Getting Into Bed with your Suppliers
If there is one common theme I have picked up from placing CPO’s from all over the world it is that procurement as an industry still lacks sophistication and maturity in the area of developing and managing strategic alliancing/partnering activity with their most strategic suppliers.
I have sat through conference after conference of procurement leaders talking the talk on joint initiatives, driving supplier innovation and value add projects but in reality we are still falling well short of our potential in this area. When the pressures of delivery kick in it is all too easy and familiar (and comfortable) to revert back to the master and slave dynamic and short termism that was employed in yesteryear.
In addition, there is a strong view that all value created and captured should be tangible and measurable, when actually it is the intangible value that is created from Alliances that is the most important. Procurement functions always seem to focus on cost reduction, whereas Alliancing is predominantly about value creation, and creating a competitive advantage. Alliances activity is an investment strategy and should be treated accordingly.
Getting this right is vital to ensuring that the procurement function is seen to be business relevant and of strategic importance by the company C suite executives and is seen to bring in new long term value for the organisation.
In addition to our search services at Executives Online we maintain a very well qualified “black book”of specific procurement subject matter experts who we deploy to the benefit of our clients for Interim assignments.
My Top 3 Tips for CPO’s on how to drive Strategic Alliance activities with Strategic Supplier Partnerships:
TIP1 – Start with a Strategy
Too many organisations try to form strategic Alliances with their top suppliers because they feel that they have a great transactional relationship with them where they spend a lot of money with them. That is s recipe for disaster.
Organisations must start with a Strategy, and strategic priorities and look at the organisations that can best help to create the WIN-WIN-WIN partnerships, remembering that value has to be created for the eventual customer
TIP2 – Remember to focus on Value Creation
There is a very strong temptation to focus on value extraction/realisation, and this a common trap to fall into. After all how can you extract value until you have created it in the first place.
Focus on value creation and do not look at the short term. Alliances is a long term play.
This is a marathon, not a sprint
Once you defined the value that you can create, ensure that as a partnering team (both internally and externally) you are completely aligned to what you need to do
Once you have done that and or on the journey, then look at the value realisation or extraction and remember that this needs to be shared with your Alliance partner, but not necessarily equally.Ensure that there is a balanced risk/reward structure
TIP3 – Create a relationship environment which enables investment of time effort and resource
Create a culture of respect for the Alliance partner capabilities
Create a collaborative culture within your organisation and between yourself and the partnership. Remember Alliance failure rates still sit at above 50%, and a big contributory factor relates to the relationship and the soft skills
Ensure that there is a high level of transparency in information sharing
This is such that you build trust, as that is critical
Invite the partner into your environment and ask them what they want from the Alliance
And there are so many more important Tips and Fundamental Building blocks that you need to ensure success.
If you would like to set up an exploratory conversation then please don’t hesitate to reach out to me using this website’s contact form.
Like this information on Supplier Alliances? Check out my latest podcasts by accessing the following links: