What the Duck?! Episode 19 Transcript
WITH POWERS COMBINED: Optimize Direct Material Spend Through Supplier Collaboration
Welcome to What the Duck?! A podcast with real experts talking about direct spend challenges and experiences, and now here’s your host SourceDay’s very own Manufacturing Maven, Sarah Scudder.
Thanks for joining me for What the Duck?! Another Supply Chain Podcast brought to you by SourceDay. I’m your host Sarah Scudder, and this is the podcast for people working in the direct materials part of the supply chain. I’m @sarahscudder on LinkedIn and @sscudder on Twitter. If you are new to the show, make sure to follow this podcast so you don’t miss any of our direct materials supply chain content.
Today I’m going to be joined by Miguel Cossio, and we’re going to discuss why supplier collaboration strategies fail and what you can do about it. If you work for a manufacturer and are struggling to collaborate with your suppliers, then this episode is for you. Miguel is a research director in the supply chain operations team at Gartner. He focuses on helping procurement leaders deliver greater value by adapting to the latest trends in supplier collaboration and innovation, performance management, and sustainable procurement. Miguel has 14 years of industry experience in direct materials plus six years as an analyst advising clients in direct procurement.
Welcome to the show, Miguel.
Thank you, happy to be here.
I’d like to start off by having you describe yourself in one sentence.
Ah, that’s a challenging question in one sentence. And I’m not gonna give you the typical response that he would put on the resume, right? I am a person who loves… that’s very hard. I guess I’m just someone who likes really enjoys his work. I love to collaborate with people. I am passionate about procurement. Procurement happened to me. It’s not that I chose procurement, and I’m sure we’re gonna get to that. Being a Gartner analyst I just get to share, you know, like, understand what makes people tick figure out how to help them and that’s just who I am. I mean, nothing extraordinary there, right? So as you can see in the background, I like to play the guitar when my little one lets me and I like to go fishing. Not very good at it, but I like to go fishing and play tennis. And that’s pretty much it.
So given the guitar hanging behind you, what type of music do you play?
I like fingerpicking. So anything from Fleetwood Mac to Mark Knopfler to Tracy Chapman. So I come from a family of musicians, my dad was, he’s still alive, but he’s no longer plays, but he was like, you know, like, you can find records of him and Spotify and everything right in Mexico.
So, okay. Yeah. So I moved to Austin about 14 months ago, and I joined the SourceDay team, and I’m now into country music. I figured I need to be a true Texan. So I’m used to…
When in Rome. Right now it’s all country western and didn’t used to be.
Miguel, why direct procurement? That’s kind of a common theme throughout your career.
So I guess I started as in a corporate headquarters of procurements working alongside a lot of different category managers, people working in direct, I was originally on the IT side of supporting them with different IT solutions that I was coding myself, and all of a sudden, I took an interest on direct procurement. To me, direct procurement, I mean, I don’t know like procurement is one of those functions that that has historically not been considered the most sexy, right, and I think it’s just, there’s so much we can do in procurement, why the impact in a good procurement organization is just significant, and specifically, on the direct side. I mean, you become an expert on whatever you’re buying, right? So I used to buy glass heating elements that you use for your refrigerator or your stoves, right? I used to buy compressors, whatever, right? So you, you get to be very hands on in terms of the engineering… the how is it manufactured? How is it made? And that’s just very different than if you’re buying consulting services. Right? So it’s, I guess that’s the engineering me that always drove me to stay in direct procurement.
So let’s, let’s get a little bit personal. I want to kind of start with the big very beginning of your career, so you started as a program manager, so let’s talk a little bit about your journey there.
