currently, they are not sufficiently recognised by the respondents to this survey. If genuinely integrated supply chains that bring all suppliers and customers closer as part of an extended enterprise are to be successful, they will need to develop an intimate knowledge of each other, breakdown barriers, change behaviours and build trust. ‘Extended enterprise’ suggests more of an eco-system of businesses along the supply chain sharing strategic alignment, creating synergies and driving value. Customer value proposition To determine the extent to which modern businesses rely on their suppliers in this way, we asked, proportion of the personnel that play an important part in producing products or delivering services that directly impact the customer value proposition are employed by suppliers? Note: This may well include suppliers further down the supply chain.
What proportion of personnel involved in delighting customers are employed by suppliers?
Key statistics
For as long as supply chains have existed, suppliers have had a role in helping companies deliver their end customer value proposition. For the most part, this was a conventional ‘hand off’ of products and services up the supply chain, with the final company handling most of the customer interactions. This traditional, almost linear path was first challenged in the late 1980s by introducing the first outsourcing strategies. These were initially cost- cutting measures for less complex manufactured goods or completing simple ‘back office’ tasks. of Leaders share product and technology roadmaps with suppliers. 67% 79% 1 in 5 of companies believe that if suppliers are treated as part of an extended enterprise, it reduces risk. makes a point of mapping the supplier journey to understand their experience fully.
More than 75%
None
8% 9%
25% to 50%
14%
51% to 75%
Up to 25%
31%
38%
What activities have been undertaken to make supplier experience more positive? (All respondents) 49% Reviewed data gathered from the supplier 41% Improve ease of doing business/ Transactional ease 35% Reviewed systems & ease of use 33% Track their perception on you as a customer 32% Reviewed own behaviours displayed 29% Make it easier to navigate your business 21% Mapped supplier journey 13% None
The activities that have been adopted most often relate to gathering feedback and being easy to do business with. Almost half of the respondents report gathering feedback and tracking how they are perceived as customers. While over 40% focus on ease of business transactions and systems. Only one in five, make a point of mapping the supplier journey to understand their experience fully. The biggest gap between the practices employed by Leaders versus the rest is tracking how they are perceived as customers 1 . One of the aims of improving the supplier experience is to engender more customer of choice benefits, an example of which is loyalty. We asked what activities companies undertake to improve supplier loyalty and found the most frequently employed technique is again linked to good communication. Almost three-quarters of companies believe that committing to a regular schedule of meetings will promote good supplier loyalty, followed by providing easy access to stakeholders mentioned by 50%.
This feedback is evidence that a large proportion of companies already have suppliers that are a vital component in fulfilling their customer proposition. Almost 70% of companies report that up to half of the people producing products or delivering services for their customers are employed by suppliers. From an industry sector perspective, IT & Telecoms lead the way, with over 80%, with capital- intensive Industries (Construction, Utilities, Oil & Gas, etc.) having a heavy reliance on contractors, with over half of them reporting that suppliers employ more than 50% of personnel delivering for customers. Supplier experience and loyalty Given companies’ dependency on suppliers to help deliver their end customer experience, they must be engaged and motivated to perform at the highest level. Our research has established that supplier performance levels are more influenced by their positive experiences than contractual conditions. We asked what activities organisations have undertaken to make the supplier experience more positive.
1 For more information on State of Flux Voice of the Supplier studies contact enquiries@stateofflux.co.uk
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