Supplier Innovation through Supplier Relationships
Covid-19 has proven to be one of the most significant shocks that global supply chains have faced since we started to globalise decades ago. If there is one thing the pandemic has taught us since its emergence in early 2020, it is that for business and their supply chains, the ability to adapt quickly is not an option but a must. The pandemic showed us that massive scale change permeating through every aspect of how we live and do business, often happens without any warning signs. In particular, it has shown us that changing the “norm” to adapt to this scale of change requires every business to be flexible but more importantly, highly innovative.
Some examples in the past few months have shown how innovation was required to solve issues such as shortages of PPE, ventilator machines and sanitising gel. In the UK we saw high profile innovators throwing their hat in to support, from Dyson and JCB on ventilators, to businesses such as BrewDog on providing hand sanitising gel for the public to purchase. One of the most successful businesses to come out of this year is of course Zoom, which has now effectively become the verb for video calling. This business saw an incredible growth of 355% of revenue in 2020 and went from a relatively unknown company to a very well-known brand in just a few months, making a highly competitive market even more competitive all the while generating incredible innovation. For example, all the functionality that your video conference software has even compared with just before summer. This growth came with many issues too, notably some of the security issues flagged at the start of the pandemic and the growth of its usage.
All these businesses have had to adapt quickly to provide these solutions, which in some cases required a complete re-think of how to operate. Most of all, they had to be very innovative to come up with solutions facing this sudden change. Whether it was the ability to turn the tooling around quickly in companies such as Dyson or adapting to massive cloud infrastructure and security requirements for Zoom, these companies needed to work with their suppliers to adapt quickly. These changes weren’t just a matter of changing quantity of usage from one day to the next, but also required suppliers to provide innovative ways to tackle these demands and new ways of working.
Simply put, you cannot just expect flexibility by your supply chain to adapt to provide you with more or less of what they did, you also need your supplier to be innovative in how they do this for you as a business. There is one other key ingredient which is required – a strong relationship.
Good relationships aren’t always the ones which give you the best price for what they provide, but are the ones that can help you achieve change, whatever that might be, with the least disruption while also helping you achieve the new targets you may have set yourself.
I recently participated in a discussion with the team at Avencia Consulting and a guest, David Brammer, on the importance of supplier relationships in the context of Covid-19. The article states how “Reimagining partnership strategies and looking for innovative collaborations, was something evidenced around the world” and how “the need for a swift response has resulted in cross-industry partnerships that show customers they are the priority.” We also addressed the strain that Covid-19 had on relationships and how “for many procurement teams, it has highlighted the increasingly complex supply chain of businesses which consist of multiple suppliers”.
This discussion evidenced the importance of nurturing relationships during the good and bad times as the supply chain of a business can provide the key for not only successfully weathering something like a pandemic but can also enable businesses to thrive.
In procurement, many colleagues use the Krajlic Matrix to identify supplier relationships as part of a category plan, but what is crucial is how the relationships are tackled once the mapping is done. In particular when it comes to strategic suppliers, these are the ones that are fundamental to successful delivery of the product or service a business provides and with the right relationship can help you unlock that innovation that a business needs in a time of massive change.
These relationships are built by sharing with the supplier the combined objectives, the issues the company has, and the overall view of what success looks like. When it comes to supply chain and procurement, most suppliers know that a company seeks to reduce waste and unnecessary costs, so the aim is to get the supplier to participate in helping with these targets. This help can then be rewarded by other ensuring the supplier is aware of new opportunities or simply has the right level of engagement within the company to ensure a steady and long-lasting relationship.
These relationships must be nurtured and built during the good times and not just when needed. This is captured well by David Brammer on the previously mentioned Avencia Consulting article, where he says that with suppliers “you have to always pay a relationship forward. What I mean by that, is you can’t begin to try and leverage a relationship if one was never there, especially during times of crisis – it will be a losing battle”.
A strong relationship built on this approach ensures that during times of crisis, suppliers come to the company first with solutions and innovations which can help them achieve stability or in the case of ambitious companies, enhance their success. Suppliers will also be more open to helping companies which they feel are easier to work with. When asking suppliers, one of the most desired requisites from a client, even more than revenue, seems to be ability to do business with ease. Working with a supplier to understand what the pain points are to do business with you, can do wonders in creating a strong supplier relationship. Furthermore, ease of doing business can start a transformative approach with the supply chain which can have a lasting impact on clients. After all, in many cases, suppliers are often the ones who represent your service for you. Take for example the simple example of breakdown by the side of the road. As a client, you may have a well-known bank or insurance provider who provides this cover, but if your car breaks down on the side of the road it is the supplier of the bank or insurance company who provides the roadside assistance or rescue. The individual in that case has the experience of the service through that provider. This provider will know in detail what good looks like and can feed this back to the insurer or bank to enhance the service and increase the likelihood that the client will stay in the future.
In summary, Covid-19 has shown businesses how important supply chain is around the world, but most of all has shown how a good relationship within supply chain can help a business tackle even the most complex issues and, in some cases, help them to achieve untold success.
Marco founded Procurato. At Procurato, we are the trusted spend experts of choice. Every project we have worked on, has bought our clients minimum savings of 3:1 return on investment. Whether it is reducing risk, removing waste or saving money we can help you improve profitability. Procurato, Procurement at its best - www.procurato.co.uk
Avencia Consulting is a specialist talent outsourcing solutions provider to the Specialty Insurance and Reinsurance market, supporting businesses through; Recruitment Process Outsourcing (RPO, Managed Service Programme, delivery (MSP), provision of cloud-based talent acquisition technology solutions and Talent Consultancy solutions - www.avenciaconsulting.com
David Brammer has worked in the people and talent industry for 14 years, gaining experience in talent strategy, people leadership, and digital automation. As a seasoned head of talent acquisition, David is passionate about advancing inclusive hiring and ai-based technology, and he is best known for his natural leadership and engaging style, placing focus upon positive impact and change.