3 min read
Is Supplier Relationship Management the Key to Procurement’s Success?
Philip Ideson : December 1, 2024
“If you want to be a customer of choice, it's not going to come down to the contract, it's going to come down to the relationship, even at the individual level.” - Oliver Jones, Director (Procurement) for H&Z Management Consultancy
Procurement might be a tech-driven function – and growing more so by the day – but relationships are still one of the most important determinants of procurement’s success and ability to provide value (for and beyond savings) to the business. One-on-one, human-to-human communication, collaboration, and trust-building are what enable procurement to deliver and, in its absence, is almost always the reason for their failure.
In this podcast episode, I spoke about the opportunities and challenges within supplier relationship management (SRM) with Oliver Jones, Procurement Director at H&Z Management Consulting. Oliver is an experienced leader within SRM, having coached many teams in the art of good relationship building, and he shared his views on how procurement can leverage SRM to increase performance and deliver the value that the business needs.
Here are a few highlights from our conversation as Oliver shares, in his own words, his recommendations for how procurement should approach SRM and what to do when they run into push-back from within the business.
Leading from the Center
“Procurement has to look at the kind of model they have, and the more common model I'm seeing is the center-led model. Not centralized and not decentralized, but center-led. The whole idea is to empower the business to still do the day-to-day operational management of the supplier. But I do mean enable and empower, whether it be through tech or other things. And that comes from the center.”
Differentiating Your Suppliers
“You have to look at the business and the business objectives and the regulatory environment, if there is any. So you weigh all of that in, and you build that critical assessment, and then you work it out across the supplier base. There have been examples when people have had to reassess because when they've run everybody through the machine, so to speak, everybody's come out tier one and tier two, when really, tier one should be the few and far between. Tier two is quite a lot, and tier three is quite a lot as well. So you should get that real width at the bottom in that lower tier.”
Allocating the Right Resources Across All Supplier Tiers
“If you think about your other typical indirect categories and also direct categories, there's a lot of individuals out there who see themselves as sourcing category manager type, but they tend to refer to themselves as an end-to-end category manager. The problem is that's usually just a half-baked effort, in my view, of looking at an operating model. And it usually means that anywhere tier 2 downwards is just not being managed, full stop. So for me, if you're part sourcing for a moment, you're right, focus on that post award space.”
Building Transparency Around the Procurement Cycle
“Procurement leaders shouldn't have to bang heads together. They should be just making it really clear that it's a procurement cycle, folks. So naturally, when it comes back around, sourcing should consult with contract manager and supplier management. As it evolves, sourcing should bring supplier management into the evaluation so that there's no shockers when that contract is finalized and handed over. Nobody wants to pick up a contract without a schedule of KPIs, no level of governance, nothing.”
Navigating Power Dynamics with Suppliers
“Sometimes there’s a power imbalance in the relationship. For example, these days, some suppliers are significantly more mature and bigger than the customer. And the account manager, quite frankly, will avoid you as much as he or she can, to basically go to another account and prioritize them. So if you want to be the customer of choice, it's not going to come down to the contract, it's going to come down to the relationship piece, those handovers, and what you do with it from then on. It's unfortunate, because you think, ‘wow, that's very down at the individual level,’ but it's just the truth.”
Introducing Supplier Relationship Management to the Business
“That's definitely a challenge when you're talking about implementing supplier management in a place where it hasn't been before. For me, there's an awareness piece business-wide. For example, I rolled out a SRM program globally for a BPO. And technology is definitely a factor. Obviously, post pandemic, as well, it is a bit more virtual. But, I think engaging the business in the right way and getting them to understand the principles and why we do this is key, making them realize there's a role for them. Center led is that point, it's not centralized.”
Overcoming Internal Stakeholder Objections to SRM
“You have to explain to the business quite clearly, ‘this is why we spend more time with this supplier, and not this supplier.’ You have to make the things that don't seem quantifiable, quantifiable, and make what is very subjective, objective. Talking about how and why you’ve created that framework is one of the best ways to communicate about it.
“Still, some people won't like it, because it's just change, and change management is difficult for a lot of people. So half of the challenge with transformation and getting them on this journey is the change management process, taking people with you on that journey.”
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