Supplier Collaboration and Your Bottom Line

change mindset

The CPO Rising 2014 Convergence bench-marking report, based on a survey of more than 250 leading CPOs, identifies effective collaboration across their organizations and with suppliers as one of the three primary areas in which top performing procurement organizations excel.

Given the increasing focus on the importance of collaboration within the global supply chain, this is not an entirely surprising revelation.  What’s striking is the direct line drawn between effective stakeholder communication and tangible bottom-line outcomes.  Specifically noteworthy is the study’s finding that “collaborative procurement organizations have profit margins 15 percent higher than the average company, and 22 percent higher than those companies with less collaborative organizations.”

Based on such results, one would have to wonder why more organizations are not able to achieve the same level of collaboration as the top performers.

Having had the opportunity to review an advanced copy of Dr. Robert Handfield’s soon to be published book titled “The Procurement Value Proposition,” the author sheds an interesting light on this question.

Handfield, a recognized supply chain management thought leader is an industry expert in strategic sourcing, supply market intelligence, and supplier development.  He notes that ideas such as collaboration “have been kicking around for quite some time, although the conditions under which they might flourish have yet to materialize in more than a handful of organizations.”

According to Handfield, one of the main challenges in terms of collaboration is that the “Integration of procurement across the business is not the responsibility of a few but rather a challenge that must be embraced company-wide.”  In short, procurement, as well as finance and IT, can no longer operate in separate functional silos.  In light of procurement’s changing value proposition, a more holistic view of the enterprise must be taken in critical areas of business, including purchasing strategy, organizational structure, system development, and the skills required to work in the profession.

This involves a change in mindset, starting with both current and future purchasing and supply chain management professionals.

Beyond this big picture view, there are also operational considerations from both a technological and process standpoint.

In our conversations with organizations of all sizes and across the globe, we see three primary barriers that stand in the way of collaboration:

  1. There is still an inordinate amount of time being spent on low-value manual processing tasks, keeping procurement, finance, and supply chain personnel busy with day-to-day tasks with little to no time for strategic and transformational thinking.
  2. Supplier adoption continues to be a major hurdle due to a combination of technical difficulties and perceived low value.
  3. Even when suppliers are connected to a supplier portal, meaningful collaboration beyond simply viewing POs and submitting invoices is limited.

Despite the hard evidence of bottom-line returns, only when we put in place a solution that can address all of these barriers — with high level of process automation, rich buyer-supplier collaboration, and streamlined supplier onboarding —will organizations be able to step up to a new level of supplier collaboration and realize the promised benefits.

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