So I was actually still in school starting my undergraduate degree, I was in IT computer systems engineering, and in the middle of that, like, as I was doing my studies, I joined one of the largest appliances manufacturers in Mexico. Sells millions of appliances in Latin American and in the US and I joined them as an intern, as an intern on IT, and pretty much my one of the biggest things I worked as a program manager there was creating a system where you could like create POs, and you know, like, communicate with your ERPs, and he was this junior person, like pulling all the factories thing and making sure that you have the right systems in place, etc. So I, I know from, if you think about digitizing procurements, I’ve done it in a very, very like from from scratch, and I think it’s, it’s a key a key enabler, right. But that’s how I started, and then the more I got into, like direct procurement, the more I got it, like interested in it. I mean, I was on the IT side, right, but I was very much working alongside category managers, and that’s where I just started picking up in my different categories was spent.
And then after you spent a few years as a program manager, you moved into a role at GE appliances as a sourcing manager. So what were you responsible for? And what did you learn in this role?
So, first as program manager, I actually moved into, I mean, I was still in the same company, but now as Category Manager, right, so that was before GE Appliances, and this is a company that back then was a joint venture and partially owned by GE, right. And in this company in Mexico, I was in charge of buying plastic parts that move to glass, heating elements and extrusion like different, very, very different. Think about your appliances that are in your kitchen, and pretty much like almost everything that’s that makes up an appliance, I went through that for a certain period of time, and then from there, I was sent over to GE appliances as a liaison between both organizations, because at the end, GE Appliances had their own procurement team, and we also had this, you know, like joint venture in Mexico, who is coming from who also had a procurement team, right? So I pretty much was responsible for everything that this Mexican company was selling to GE, which was slightly over 2 million appliances on a yearly basis. Any supply chain issue, I was the person that would go to to figure out what’s going on, what are we doing about it, etc, etc. So that was one part of the job, and the other part was really identifying synergies, right, where can we get procurement team across the two companies to join forces and drive cost optimization and innovation? You name it, right? Different suppliers?
What was the most important thing you learned in your role at GE Appliances?
Very, very good question. So the art of communication. So really understanding what is the problem like you have to think about the next five questions your senior leadership team is going to ask you right, so there is a problem, material stuck anywhere or whatever it is right capacity constraint, so you have to not only understand the problem, and figure out like, what are the actions that we are taking, right? Or that are being put in place to address that issue? You have to anticipate what are the questions? You have to senior leadership is going to ask, right and make sure that you come to a meeting, knowing what are the next five things that they are likely going to ask? And keeping that balance between being tactical, when you have to be tactical and give details to saying don’t worry, we have this and, you know, like that to me, was one of the major things I learned.
And then I find it interesting. So in all these roles, you were involved in manufacturing, right? So that’s another theme direct and then the manufacturing piece, then you transitioned into what I would consider a pretty different role you actually moved and went to work for Gartner. So why the change, why did you want to transition into more of an analyst consultant role?
So that’s a very good question. So, what happened is I had a lot of years of experience in direct procurement in manufacturing in appliances, right? So if you think about it from that perspective, it was almost very industry-focused, and I wanted to either make a change from a functional perspective, like moving into product management or something different, or expand my experience to other industries? And Gartner gave me that perfect opportunity. Because right now, I’m working with companies in CPG, in aerospace and defense in the airline industry, like you name it, right? So it’s very interesting seeing how the challenges are similar, but you cannot talk the same way as you would advise a company in CPG to, versus a company that’s making submarines, right? It’s very, very different. So it’s almost like the ability to expand your knowledge, and also the ability to properly do analysis, right? Figure out what is hurting people like, where are they hurting? And what are the things that they can do to overcome, right, like, almost like a center of excellence, but on steroids, right? Where you get to do this with pulling insights from not just within your own company, but in all different sorts of industries.
It’s kind of like my love for startups, I’ve always worked for startups in supply chain, and I think it’s because I like to do lots of different things. I think I would get pretty bored if I had one very specific role that I was just focused on and doing every day. So I can definitely relate to that. So you play or do work on the indirect and the direct side, our podcasts are solely focused on direct. What do you like most about working with people on the direct side?
