BEYOND THE TRANSACTION – ENGAGING SUPPLIERS FOR COMPETITIVE ADVANTAGE

A deeper understanding of the business, suppliers and end-customers can – with some suppliers – lead to not just better management of day-to-day transactions, but create long-term engagements for greater value.

“It’s vital to remember that at the end of most supplier / customer transactions is an end-customer” says Jonny Michael of JMCL. “Working with the right supplier in the right manner can transform the value delivered to the end customer and create competitive advantage”.

We discussed in a previous article, Striking the Right Balance that not all suppliers are equal, and it is important to identify those suppliers that pose the greatest risk or opportunity to the business.

Identifying opportunities for more strategic engagements is only possible through an appreciation of the bigger picture. Seeing beyond the transaction and understanding the potential impact suppliers can have on a business’s ability to perform for its end customers.

Identifying suppliers who can or could deliver enhanced value is one thing.  Creating the environment to make it happen is another altogether.   This requires a different skill-set altogether.  One of facilitation and relationship management.

Jonny points out that “where working with a particular supplier will assist in meeting strategic objectives there needs to be a strategy to the way the supplier is engaged.  This is often a human process.  It requires an understanding not just of the supplier and customer businesses but the way that stakeholders will need to interact at all levels.  Dialogue is essential”.

Relationships develop over time and this needs to be recognised.  As mutual understanding is built, it is the role of procurement to ensure that appropriate communication is taking place at the right levels.   A tailored journey is required as every supplier is different – a one size fits all supplier selection and service level management approach is unlikely to realise the full benefits.

Considering engagement when taking on important new suppliers can be extremely beneficial.  There is inevitably a period of on-boarding and lessons-learned as new processes are adopted and all stakeholders adapt to the new relationship.

Engaging ‘users’ – those who are most directly affected by the change in supplier – first, ensuring that feedback is captured and acted upon will deliver the first level of engagement.  Creating dialogue between supplier and customer managers will build operational understanding beyond adoption.   Finally, where significant opportunities or risks exist, executive stakeholders can be brought together to consider strategic goals.

Reviewing the supplier engagement can also be helpful for existing suppliers.  If planned goals and objectives can be achieved without the pains of a big change then so much the better.   It needs deep understanding the current level of engagement, issues surrounding performance and the capability of the supplier to perform.

JMCL have encountered this situation many times: a significant increase in performance is needed and ‘users’ and ‘managers’ highlight shortfalls in supplier service levels.   In these circumstances, putting the right management frameworks in place and recognising the need for two-way engagement can have a transformational impact.

A good example of this came in our work with a national health-club chain.   JMCL were engaged to manage the process of selecting contractors to refurbish changing facilities at a number of clubs.  This represented a significant risk to the business.  Changing facilities are a big part of the member experience.   Their quality (or otherwise) represents the value proposition – it is vital that the quality of work is to the highest standard.   The disruption during the works is also a huge risk.

After putting a rigorous process in place, an existing supplier was selected – and by putting the right engagement in place work was completed on time and within budget.  You can hear what this meant to the health-club chain here.

“Strategic engagement isn’t necessary for every supplier, but it can deliver enormous value for the customer and supplier alike.”  says Jonny.  “It begins by recognising firstly that the supplier has the potential to make a difference, and secondly that there is a risk from lack of engagement.  Then specific strategies can be put in place to deliver engagement at all levels to ensure that risks are managed and new opportunities acted upon.”