In ‘Do You Know Your Suppliers‘, we set the scene as to why it is essential to know who your suppliers are, and more importantly, we stressed how important it is it to know which ones are key to the success of your business and have a strategy in place to manage them effectively. Over the SRM series, we will outline the fundamental building blocks for a Supplier Relationship Management (SRM) approach that meets your business requirements.

The first step is to share your corporate strategy with your suppliers. You will be surprised how many companies have not shared their goals and objectives for the business and are then confused why their supply chain is not helping them to achieve them. Even the best suppliers cannot consistently help you hit targets they don’t know about!

Here are some more very good reasons why sharing information with your suppliers is important:

  • Supplier-led Innovation – Suppliers can also offer innovation to help you solve a problem or to seize an opportunity. You may think only your internal team can contribute to your corporate strategy but suppliers are a critical part too. Your suppliers have hundreds / thousands of smart people and access to a much wider sphere of knowledge than any one company could possibly have; make sure you leverage it.
  • Supplier differentiation – How your suppliers react to knowing your strategy will help you further differentiate them. In our experience, we have seen suppliers take our strategy and get their team laser-focused on helping us achieve it. Equally I have seen suppliers take the information and just look for ways to sell us more off the back of it. You can probably tell which ones ended up with a much longer and profitable relationship.
  • Influence your suppliers’ direction – If your suppliers know your strategy it can influence theirs. If you are a key customer for them, you would expect that they take your strategy into account as they think about their future direction. It is really beneficial when your supplier’s entire organisation, and not just those working on your account, are heading in the same direction -so if you can get your suppliers to have similar corporate goals as you, where appropriate, it further improves your cultural alignment.

There are several ways of sharing your strategies that bring business benefits:

  • Be a presenter at an internal event run by your suppliers. Many companies have a strategy session for their key leadership – if you can get time at an event like this you immediately have all the senior leadership hearing your message.
  • Run an “innovation day” with your suppliers where you share your corporate strategy and ask suppliers to contribute. You need to manage these very carefully as suppliers would not want to share anything they feel as a competitive advantage in an open forum. The best way is to present your strategy to a large number of suppliers and then have separate one-on-one meetings with key suppliers to hear their feedback and get their input.
  • During a Strategic Business Review, before diving into operational detail, take some time to share and review progress against your strategy

Many may take this first step to a SRM strategy as their last once they have first identified who their key providers are for more targeted sharing. However, more benefits come from doing this first, with other SRM activities running in parallel, as identifying a suppliers reaction to your strategy can be a helpful factor in deciding who your key supplier will be, especially when there may be more than one fulfilling the same need.

For more information on SRM and other topics, contact us today where our cost reduction analysts will be more than happy to help.

Article by: David Rickard