I think from an ownership perspective, right, like people who are on the direct side, that they’re in their ideal state, they own the strategy, right? The sourcing strategy, the category strategy, they’re the ones who do this. They’re the ones pulling different stakeholders into the mix, right? And they’re like, they almost have like these glue that brings everybody together to make sure that we move forward. On the indirect side, I think it’s extremely important, but the role that procurement plays, it’s more about convincing others that, “Hey, we can add value and you know, like you’re coming in from a very different place.” And at the end, I don’t think you really own that, right, it’s more likely that your stakeholders know more about those floors than you do, so that depends on the category that we’re speaking off, but generally speaking, I would say that that’s the ownership perspective is one thing that continues to really catch my attention from the direct side. I started my career on the indirect side, and I always describe it to people as doing lots of selling, you’re always out selling and trying to get buy-in, or on the direct side, you have the buy-in. So it’s more about strategy and optimization.
Correct, and it’s about pulling people together rather than trying to convince them why you are there in the first place.
So Miguel, in preparing for our interview today, we talked a lot about supplier collaboration, and you mentioned that one of the most important things a manufacturer can do to optimize their direct materials spend is to collaborate with suppliers. Why is that?
So I don’t think it’s just about spend. Generally speaking, to reach your goals, whatever they are – be it service innovation, sustainability, or anything else – you need to collaborate with suppliers. And when I say collaborate, I’m not talking about tactical or operational collaboration. That’s important too – having the right systems in place to facilitate efficient communication with suppliers. But I’m thinking more about the strategic side of collaboration. So making sure that, in a nutshell, you’re doing everything you can to become a customer of choice for those suppliers so that when there are capacity constraints or they have an idea for innovation or anything else, they’re coming to you first and foremost. This is something that I’ve done in my past life, and I’m just really passionate about it. It’s funny because as I think back about my career in procurement, I always thought I wasn’t the right person because I really cared about the relationship, and everybody I was surrounded with was like, “No, you just have to squeeze the supplier for the last cent, right?” And I’m like, “No, the relationship is important.” So I always thought about myself as being quote-unquote “too soft” because I really cared about collaboration. So how do we actually improve it? We see a lot of companies doing strategies for improving collaboration.
And I would argue that you described yourself as soft. I don’t know if that’s the right term, but soft buyers are the ones who won in the last couple of years during COVID.
Absolutely. There’s, I mean, if anyone hearing this is still on the fence about supplier collaboration, this is where the ones that have done it right definitely came ahead. I mean, I had so many companies reaching out, “How can we start doing this in the middle of a pandemic?” I’m like, “You’re too late.” So it’s, you should learn to swim before the boat is sinking.
So what are most manufacturers struggling with? We talk about it, and I think a lot of people are aware of the importance and the benefits, but I think it’s a lot harder to actually do and shift culture and shift mindset. So what are most manufacturers struggling with in terms of supplier collaboration?
So I think that brings us to the original reason we say, ‘let’s talk’, right? The whole concept of why our supplier collaboration strategies or initiatives are failing. And that’s something I’m actively doing, you know, like pulling all of the insights I’ve learned in the last six years of speaking to hundreds of companies on this. I came up with six very specific things, right, that we can go into depending on where we want to focus. But the first thing is, a lot of companies simply don’t have a strategy. I’ve spoken to very large companies that think they have this right, and when I asked them, ‘what is your strategy? How do you know what you’re doing with which suppliers, why, what are the goals, etc.?’ And there’s no strategy, right? And that’s a very risky position to be in because saying ‘it’s just who we are, we collaborate with suppliers’ can get you halfway there, but the moment there’s a leadership change, that’s all gone, right? I’ve read books of companies, claiming to have great supplier collaboration strategies 20 years ago, and now I’m speaking to them because they’re trying to start from scratch, right? So, to me, not having a strategy is one of the biggest things. But if we move beyond that, and let’s assume you already have a strategy and your manufacturer is struggling with… We have been running a series of surveys in the last three years, and the top three things that I can say come up are: one, the lack of resources – and this is based on the latest survey that we did earlier this year. So 88% of companies told us we don’t… When you say resources, are you meaning lack of people? Or what does that mean? It’s people, time, technology. So it’s we actually asked, like, what are those? The challenge that most are being faced with is when there’s a fire and whipping, putting out fires for the last three years. This simply has just been put to the backburner, right? Supplier collaboration, proactively driving these and holding your top-to-top meetings and doing the typical elements of supplier collaboration strategy. People are struggling to find time to do this right because they’re being pulled into just keeping everything afloat. So that’s one of the major things that I think companies have been struggling. The two next big things, and I think these top three are highly relevant, are the lack of internal stakeholder support. So stakeholders are pushing back, and they’re saying, ‘what is it that we’re doing?’ And there are many things that happen with that, right? So it could be from simply a branding perspective, right? So most companies or people talk about this as SRM. Let’s face it. SRM is one of those terms that people might not simply understand, right? Or they might think, ‘oh, it’s scorecarding, or it’s supplier management.’ So the cultural details internally within your organization, if you feel like stakeholders are pushing back, I mean, I’ve seen a lot of companies that just simply don’t call it SRM. They call it supplier excellence program or partner to win or Win-Win way, or Kellogg’s has… So what you’re saying is branding matters and what you name and call branding matters.
Yeah, and if you say SRM and everybody’s happy, then go with that, right? But if you see some people cringing, well, you have to change, you have to think about the branding of the program. So that’s one of the things that happens with stakeholders. And the other is when you think about procurement teams. If you go out and speak to one stakeholder in R&D and talk about costs, they don’t care as much as customers as you do. So people have to think about, as they’re trying to overcome this huge challenge, which is stakeholder buying, what’s in it for the stakeholders, and how are they going to bring them into the process, etc. So the first challenge is lack of resources, the second one is stakeholders pushback, and the third one, which many companies don’t seem to think about or choose not to think about, is that suppliers are skeptical. So a lot of companies are going to say, “We’re going to do a separate collaboration strategy. These are my top 20 strategic suppliers, and they’re just going to be thrilled that we’re calling them strategic, right?” Well, no, because most likely, your competitor already reached out to that same supplier, called them strategic, and nothing happened. So I would say 90% of the strategy documents from different companies who are trying to do this, when I look at their deck and what the program entails, etc., 90% simply forgets to include what’s in it for the supplier. And if you cannot clearly define what is value for the suppliers, suppliers are still going to give you your beat, they’re going to tell you there’s your strategic customer, but you’re not going to be there. You know, like, show them show you that you’re… In marketing, this is a challenge as well. I mean, I talk to marketers who have never spoken to a customer, and I would argue how can you do marketing if you don’t know what your customers are talking about and what they care about? So it sounds like this is kind of similar, and that you’ve seen companies put strategies in place and have never spent time to sit down and talk with suppliers, and listen to what they care about and what matters to them. And most people will say, “Well, we have top-to-top meetings,” yeah, that has some value, right? But it would be way more valuable for you to say, “Hey, we’re going to do risk and you’re sharing with all these strategic suppliers. Now we’re talking about real benefits for the supplier.” So are we going to say, “Sign better agreements with them that are not as onerous on them as we typically are?” So that’s real valuable suppliers. So thinking, if you have a strategy in your and it’s failing, one of the key things is to figure out like, “Are we really offering suppliers something that’s worthwhile?” Those would be the top three things.
So it almost sounds like setting up some sort of focus group where you’re actually sitting down in person or remotely talking to suppliers, getting feedback, getting input, maybe even running some ideas by them could go a long way in setting the strategy.
