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- April 23, 2015
If you're in procurement, suppliers sit across the table from your team. They are not the enemy, but without attention that relationship can be characterized by distance and antagonistic behavior, says Stephen Hall writing in Procurement Leaders. What kind of attention?
Inclusive technology, he says. Too often when technology is brought to bear on procurement processes, suppliers are overlooked as stakeholders, or if they considered, buyers tend to take a very limited, short-term view of the impact their technology choices have on suppliers.
They presume they can mandate compliance with their systems, but suppliers will only comply if it’s beneficial for them, or at the very least, the impact is neutral. If it hurts too much - if there’s too much complexity or cost - they won’t adopt your system. Over time, that leaves the majority of suppliers marginalized and possibly dissatisfied.
In an era where understanding your supply chain is critical for risk management, and co-innovating with suppliers is the key to maintaining a competitive advantage, that won’t do. Hall says there are three reasons why attention to technology solutions that support closer supplier relationships is the key to partnering effectively:
- You want to establish the optimum relationship between procurement and strategic suppliers
Segmenting the supply base and applying a relationship matrix to those suppliers is vital to applying modern procurement techniques – category management for example. The concept hinges on the premise that you know where your spend goes and that you know something about who you spend your money with. The onus, therefore is on having information and insight on suppliers that’s not just for levering a better deal, but that can guide a relationship (and, by extension, a better deal). This should be a prerequisite for investing in tools and processes today. Customer-of-choice, for example, is a pipe dream if there isn’t the kind of process to sustain that relationship.
- A disconnected supplier is an inefficient supplier
While the performance of Accounts Payable has a bearing on how efficient the transactional side of procurement can be, it’s ultimately the legacy of years of procurement – the tools they’ve bought and implemented and the processes they have in place – which determines what it’s like to do business with that organisation. Procurement has to own that process and avoid the temptation to ignore the supplier as a stakeholder in that. Whether it’s managing cash flow, dynamic discounting, forecasting, or even spend analysis, there’s many ways that leaving suppliers outside of the process can result in it leaking value and holding back various initiatives.
- Procurement isn’t doing it’s job unless stakeholders and suppliers are equipped to deliver to business requirements across the spend portfolio
We often hear about the difficult trade-offs that procurement faces – sometimes, it’s simply about getting out of the way. In order to be an enabler themselves, rather than a painful process, businesses are focusing on how to make sure that both stakeholders and suppliers have a straightforward channel to interacting that, at the same time, holds all the governance, data capture and all the other strands that the business needs to wrap around any transaction. Never an easy task, but purposeful thought being put into the supplier side of that initiative is just as important to its ultimate success.