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Creating Value with Strategic Supplier Relationship Management

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What measures are you taking to add incremental value through SRM?

This is the third and final report on our virtual round table, held under the rubric Digital Darwinism”. Moderator David Ford, Global Head of Procurement at law firm Freshfields Bruckhaus Deringer, asked contributors to the discussion about their approaches to supplier relationship management, especially in the light of the pandemic. For example, how are they looking to build greater supply chain resilience and mitigate risk? Or innovate? Or diversify? Note that the people taking part did so in a personal capacity and any views expressed do not necessarily reflect those of JAGGAER or any other organization or company.

Read the second installmentWhere are you on the Journey Towards Autonomous Procurement

The former director of procurement with an online retailer commented, “A lot of people think a recession is really good for procurement because it’s all about cash retention and saving money. That’s all very well, but how do you stay on the executive agenda when things pick up again? The way I view it is that you have to become a more commercial organization and present yourself as a business partner. A trusted advisor. It’s not just about negotiating a contract. There’s a bunch of suppliers that you really need to manage, and a very few that fit within SRM. Look at these suppliers as an investment, as an asset to your business bringing innovation, first to market, exclusivity or whatever.

“It is also worth considering alliance programs. As an example, you might be considering a marketing alliance: ‘We’re an important client of yours, how about investing some of your marketing dollars with us?’ Or, ‘How about making your next product launch exclusive to us for a week or two?’ Alliance programs are one of the ways you can keep procurement on the executive agenda when the economy picks up again.”

Relationship management

Oil and gas is a very different business with high exposure to risk around the world, but this point resonated with a global sourcing director with one of the world’s leading companies in this sector. “We have partnerships with technology companies such as Microsoft and Amazon for carbon offsetting and this is becoming part of our business approach as our customers and our objectives change. And we have many bidirectional relationships where we are both buyer and customer, for example with [a major airline]. Our objective of net carbon neutral by 2050 means we are entering into new partnerships and new supplier relationships that we haven’t seen before.”

The head of procurement operations at a multinational energy company commented, “For some time we’ve been trialling something we call ‘Open Innovation’, which involves giving SMEs that may have solutions to some of our business issues but would not get through the normal procurement route to secure an opportunity. I’m talking here about things like the developers of big drones that can take parts out to wind farms where downtime is expensive but it’s difficult to reach them by conventional means. But it could be any kind of potential solution to anything that is costing the business more than a million pounds in operational expenses.

“The economic development agency has been helping to facilitate it, and the beauty is that if there is an innovation out there that has promise, but is maybe only available as a prototype, we can get some money to that potential provider that solves a problem for us and potentially helps them to scale up their business as well. We’re looking at making this an enduring capability.”

Francesco Colavita, JAGGAER Head of Solutions Architecture intervened to make a couple of points: “First, it is really worth discussing improvements with suppliers to identify ways they can collaborate more effectively to add value or bring benefits. Second, we advise clients not simply to look at the supplier, but to look at the supply chain of the supplier; this means looking beyond the tier one or tier two suppliers. It’s especially important now for risk mitigation in certain categories. To do this you will need to get various data feeds and put it in one view of the extended supply chain.”

Francesco and Richard Hogg, Managing Director of JAGGAER UK, then summed up the discussions. “I think we have really highlighted the need to adapt in order to survive, drive things through more rapidly and become more agile. One of the important points made by a couple of contributors is the need to get the people side right. Automation in procurement is a bit like industrialization – it does not mean people are going to go, but it does mean that people will need to adapt,” Richard said.

Autonomous procurement will augment people, not replace them. What we need to do is to identify where autonomous procurement can create more value. Why do we spend time checking thousands of documents when there are RPA solutions that can to this for me and I can be more focused on more strategic activities such as the evaluation of sourcing events? This is the real meaning of these technologies, because technologies can never replace the human mind,” Francesco concluded.

You can find our coverage of the first part of these discussions here, and the second here. If you would be interested in participating in a future virtual roundtable, do get in touch.

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