Could be, but it’s not necessarily a success factor. So I’m completely sold on the idea that we need to collect feedback from suppliers in terms of how good are we as a customer? What are the things we need to improve, etcetera? But coming up with, how are we? If we call a supplier strategic, what does that mean, that has value for them? You don’t need to speak to the supplier. I mean, you just have to do your homework, and guess what? It’s not just about like giving them more volume, because a lot of people say, ‘well, they just won business,’ well, not the survey. So maybe even the way that you’re measuring their performance, right? In terms of risk and resilience, or everything we were doing in terms of innovation and sustainability and all, like making sure that you’re capturing all of the value that they’re bringing to the table? You don’t need to ask them anything. I mean, they’re doing that for you, you just have to show them that you are quantifying that in the way that you’re doing the session so that when a new supplier comes in, that’s way cheaper than them, you’re not gonna take business away because that new supplier doesn’t, he’s not providing the right value.
So we have some listeners to the show that are actually buyers. So they’re in the doing role, not necessarily the management and leadership role. What can a buyer do to help get a successful supplier collaboration program in place? Why does it roll? Okay, so first of all, we have to find a buyer, right? He’s the buyer, the one cutting the POs and sending the forecast and all that good stuff. That’s great, although some companies call buyers or category managers, right, the ones creating the strategy, etc. So if you’re a buyer, and you’re in the manufacturing side, and you are the one dealing day-to-day with a supplier, then as you’re thinking about supply collaboration, first you need to challenge your procurement team, making sure that you’re saying, like, you know, like, we think these are our most important suppliers. I mean, you need to make it very clear to your procurement team. What is it that you need from suppliers? It could be most likely it’s going to be something around service, consignment stock or responsiveness, whatever. But you clearly have to define what you need and make sure that procurement is incorporating those needs into the way that they’re assessing suppliers. So I wouldn’t recommend someone in a buying role saying we’re going to start a mess around program or a supplier collaboration program because that’s usually procurement. You’re just one part of the puzzle. You’re as important as R&D as quality, like the different stakeholders, it’s procurement that has to pull that together, but if they’re not doing it, you need to push them, you need to challenge them. Another thing that I think is important, as we think about supplier collaboration, we see a lot of companies thinking or implementing CPFR, collaborative planning and replenishment, and the reality is that kind of approach of CPFR, or you should be doing it with a handful of suppliers, and if you’re a buyer and you’re participating in CPFRs, you need to make sure that those suppliers are the ones that are strategic for the business and not just for you as an entity, and that’s where another conversation with the procurement team is, you know, you want to avoid being in a position where you call a supplier Strategic Procurement calls them, you know, your bottleneck, and you’re horrible. We’re getting rid of you, like everybody has a different opinion, right? So you need to make sure that you’re raising your needs and your priorities to procurement folks to feed the strategy. Does that make sense?
Absolutely. So let’s say I’m starting Sara, Scatter Incorporated, I’m a company that’s going to manufacture something or things in the US…
Widgets, that’s right. What does a successful supplier collaboration program look like for me? I have nothing in place, and I want to build something. How would you coach or advise me to do that?
So the first thing is, if you’re extremely low maturity, and everybody every factory is buying from whoever they want, and you know, like, it’s the Wild West out there, don’t pursue this because you’re not ready for this. And we need to recognize that ownership of making sure that there are strategies in place, etc. is a key element to at least consider a strong collaboration strategy. Assuming you have that, when I speak to companies, large and small, and I’m trying to figure out if they have a good supplier collaboration strategy, there are a few things that I’m looking for. One is what is the goal of the strategy? So you tell me, is it to save money? That’s not good enough because not everybody cares as much about savings as you do as a supplier or procurement person, right? So the goals of the strategy have to be more corporate-wide, think about innovation, sustainability, things like that. That’s one thing. The second thing is, who owns this? If it’s only procurement doing this alone, that’s a huge mistake because procurement is going out and promising things, but stakeholders are like, “nah,” without adequate, right? So procurement leads, but it’s a group effort with stakeholders. That’s the second thing I’m looking for. The third thing I would say I would look for is the scope of the program. So every time I read an article, post, or whatever on LinkedIn, people usually say you should do SRM or collaboration with your strategic suppliers, and I always cringe because, yes, you should definitely do that first and then think about your non-strategic suppliers and what are the things you could do to reach them? Because at the end, I’ve spoken to large companies that have 60,000 suppliers, and I’m not making this number up, right? 60,000 suppliers, out of which 13 are strategic. If 13 suppliers love you, but the rest hate you, you have a problem. So yes, you start with your strategic suppliers, hopefully, you’re doing a good selection, not too many suppliers, etc., etc. But then you create, like, what are the set of mechanisms that we’re going to put in place and think about things like supplier summits, Voice of the Supplier surveys, recognition awards, right? All of those things that can help us reach more suppliers without having to sit down with them personally, right? So that, to me, is another big part of what a good strategy would look like.
