Coaching Suppliers and the Implications of Doing So
“Supplier Relationship Management” is a term that’s thrown around a lot in procurement, and generally assumes that the relationship with the supplier is “managed” by the buyer. This doesn’t leave room for what could be a more open interpretation of a relationship as a team effort, rather than a hierarchical relationship. For this reason, I believe a supplier “coach” is a more appropriate term for thinking about how buyers and sellers engage in driving improvement for mutual benefit.
Depicting procurement as a coach to suppliers has several implications. (BTW we’re not talking about the style of coaching that we saw on the Rutgers basketball team, which is akin to relentlessly beating up your suppliers on price!) First, coaches are expected to act ethically and in the best interest of their players. By improving the individual and helping them become the best, the entire team (e.g. the supply chain) benefits. Second, coaches must recruit and select the best players from a larger population. This means being able to winnow down suppliers to those that are the best. “Best” in this case means those that have strategic capabilities, a collaborative attitude, and act with passion and trust. Third, coaches must often dedicate their time to those players on the “first string”. Organizations may have thousands of suppliers, but only a handful of these are strategic and merit attention. There will always be suppliers that are “carry-overs” from prior product histories, or were included at one time when the competitive environment was different. Supplier management involves knowing which suppliers to keep and which to develop. And finally, coaches must understand the competition, and help their players understand what they must do to win. As such, organizations need to continually push their suppliers to improve, hone their skills, influence technology roadmaps, and drive operational excellence in every dimension of their performance.
Coaching can occur at both the tactical and strategic level At the tactical level, supplier management will need to become more aligned to the needs of the business. As one executive mentioned, we can’t afford to try to maintain or sustain duplicate capabilities in the supply base as well as within the organization. Suppliers will be expected to take on more of a planning and operations role, but this needs to be introduced by procurement to harmonize the capability with the business. The old school thinkers who are trying to drive world class procurement principles into the business are finding it doesn’t really make sense, and can drive the wrong behaviors. One company that is doing this well is Coke, who hired a marketing person into procurement. This individual recently discussed the fact that they now have 25 different business models for each one of their product lines, each with its own regulatory issues, branding requirements, local content, etc. Procurement needs to reflect and mirror the business and be able to adopt different supply solutions for each business model.
At the strategic level, suppliers should be coached on innovation. Driving new ideas from suppliers into the business is an area where there is a lot of dialogue, but only a few companies are really achieving and making headway. As procurement matures, sources of supplier-led innovation will become more of a value driver than it is today. With that, the need for bringing stronger relationships as a precursor to innovation is important. Procurement will soon become a channel for bringing supplier ideas and technologies to the marketplace, but this will require establishing a smooth path that has barriers to overcome.
Ready for practice, coach?
