For some time now, ‘experience management’ approaches have been gaining in popularity:
- User experience management (UX) practices center around how intuitive a technology interface is. Do the users require intensive training? Can they navigate based on their knowledge of other systems? Is the overall look of the interface pleasing?
- Customer experience management (CX) started in the B2C world, but quickly spread to B2B as teams realized that their efforts to collaborate with internal stakeholders could be improved by treating them as customers.
The latest addition is supplier experience management (SXM), a movement that recognizes the strategic importance of suppliers and seeks to improve technology, processes, and communication practices in order to strengthen those relationships. Procurement teams that have pursued ‘customer of choice’ status in the past will find SXM familiar. Unlike supplier performance management (SPM) and supplier relationship management (SRM) which focus on opportunities to work with suppliers towards some mutual objective, SXM challenges procurement to look at systems, requirements, and process through the suppliers’ eyes. The goal is to experience working with the company as the suppliers do, and take steps to relieve friction or increase speed and transparency as needed.
The Business Philosophy Behind SXM
It could be that we would be talking about SXM in 2021 regardless of the COVID-19 pandemic, but the reality is that we’ll never know for sure. Some companies discovered their supplier experience when it was reflected back at them through the loyalty or desertion of critical suppliers. Others created an ad hoc experience practically overnight in an effort to help key suppliers recover from disruption and uncertainty.
While it may be necessary to present a formal business case for SXM or select KPIs for measuring the impact of SXM over time, most executive teams have already bought into the driving principles behind investing in the supplier experience. They realize that no company can be successful without the support of specific key suppliers. That support can not be secured without knowing how good of a partner your company is.
Some teams will be fortunate enough to address SXM as a progression or maturation of customer of choice programs already in place. While customer of choice status may previously have been based upon total spend with a supplier, it is now increasingly driven by relationships. Being in a healthy relationship requires a company to understand the impact that their choices and practices have on a supplier. For instance, all suppliers should be paid on time, but for smaller suppliers this should be considered a non-negotiable imperative. This nuance is rarely addressed by standard processes or systems implementations.
The idea of relationships also plays out in the difference between suppliers and supply chain. In this context, procurement’s role is to connect the capabilities of suppliers with the demand and requirements of consumers. Resilience can be increased through supplier redundancy, but that is not the same as competitive differentiation. Procurement has to see that supplier experience can be treated as a proxy for procurement quality and value. It is unrealistic to think that procurement can serve as a trusted advisor to the business if they do not hold equal trust with suppliers.
Making the case for SXM in reality and at scale requires procurement to know how and when to customize supplier-related processes. Procurement has to automate as many tasks as possible without dehumanizing the experience, disconnecting suppliers when relationships are most critical. Perhaps most important of all, SXM has to be systemic. If the company only invests in supplier experience in response to the disruptions of the last two years, they will forgo any ROI. Real relationships are built to withstand honesty and constructive criticism. Wise procurement leaders will build SXM programs that stand the test of time, through good news and bad, and deliver what all involved businesses need from each agreement.
Even if procurement is able to see an experience from the supplier’s perspective, their ability to improve it will be limited by their own vision and priorities. Every procurement organization has to define what ‘best-in-class’ means for them. If procurement is savings-myopic, the supplier experience is unlikely to be geared towards collaboration and innovation, best intentions notwithstanding.
Another internal factor that will impact procurement’s ability to create an improved supplier experience is how well they work with other functions. Siloed procurement will create a limited supplier experience. Take the simple example of payment. Procurement can talk about source to pay, but how much involvement do we really have after the contract is signed? A SRM-driven effort might look at improving source to pay processes or technology, but SXM demands that procurement examine the same processes from the suppliers’ perspective: usually referred to as order to cash. Again, when seen through a supplier’s eyes, procurement may be surprised at what they see and how empowered they are to resolve it.
If streamlining procurement processes is deemed the best way to improve the supplier experience, start with how suppliers request help and information. How effective is that process? What does the process – not the answer – communicate to suppliers about how they are viewed and valued by the company? Supplier characteristics are a significant variable here – procurement needs to take on the challenge of ‘seeing’ the process through the eyes of multiple types of suppliers. Small, large, new, incumbent, local, global: there is not one supplier experience because the supply base itself is so diverse.
Prioritizing the supplier experience is a mindset shift, not an initiative. Fortunately, there are many benefits to be realized by facing the hard truths we are likely to discover once we start looking. Poorly managed supplier processes are probably creating inefficiencies on the buy side as well – if we can fix them for suppliers, we will reap the residual benefits – as will our internal stakeholders.
What does SXM deliver – and for whom?
The ROI of supplier experience management can’t be captured by improved supplier satisfaction rates any more than procurement’s impact is represented by savings. So how, then, should we think about what investments in SXM will do for the enterprise?
First and foremost, support for supplier centricity is more tied to corporate culture than procurement mindset. Procurement can’t craft a relational supplier experience if they are tactical and siloed, and a company can’t partner with suppliers if they don’t see the connection between what those organizations do and their own top line potential. A lack of interest in SXM may reveal a critical oversight on the part of leadership that needs to be resolved – for many reasons – before supplier partnerships can form.
Understatement: the world is a complicated place to do business. Since we don’t have an alternative (yet), supplier partnerships will be a key factor for companies that are successful despite the disruptions they face. Creating or preserving agility may end up being about a willingness to decide or act with less information/preparation/analysis than procurement would like. Fortunately, in the cases where we end up being wrong, suppliers can be an active part of the response.
As I have pointed out multiple times, SXM requires effort and attention from procurement, but it is not about us. How much do we know about the regulations our suppliers must meet? How much do we really know about the supply chain beyond our tier 1 suppliers? There is no shame in admitting that we only know about these things if they affect us; the shame is allowing it to continue.Supplier experience management is a long-term strategic play, and therefore someone has to own it. Ready or not, procurement is the right team to step up and own SXM no matter what we have to face about ourselves in the process. That may be the ultimate ROI… procurement can’t ‘fix’ the supplier experience without confronting our own opportunities to improve. Everything procurement works to change in the context SXM will ultimately change us right back – for the better.