I also think it’s important to define: what does strategic mean? I would argue that just because it’s your biggest spend does not mean it’s a strategic supplier, literally. There could be a supplier where you spend 10 or 20k a year with, but they make a part that is absolutely essential and critical, and without it, you can’t produce your products. I think it’s very important to define and look at what is a strategic supplier. And that’s definitely one of the reasons why I struggle over whether a strategy fails because it could be either you have the wrong set of suppliers. So you’re saying, “Well, it’s my top spend, they must be very important. So we’re going to call them strategic.” Spend has its place, but you have to think about that. The easiest way for me to define this is: which are your most valuable suppliers? It doesn’t matter about the performance. It doesn’t matter their spend. Like, which are the most valuable suppliers for you? And it depends on your business strategy. It could be you’re all in for innovation, you’re all in for cost, that definition of value is going to differ, and yes, we can set some minimum thresholds for spend, but at the end, it’s those valuable suppliers that we need to figure out. Yes, maybe they’re strategic, and I’m saying maybe because you might have suppliers that are extremely important for you, but you’re not very important to them. So in that case, they’re critical. They’re not strategic. They do belong. I usually when I talk about segmentation, everybody thinks about the college matrix and the two by twos and that’s all good, but in practice, most companies that are speaking to that do this well usually just have three segments. So it’s just like the strategic suppliers, the most important where we’re also important to them, the critical, which are very important suppliers, but we’re not that important, so it’s more like a risk-based approach, and the third, everybody else, the transactional costs, right. So I mean, you could have… I hear people telling me, “Well, we have five segments,” and that’s how we want to do. That’s fine, as long as you can clearly differentiate how you deal with each supplier differently. You’re going to have seven segments, right. But usually, most companies struggle that they just say, “Well, my segment one is there, something to that,” and then the rest, we just treat them the same. So why are you even segmenting them? So, waste of time.
You can see me perfect.
So, Miguel, I have to ask, we’ve talked about why programs fix supplier collaboration programs fail. What can be done to put a solid program in place? But then there we have the data and metrics piece of it. So what metrics should an organization be tracking for their Supplier Collaboration Program?
Not everybody cares as much about savings as you do as a supplier or procurement person, right? So the goals of the strategy have to be more corporate-wide, think about innovation, sustainability, things like that. That’s one thing. The second thing is, who owns this? If it’s only procurement doing this alone, that’s a huge mistake because procurement is going out and promising things, but stakeholders are like, “nah,” without adequate, right? So procurement leads, but it’s a group effort with stakeholders. That’s the second thing I’m looking for. The third thing I would say I would look for is the scope of the program. So every time I read an article, post, or whatever on LinkedIn, people usually say you should do SRM or collaboration with your strategic suppliers, and I always cringe because, yes, you should definitely do that first and then think about your non-strategic suppliers and what are the things you could do to reach them? Because at the end, I’ve spoken to large companies that have 60,000 suppliers, and I’m not making this number up, right? 60,000 suppliers, out of which 13 are strategic. If 13 suppliers love you, but the rest hate you, you have a problem. So yes, you start with your strategic suppliers, hopefully, you’re doing a good selection, not too many suppliers, etc., etc. But then you create, like, what are the set of mechanisms that we’re going to put in place and think about things like supplier summits, Voice of the Supplier surveys, recognition awards, right? All of those things that can help us reach more suppliers without having to sit down with them personally, right? So that, to me, is another big part of what a good strategy would look like.
