The speed and complexity of business has been increasing in recent years and shows no sign of slowing down. New geographies and supply markets have opened up; innovative technologies have hit the market; and product life cycles are becoming shorter as a result. Opportunities to offer new and exciting products, increase market share, and reap handsome financial rewards are greater for enterprises, but so are the category and supply risks. Innovation and evolution across spend categories and suppliers continue, and the regular churn across each can put enterprise procurement teams at risk when trying to maintain or accelerate the pace of their business. Categories or suppliers that were on hand before to serve the enterprise may be obsolete or out of business tomorrow.
As a result, enterprise procurement teams should not go it alone when it comes to sourcing – they need to collaborate both internally and externally to mitigate these risks and ensure that the enterprise remains on its upward trajectory. For a few years now, Ardent Partners has advised that collaborative sourcing, which blends traditional sourcing approaches with more robust category strategies, more penetrating views of supply markets, and deeper collaborative ties with suppliers, is how today’s supply management professionals will continue moving forward and preparing for greater innovation and market changes.
In order to source more collaboratively, Chief Procurement Officers and enterprise procurement teams should consider adopting the following three strategies:
- Work to embed procurement and sourcing staff within line-of-business operations: As we have stated previously (on CPO Rising and in our research and presentations), the sooner that procurement becomes involved in the sourcing process, the more effective it and the enterprise as a whole can be and the more value it can drive throughout the process. That is why CPOs and other procurement leaders should consider pressing line-of-business budget holders to welcome procurement staff into their ranks to serve as in-house sourcing consultants and help line-of-business users plan current and future sourcing events. Category managers and supplier performance managers can advise key internal stakeholders, like manufacturing and product development teams, and help them extract more value from strategic categories and suppliers.
- Define (or redefine) “Supplier Collaboration” for your team and to your suppliers: Supplier collaboration can mean different things to different parties – both internally and externally. Agreeing to collaboratively source without codifying what that entails for all stakeholders can shatter expectations and ruin business relationships. Thus, it is important to discuss and decide exactly how stakeholders will source more collaboratively. Will procurement serve as the single source of truth for all supplier information and the intermediary for all parties? Or, will other internal stakeholders own certain parts of the buy-side process? What role will the supplier or suppliers play in the process? These are just a few of the questions that enterprise procurement teams should answer on behalf of the enterprise.
- Develop an environment of trust and open communication with key suppliers: Communication, collaboration, trust, and shared visions are critical elements to any relationship, and necessary for enterprises to elevate their supplier relationships to a truly strategic level. However, relationships may have strained or soured during intense sourcing negotiations, making it hard for either party to view each other as a trusted business partner. Although it can be difficult under these circumstances, procurement needs to turn the page and work to rebuild communication, collaboration, and trust with their suppliers. For starters, it can ask what the sourcing or supplier performance management teams can do to rebuild supplier trust and understanding, and then share what value the supplier can provide to the enterprise. Communicating what the give-and-take – and the value – is for both parties will help to reinvigorate both parties.
Collaboration goes far beyond communication and good intentions (although one certainly needs both to collaborate successfully). In the context of product innovation, supply market changes, and constantly evolving business needs, CPOs and procurement leaders need to consider collaborative sourcing as the best way to mitigate category and supplier risks that could threaten current or future business operations. One stakeholder does not have all the answers, and is less effective at managing these risks than if it were collaborating with all stakeholders in the sourcing process. Thus, tight linkage with line-of-business stakeholders, clear understanding of the rules of the game for all players, and gaining (or regaining) and maintaining supplier trust and vision are three basic ways that enterprises can ensure that all stakeholders are keeping their eyes on the horizon as it climbs higher and faster towards new heights.
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