Strategic sourcing relationships – more than just saying “I do!”
In Finland we have an old saying that during a marriage a Finnish husband has no need to repeat the words ‘I love you’ – to say it once to the bride on the wedding day is enough. Thankfully, most of the Finnish guys I know have figured out that in today’s world, this old approach won’t get them far.
A successful marriage and family life need good communication. At my home, we have two kids and two full-time jobs. My husband and I know that we have to work on our relationship if we want it to succeed. The same goes for our kids. We can leave them for a day or two with takeaways and television but we know we need to nurture and engage them as much as possible, for them to thrive. This is so obvious to most people, yet surprisingly few of us think this way in our professional relationships.
Potential of procurement partnerships
In my own work with procurement teams, I see so much potential for more value from supplier relationships just by better engagement. And my clients are quickly waking up to this too. Strategic partnership management is the new value generator for the public and private sector. And I’m not just talking about cost savings but value coming from better quality, better market intelligence, and most importantly, better opportunities for innovation. And you can get there in four simple steps:
1. Automate automate automate
First, start automating all your manual and routine work related to sourcing. That means exploring all electronic possibilities on offer. Anything that can be digitalised do it now. Then once you’re freed up from all that rote work, you’ll be ready to shift focus to the more strategic stuff, like planning and rethinking your sourcing processes and developing your supplier relationships. But we’ll come to that.
2. Centralise your sourcing
The next thing to do is get your procurement people out of their silos. That means organizing and building sourcing teams around different categories, and giving people the chance to start developing specialist knowledge about market conditions and high-performing suppliers. You’ll find that once you get started, you’ll see new efficiencies and cost reductions coming on stream, giving you more time and resource to dive into step three:
3. Plan procurement ahead
I see from my own experience that there’s still not nearly enough strategic procurement planning going on. Advance planning means having systems in place to let you know what you need and when you’ll need it. There are big economic gains to be made from making the right follow up on your agreements for example to avoid paying higher prices or missing deadlines. There are also opportunities particularly in the public sector to positively impact environmental and social change, while advancing your own operations. This could be in areas like local sourcing, lean transportation times and delivery routes, or the use of low-carbon or green fuels or green packaging. Advanced procurement planning can also be in support of government level strategies for a more inclusive society in areas like social welfare services. And it’s not just a one-way street. Suppliers ready to reinvent themselves can become well-positioned as preferred suppliers. Which brings us back to relationships.
4. Build strategic relationships
Change takes time. But the link between enhanced supplier relationships and business value and innovation is gaining traction by the day and it’s no longer just talk. At some of the hospitals and municipalities, among my clients, progress is being made and there are actions on the table. Special systems and processes are also being designed to nurture supplier relationships so that cooperation works well and suppliers are also motivated to deliver their best goods and services.
One thing’s clear, whether it’s your wedding day vows or a new procurement partner, it’s not enough to just sign on the line and say “I do”. You have to know what your partner has agreed to and when and what you’ve promised in return. This is the minimum at least to avoid those nasty larger interventions like law suits, the procurement equivalent of expensive divorce papers. But by developing genuine partnerships, acting together, resolving issues and advancing the quality of operations for both parties, innovation is bound to happen – that’s the marriage equivalent of happily ever after.
Sales & Consulting Services Director, Public Sector
+358 40 820 0879