Putting the Supplier Experience at the Forefront of Strategic Procurement
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SXM Webinar Series with Art of Procurement
In the first of a three-part Art of Procurement Live Webinar Series ‘Putting the Supplier Experience at the Forefront of Strategic Procurement’ in partnership with HICX, we focus on how to make the business case for Supplier Experience Management (SXM).
For the session, we were joined by Charlotte Anabelle de Brabandt, a representative of the Institute for Supply Management (IMS) and Ramit Mahajan, the Head of Supply Chain Enablement, India at Henkel.
This discussion reveals how the aftermath of the pandemic has made the case for Supplier Experience Management and viewing the world through the lens of the supplier, more important than ever before.
The post-pandemic context
Starting with the post-pandemic situation, Charlotte believes that many of the challenges are really just beginning with newly rising threats such as cyber-crime, data breaches and cyber-attacks. “I think the impact and threat level has truly risen and become the number one risk factor right now within organizations – and also within our supply chain. So, I think that the whole cost of cyber-crime has been underestimated,” she adds.
In the case of Henkel, Ramit confirms that, due to the nature of their business, a lot of segments actually grew during the crisis period of the pandemic, so that the business overall remains stable but not without change. For Ramit, the focus is on accepting the changes instigated by the pandemic, as he explains, “At Henkel we realised very early on that this is going to be a new normal and that’s what we are now adjusting to. We do not expect to go to the pre-pandemic reality. So, we have been, globally, trying to move very quickly towards this new normal. That’s the mode that we are in right now. Of course, there are a few challenges that you encounter and we are tackling them,” he explains.
Impact on the ecosystem
The experience and impact of the pandemic has been different around the world, which has led to a recovery that is uneven and unequal, with suppliers in certain countries struggling more than others, which has to be taken into account. As a result, Ramit points out that this new level of uncertainty has meant that transparency has had to improve, and that Henkel has placed more stress on transparency of information than ever before.
Other areas now in the spotlight include resilience and logistics. As Ramit describes, “Procurement teams really went out aggressively looking for more available suppliers,” adding, “Another example would be in the warehouse network,” with ramifications of materials being shipped to potentially closed locations needing to be dealt with.
“The whole thing was about speed at that point because things were changing so quickly from the one week to the next,” he continues. Making sense of government policies in different jurisdictions added to the requirement for speed. “They were coming out with new rules and regulations so quickly. So, as organizations, we were trying to keep up with those rules and regulations. It was probably the biggest change I have seen in my career.”
“Other problems that occurred suddenly were fraud and corruption,” Charlotte adds, as she describes the tremendous growth in counterfeit products, which led to procedures and regulations internally within organizations having to increase along with higher levels of security around payments.
As a pain point revealed in the HICX Supplier Experience Management Survey, Charlotte explains that the ‘new normal’ has cemented the need for more efficient communications across the board. “Just establishing these security guidelines and more controls, more quality controls internally, and externally, and making sure that employees are aware of what’s going on when going into the dialogue with the supplier,” has increased the urgency in this area, she explains.
Added to the communication aspect, Charlotte points out the importance of providing even more training. “Sharing best practices with our staff, with suppliers, and the lessons learned to really make sure that everyone is aware that there are counterfeits, that there are these political barriers, port closures,” and so forth.
The key to this, Charlotte stresses, has been to make sure everyone is alert, so there has been a bigger emphasis than ever before on both internal communication and then also supplier direct communication to build even greater levels of trust.
Trust and ‘customer of choice’
The discussion also revealed how the notion of ‘customer of choice,’ a key tenet of Supplier Experience Management, and which has experienced changing fortunes over the years, is now set to remain.
Charlotte says that working collaboratively with suppliers and opening the dialogue to reflect on their requirements is fundamental to building trust and becoming a customer of choice. She believes that the difficult times of the pandemic will be remembered. “If there is another crisis, if the suppliers have a limited amount of stock, who do you think they will be giving their supplies to? The one who has actually been there and supported them, had a relationship and listened, and, when they were in need with payment terms, or in areas of innovation, made them feel important and their voices heard. I think this is a really big wake up call for buyers.”
Ramit agrees, adding, “We’re always making sure that we are customer of choice, but this pandemic has really brought up the importance of that topic. So we have been making sure that the suppliers that really need the money to survive get that money to survive. There are many of these much smaller suppliers, for whom the importance of working capital really came up during this pandemic. So we made sure that these suppliers could sustain themselves.”
Ramit believes that the customer of choice approach is now accepted by organizations and represents an area that will receive even more focus post-pandemic, rather than being a strategy to suit short-term needs through the crisis. “Any company that has a long-term vision will make sure that the supplier network is sustainable.”
Charlotte also believes that we are witnessing systemic change. “I think it will really penetrate throughout organizations, throughout different parts of the organization – and will actually, I think, in the future become part of a strategic framework similar to what we have now, in what we call the employee experience. Then, I wonder who will actually own it in the future, and whether, in organizations, this will be a new role, so having a lead for supplier experience or making sure that customer of choice is a new variable within the company, something that we want to strive towards.”
Understanding the supplier view
In the discussion, Ramit stresses the need to understand the supplier viewpoint, as he explains, “It cannot be a one way street. We have clear metrics that talk about payments on time to suppliers, or, if they raise an issue, how quickly is that getting resolved. We have clear metrics and a good sense of how in sync we are with our supplier base.”