Okay, so first, that’s a very good point. So the first thing is there should be metrics in place. And believe it or not, in most cases, there’s no metrics, and I always ask, alright, so gonna implement this. And in two years, how do you know you were successful or not? And that’s where people start thinking about metrics. I think, as you’re doing or defining your metrics, I think about two things, so it’s always good to have activity basement metrics. So yes, how are we meeting with the suppliers? How many summits we did? etc. I think there’s merit in terms of just keeping a pulse on the actual activities that you’re doing. But if you have no metrics, and you say, like, what are the key things that I wish you’d be putting together, I would completely forget about activity metrics and I would think about more likely the outcomes, right? So you’re going to be tempted as a buyer or as a procurement leader to talk about financial metrics, and actually a survey I did, like 60% of companies are doing this right, and that’s all good, but most companies are trying to think about this from a financial benefit because everybody asks about the ROI. Why should we collaborate with suppliers otherwise? And to me, financial metrics are very tricky when you talk about supplier collaboration. It’s almost like if you invest in training, or you know, like giving MBAs to all your procurement staff, and then you save X percent. Was that because of training, or was that because of other factors? So it’s very hard to really, you know, like drive a lot of draw a line between the strategy and the particular financial results. Instead of that, the three things I typically recommend companies tracking are:
One, and it could be one of them, or the three of them at once, right? But one is doing a voice of the supplier survey where you’re actually asking suppliers, what are the things that we’re doing right? What are the things we’re doing wrong? So they’re scoring you for a change, right? And tracking that. That’s a very demanding…
Are you recommending the combination of phone in person and email or how are you conducting? It’s usually a survey. So you say here are? Yeah, yeah, like, Here are 15 questions that we’re going to cover in terms of how expensive are we as a customer? How easy is it to work with us who are skilled or staff, etc., etc. So you’re collecting, almost like an employee engagement kind of survey that hopefully, like most companies have in place, right? To figure out? How do we keep employees engaged? Very similar, right? You can always complement that with follow-up conversations and things like that. But usually, coming up with a score in terms of how our suppliers a big group of suppliers seeing or as a customer, that’s a very good indicator in terms of how well they like you. This is how close are we to being a customer of choice? Or how far we are? So that’s, that’s one key thing, and I see a lot of companies incorporating these numbers into their procurement dashboards, so you’ll see savings on time delivery, etc. And then, you know, like almost like a sub like a net promoter score from suppliers holdings, right, like very similar. So that is definitely one of them.
The second thing that I typically say, and I would recommend people look at this is if you’re already in the stage where you’re tapping into supplier innovation, so making sure that you are measuring the outcomes of that innovation program that you like, like, you know, it could be savings, it could be revenue enablement, it could be process efficiencies, but if you’re a good customer, suppliers are coming to you first with their innovation ideas, and if you’re a good customer means you’re doing supplier collaboration. So you can measure that. So if you think about financial benefits, that could be a good way of saying, you know, what, we got this innovation from suppliers, and that’s a metric. And the third thing that I see a lot of companies thinking or like implementing is pretty much tracking the performance of the suppliers and tracking that as part of like the health of the supply collaboration strategy. And when I say performance, again, it’s not just on time delivery. So if you have a good strategy, you’re gonna have a scorecard that includes cost, quality, service of course, but you also include things like risk, sustainability, like responsiveness. It’s a very comprehensive scorecard that you’re not doing with all of your suppliers, but it’s something that incorporates all of the needs of the company, not just the operational ones. And then if those scores are improving over time, you can definitely say, ‘Yes, we’re getting more out of this,’ and why because we’re investing time on the suppliers. So those are the top three ones that I’m seeing more consistently being used…
I would argue this is where technology comes into play. If you are already strapped for resources, you have a limited amount of time, and a smaller team to manually track all of this is really not realistic and reasonable. So yeah, I think there are things that you can implement or put in place that are very cost effective to help with the metrics piece of it.
