The expanded procurement responsibilities that come with strategic sourcing involve a deeper entanglement with suppliers than under past models. When a company's supply chain focus is taken off of cost alone and expands to incorporate other elements of the relationship between companies and their suppliers, procurement executives have to update their competencies.
This expanded purview means taking a more substantial and data-based approach to finding partner companies and a greater focus on keeping them. Ongoing negotiations between organizations and their suppliers can encourage professional relationships to become stronger when times are good and repair issues when communication has broken down.
Manage with an eye on the future
Forbes contributor Jonathan Webb noted that companies should look beyond the present moment when managing supply chain relationships. While there is a tendency to think in absolutes - for instance, assuming that past issues may derail the connection between organizations permanently - great procurement departments can move through such mishaps.
Buyers that generate future goodwill via clear strategies for the future, ones that are shared with partner companies rather than created unilaterally, can win trust. Once this bond has been rebuilt, the rewards can range from better rates to future expansion of the scope of the companies' collaboration. A sourcing department that has been empowered to negotiate effectively will be able to guide such a relationship in a way that would be impossible if procurement's only role was to negotiate prices.
Webb added that the reasons why a contract breaks down in the first place are often human factors rather than raw numbers. If people make assumptions that prove to be untrue, trust may chip away. When one side performs a perceived slight of the other, a difference in perception could cause the whole relationship to crumble. Strategic and empowered sourcing departments can look into matters and get back on solid footing.
A recent Spend Matters post by contributor Muddassir Ahmed, Eaton divisional supply chain manager, delved into the current role of supplier relationship management. With companies' products becoming increasingly complicated and consumer expectations greater than ever, it's clear that the link with suppliers has taken on extreme importance. The components provided by key partners are now essential to organizations' efforts to establish their own names. Suppliers aren't easily replaced, which means collaboration and ongoing relationship management are strategic competencies.
Ahmed cited foundational 1993 research from the International Journal of Purchasing and Materials, which indicated that having a strong network of partner organizations is at the root of everything companies do - keeping costs down, manufacturing items on time and maintaining high quality standards are all functions of suppliers that work well with the rest of the supply chain.
Mutual benefit is the guiding principle that will help these networks of strong, lasting relationships come together. Ahmed specified that supply chain teams at organizations of all kinds must have a strong basis in decision-making, even when circumstances are unsure. Rather than facing simple decisions around prices, companies will have to find ways to unite their strategies and interests with one another.