Meetings with senior management across different stakeholders are recommended
Meetings with senior management across different stakeholders are recommended

The four keys to better supplier collaboration

16 October 2020

Increased access to leadership and more risk and gain sharing are among changes that will enable better strategic supplier collaboration, according to Gartner.

Miguel Cossio, director analyst of supply chain at Gartner, said there were four changes needed to improve strategic supplier collaboration:

• Increased access to leadership

• Contracts and KPIs that measure “beyond cost”

• Inclusion of suppliers in technology roadmaps

• Risk and gain sharing

Speaking at the Gartner Supply Chain Symposium, Cossio said: “When you think about what has to change when you tell suppliers that they're strategic, there are four different things that I'm going to highlight. All of these things help build a better relationship, even with transactional suppliers. 

“The first one is access to leadership, it has to be constant, and cross functional. 

“This means no more QPRs [quarterly performance reports] or executive meetings where your suppliers are just sending someone from sales, and you're just sending someone from procurement. No, these meetings usually have to involve the senior leaders across different stakeholders so that you can think and speak about the different things that the relationship needs.”

He warned that “a lot of research has shown in the past that the lack of stakeholder engagement is among the top three areas on why these kinds of initiatives fail”. Therefore, it's extremely important that stakeholders are included in the earlier engagements with strategic suppliers to gain support.

Concerning contract and performance measurement, he said: “If you tell a supplier that they're strategic, but you're only measuring them on cost, your actions are not reflecting your words. You want to make sure that you evolve in how you're going to be measuring those suppliers to include and acknowledge areas such as innovation, capabilities, technology growth, and alignments.” 

He went on: “The third area is around your shared technology roadmaps with your most strategic suppliers. You need to be actively working together with them as you develop your technology roadmap in the next three to five years.

“Make sure that your most strategic suppliers, who you are planning to work with in the long term, are working on things that can help your technology roadmaps.”

Concerning risk and gain sharing Cossio said: “The reality is that in procurement we're used to trying to transfer as much risk as we can to our suppliers, asking them to do investments on our behalf so we're not having skin in the game, but with this type of relationship all the risks and the gains have to be shared.”

He added: “Supplier scepticism is the number one challenge that we have found through research. Most of the great suppliers out there have been burned by different customers who tell them they are strategic and they're going to change the way they work with them. But it's all about concepts, and there's no real changes being put in place. 

“That's why you want to make sure you understand and you create and craft the story of how you're going to be engaging with this with the supplier. And the bottom line is you need to focus on what's in it for the supplier and not for your business.”

Cossio warned: “During these turbulent times of Covid-19 we've all been starving for that capacity of suppliers. Guess who has been getting that capacity? Preferred customers of these suppliers. So increasing collaboration with suppliers makes sense and there are tangible benefits to be had.”

A 2019 Gartner global survey found the top-rated benefits of supplier collaboration were better cost management, quality improvements, and increased engagement on the sustainability agenda.

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