Absolutely, and to me supply collaboration, you know, like from this perspective, SRM call it whatever you want. I always say, technology is not a key success factor. If you don’t have technology, you’re doomed. No, but it can definitely help, and it can definitely help from a scaling perspective, right? And I usually say this because a lot of people are like, ‘Well, we don’t have money to invest in this.’ You don’t have to invest in it, you just have to invest time. Put together a strategy you like, bring some stakeholders, and then just start doing it. You don’t have to spend millions, right? I mean, there are some really nice platforms out there, but you don’t need it unless you really want to optimize resources, etc., etc. But to begin with, I mean, it should be fun.
So how do you know if your sole supplier collaboration program is actually working?
You’re gonna definitely know, when you have the conversations with your suppliers. I mean, aside from the metrics we identified, right, but like in the last two years, if you haven’t seen a lot of, you know, like disruptions from your supply chain, you’re doing a good job in supply chain collaboration, because most companies are. So that’s a very… when there’s no materials, you can definitely I mean, there is capacity out there, it’s just like less capacity and that capacity is going somewhere, and if it’s not going to you it’s going to someone else, was actually doing a better job at collaborating with suppliers. Profitability of the suppliers, you know, the price points has a part of it, but also, if you have, think about this, if you’re a supplier, which we tend to often ignore, think about think about how suppliers feel. If your supplier, you have a very limited capacity, who are you going to give it to the ones who are collaborative sharing, you know, like product roadmaps, the ones where you see a future of growing together, respect your supplier, etc, etc, or the big guy who yes, you’re selling a lot to them, but they just don’t treat you right, and like this, they can change suppliers. So you’re gonna, most likely think about the other guys, so…
Thank you for discussing why supplier collaboration strategies fail and what you can do about it today, Miguel. If you have anything to promote or a project that you want our audience to know about, now’s the time. So maybe tell us a little bit about what keeps you busy nowadays? And where would you like to send people to find you?
So my LinkedIn profile is very easy, you can reach out by email as well, so email@example.com. So I actually have a lot on LinkedIn, even though it could be dangerous because I get a lot of people reaching out to sell me stuff and talk to me about all the materials that we’re shipping out of Gartner which we don’t ship any material. So please, you do your homework, but definitely by LinkedIn, I’m always looking for companies who are willing to share their success stories with us, and it could be a tiny success, like something that you struggled with, that you thought about something like those examples I love so that we can include in our research, maybe do a webinar with them, things like that. So that’s one of the biggest things. So if you have something interesting to say, by all means, let me know, I’m more than happy to connect, learn from that and see how we can, you know, like, make sure that your story is heard right across different audiences. The second thing is one of the things that I’m most passionate about is sustainability in procurement, so how do we bring sustainability to the way that procurement operates? So every year we are doing a survey in partnership with a Sustainable Procurement Pledge, which is a very interesting organization that I encourage you to check out. You don’t have to pay anything, you’re just a part of a very large group of people in procurement interested in sustainability. But with them and Gartner, we usually partner every year and we run a survey. So if you see that link, by all means, respond to that because the findings of those studies are not only for Gartner clients, but also for the general public. I just published it last week, and so it’s one of those things that we need people to really take seriously right people in procurement take sustainability seriously. So by all means, participate there and reach out if you have any questions.
If you missed anything, you can check out the show notes. You can find us by typing in What the Duck?! Another Supply Chain Podcast in Google to have the optimal search results, make sure to add “Another Supply Chain Podcast”. To ensure you don’t miss a single episode, make sure to follow this podcast and subscribe to us on YouTube. If you are new to the show, make sure to follow this podcast so you don’t miss any of our direct materials supply chain content. I’m @sarahscudder on LinkedIn and @sscudder on Twitter. This brings us to the end of another episode of What the Duck?!?! Another Supply Chain Podcast. I’m your host Sarah Scudder, and we’ll be back next week.