By Costas Xyloyiannis
In recent years, ESG was hoisted to the top of the board agenda. To manage it, leaders had to ensure compliance and readiness across multiple areas were captured, analyzed, and reported.
This job needed an owner. When it came time to delegate, leaders assessed whether a single department with a clear responsibility across all suppliers for all these areas existed. Unluckily, in most cases, it did not. So, management turned to the next best option: procurement.
The function’s leaders, Chief Procurement Officers (CPOs), now had new mandates to meet and quickly sought to apply technology. ‘Point’ solutions, software dedicated to tackling individual use cases, were implemented. Often these tools were standalone. Integrating them with established P2P and S2P suites, used to manage sourcing and supplier relationships, emerged as a challenge.
Today, swapping between these old and new tools is a slow and painful experience for procurement – and all their suppliers. The impact of this digital struggle extends even further to the greater business. So, how does this stack up, and what can business leaders do about it?
Get to the heart of the problem
The digital environment which plagues procurement teams must also be navigated by suppliers. According to recent research, if a supplier wants to serve a single customer, they must navigate around eight different tools, each with a unique login. The time loss to these, often smaller, businesses is a concern. Another is that behind each password, many of these solutions produce and then store data from suppliers using it.
So, the way in which each supplier works with the business, results in their data being stored in an average of eight databases. Viewed as a whole, the supplier’s data is unreliable. It will be riddled with duplicates, gaps, errors, and inconsistencies.
Now multiply this data pool scenario by hundreds of thousands of suppliers. The millions, billions, entries that result, create a mirky view of supply chain activity.. A consequence is that ESG reporting suffers. And so does the supplier relationship. Apart from the disjointed tech landscape, the experience which suppliers have in communicating with procurement could be better, which mainly stems from "bad data."
All considered, can procurement teams really expect to receive the best work from suppliers? What about trustworthy data? If “no”, then how will the function progress? It has reached an evolutionary sticking point, and CPOs have a choice; they can accept things the way they are or find a way forward. Business executives can give their counterparts in Procurement a hand, but first, they should know the risks and rewards of progressing the function.
Resolve whether the reward is worth the risk
It’s one thing for management to see the problem for what it is, but deciding to address it cannot be taken lightly. Let’s start by envisioning what could be.
Encouragingly a reality exists in which suppliers and procurement work together seamlessly, like partners in the same ecosystem. Suppliers are happy, their work is good, their data is pure. In this environment, Procurement can thrive. Not only can the team deliver on traditional cost saving metrics, but they can also generate accurate ESG reports. Further, the function is set up to contribute opportunities in areas that span the business – such as diversity and inclusion, sustainability and product innovation.
Behind this eutopia is a movement that I like to think of as “Supplier Experience Management”. As the name suggests, the idea is to manage an experience for suppliers, in which everyone is empowered to succeed – from the supplier base right through to the board.
As attractive as this environment is, the journey to reaching it is not easy or risk-free. The first challenge lies in people management: the entire business, from management to every employee, will have to reform how it views suppliers. Next, Procurement will need to transform its digital setup. What this will take, is for the CPO to radically rethink the architecture of the digital landscape, and then to embark on a rebuild. Expensive tools and teams will be needed to progress this plan, which raises the stakes. No doubt this is a momentous task.
But business leaders who refuse to stagnate, won’t be alone. A growing number of enterprises have transformed the status quo, and are enjoying the fruits. For example, in 2013 an early adopter, BAE Systems, started to manage supplier experience. This led their procurement team to remove process friction for suppliers and enabled them to consolidate data from 50,000 suppliers across North American. The “single source of truth” that resulted, was incredibly valuable to the broader business in 2020 when Covid-19 hit. When leaders needed it most, they could access a clear and accurate view of the supply chain. This visibility, coupled with the zero-friction supplier environment they had established, meant that every department could respond to the crisis with agility.
The benefits of the agility gained through supplier experience are enjoyed by many other companies, including Mondelēz International, Baker Hughes, Lenovo, and more. A wave of globally recognized CPG brands such as Unilever, Mars and Heineken have also joined the supplier-centric movement in the last 18 months.
Take inspiration from the pioneers and drive change
Trailblazers of the supplier experience principle follow a proven method. Four steps stand out by which the broader business, procurement, and all suppliers can achieve mutual success. For business leaders to reach this point, here’s a plan of action…
- First, work with the CPO to assemble a legion of loyal leaders. Their support will be invaluable. Attaining it, however, might push your persuasion skills. Some executives, particularly those who still view procurement as a transaction center, will only accept working with suppliers within the boundaries of cost savings. So, show them the value. Look at the virtues of “experience” management in other areas, such as with employees and customers. Can parallels be drawn to suppliers? Showcase the woes of a fractious supplier environment. What risks arise? Were major opportunities missed? Explore what a more harmonious setting will yield.
- Next, with the c-suite on board, it’s time to gain ground. The critical move is to abolish 100% of the barrier to supplier success: friction. Before that, you need to know all the process pain points. Unearthing these insights will require curiosity. What do these obstacles look like to suppliers? How are they removed? Getting immersed in their world – caring, stepping into their shoes, doing surveys – is key.
- Now from this vantage point, work with Procurement to craft a friction-free digital environment. Other pioneers follow a data-first approach in which a central platform is used to consolidate, host and govern all supplier data. Once the landscape is engineered to prioritize master data, Procurement can automate. Apply routines for transactional jobs and then use the saved time to introduce digital workflows that improve the supplier experience.
Finish strong
At this stage, the business has helped Procurement to digitally transform. In doing so, the function – and business – have gained two assets: a single source of truth in supplier data and a supplier network whose needs are better met.
It would be easy to stop at this point, but a crucial step remains. The supplier experience, which has taken so much to improve, must be maintained. For this, we need human collaboration. Everyone who engages suppliers (most of the company) must view them as equal, valued partners in a shared ecosystem – and treat them as such.
With both interpersonal and operational barriers removed, the business can partner with all its suppliers. In this scenario, suppliers are happier, and Procurement can deliver its mandates, the benefits of which extend well into the business.
About the Author
Costas Xyloyiannis is co-founder and CEO of HICX, the leading supplier experience management solution. Costas founded HICX in 2012 to address the challenges of bad supplier data in the enterprise.
He holds a Master’s degree in Computer Science from Imperial College London and has 20 years’ experience in helping some of the world’s largest companies to take control of their supplier data and deliver a superior supplier experience.
He strongly believes in the importance of data and supplier-centricity, as a foundation for digital transformation in business, and is a regular speaker and contributor on this topic.
