Building a long-term alliance that’s mutually beneficial
Businesses regularly turn to the CPO and ask for savings. It happens across many departments, but there’s always an assumption that procurement can squeeze some additional savings and/or efficiencies out of contracts with suppliers.
Identifying justifiable savings is of course valid, but there’s a growing understanding that pressuring suppliers is far from a smart move in the long term.
Modern supplier management is not only about contracting with suppliers, measuring their performance against KPIs, and asking them to toe the line when necessary. Managing suppliers should also be about building a relationship and encouraging professional behaviors.
A large American retailer recently decided to offer discounts to its customers, and redistributed the associated costs to its suppliers through renegotiated contracts. Time will tell how this story pans out, but it’s a dangerous game to play. Squeezing suppliers can damage their performance, which in turn will impact your output. And what damage would that do to your bottom line and your reputation?
Every business is reliant on its suppliers. Suppliers do things that the business cannot or choose not to do. They bring knowledge, experience, and expertise to the table. Businesses should be asking suppliers to share this knowledge, rather than asking them to do more for less.
More and more organizations are realizing that supplier alignment is more important than ever. If suppliers understand your business, including key goals and core objectives, then they are in a better position to help you become a market leader.
With a better understanding of your aims, suppliers can be proactive with ideas and share innovations. By analyzing real-time data and performance you can discover how you can work together to mutual benefit. You can minimize risk, add value, find efficiencies, and develop strategies that satisfy both your needs and your suppliers’.
The technology exists now for you to start having these conversations and sharing crucial data. What are you waiting for? Your competition to beat you to the punch?