Charlotte reminds us, meanwhile, of the difficulties sometimes in capturing the voice of the supplier, offering a word of caution on surveys. “One needs to consider whether it’s 100% true and whether this is really what you can use, just because, if you do a survey, suppliers are mostly inclined to say everything is great,” which means a view cannot be formed on surveys alone and it is recognized that there is still work to do in terms of continually improving the experience for suppliers and ensuring a best-in-class result. This echoes a point made by Richard Wilding, Professor of Supply Chain Strategy at Cranfield, who we spoke to as part of our Supplier Experience Survey. He reveals that studies have also shown that suppliers generally report that the relationship is better than it actually is – mainly because most, understandably, do not want, of course, to upset their customers.
Charlotte continues: “I’ve worked in Asia, Europe and the US and I have seen differences in the different cultures and across different industries, but overall, there is still a gap. We want to be best-in-class, but still it remains a mission to establish that easy process with a supplier. So I think we start by streamlining, and making it more personal for the supplier. If it’s a small spend, then let’s have an easier process whereby the supplier can register themselves. If it’s a bigger spend, it will be more complex but it can still be customized, making it a lot more streamlined and easier for the customer to register, as well as just reducing the number of different systems,” she adds.
While Charlotte believes that surveys have their place, under these circumstances, the onus remains on the customer organization to use other mechanisms in conjunction with them to really understand what is taking place. “I would do a bit more deep digging to really understand the pain points,” she comments.
Sometimes this deeper research might involve traditional communications channels, including the telephone. It is important, Charlotte says, to remember that human touch, alongside the automation aspects that come with the evolution towards ‘autonomous procurement,’ in order to not lose the connection with suppliers. A really important point to remember is, “we need something from them and they need something from us.” Picking out an example, she explains, “In the past, there was one project that I worked on where I implemented a sustainable procurement program and we wanted to approach a few suppliers – and we wanted them to fill out a long survey. But instead of just sending out an email or the suppliers just getting reminders, we actually picked up the phone and had the conversation with them and they were so thrilled, happy and surprised – in a good way – that they then immediately felt important, and they filled out that whole survey.”
In terms of the technology aspect, Charlotte believes that it is essential to look internally with leadership and understand how experiences can be streamlined, for example based on segmentation. “If you have a supplier with whom you have a purchase order for $50 a year, for example, do they really need to fill out and go through that whole process in the same way as another supplier with millions of spend? So I think it’s key to really understand these differences in your supply base and overall it’s about communication and technology. I think that these are the two main points to enhance your supplier experience.”
Measuring and understanding supplier experience
Throughout the discussion, Ramit mentions several specific KPIs that Henkel tracks when it comes to measuring or better understanding the supplier experience. “Let me give you two specific examples,” he adds. “Starting with sustainability. We held a competition on sustainability in which we had given fairly clear guidelines to our suppliers about which parameter we would be measuring them on. Last month we concluded the competition with the supplier sustainability awards. This helps to make sure that the focus of the suppliers remains on this critical parameter. The other one is in the area of safety. We have a campaign for our logistics transporters and we give them training, collateral material, and we make sure that we are auditing them on these safety parameters. We ensure that we connect with them beyond just the regular pricing discussions and we’re making sure that, if we are looking at metrics, we are humanizing them. We are discussing them. We are actually measuring them. And we are going the extra mile to make sure that the suppliers know that we are serious about these metrics.”
Therefore, it is not about penalizing the companies that fall short, rather it is about incentivising corrective action through creative programmes, like awards or through the support initiatives that ensure that suppliers have the materials or the literature that they need to understand the metrics they are being asked to achieve.
Ramit confirms that the ownership of programs can vary, depending on the focus, as he explains, “We do have specific people who make sure that we are heading upwards from point A to point B, in a safe manner. These are the people who are then also tasked with engaging the suppliers to make sure that those suppliers are equally aware about the importance of not just as human aspect, but also the environmental aspect, when it comes to safety, for example. On the other hand, the sustainability award was actually the result of something that we were brainstorming within the teams on how can we engage suppliers, and it came out as an idea. The team that came up with the idea was then the team that led it right up to the execution and it worked really well for the business.”
Supplier onboarding and supplier experience
There has been a trend towards thinking of supplier onboarding more as a formal and focused activity, which Charlotte believes is driving a more fundamental change within Procurement, as she explains, “I think it has truly become part of the strategic framework. How do we have a smooth onboarding? And then, going a step further, how can we make it more customized? What can help is, when suppliers onboard, it doesn’t just go into the system, but that the queries are rooted and handled by individuals – and that they actually have humans responding to them. I think we’ve already gone through a big change in Procurement. Functional procurement has changed over the last decade, and just being able to have more marketplaces, that will change the supplier experience. It will be part of the strategic framework.”
The key aspect for Charlotte, is that everyone’s voice is heard, including using tools such as webinars rather than just mass email outreach, so that there is an interactive way in which suppliers can, for instance, have their questions answered, or engage in dialogue about innovation.
The cross-functional challenge
Addressing the point about the range of other functions and roles in the organization that end up either deliberately or incidentally playing a role in the supplier experience, Ramit talks about how organizations can make sure that they are also included in any improvements or changes.
“I think we have seen many instances where several functions have come together to make sure that either a particular problem was resolved, or to start looking at overall experience and how it can be enhanced. So, if there’s a supplier focused project, we would never have only the procurement or only the supply chain function involved.
We would have other functional heads, or finance involved. In one case, we even had HR involvement because the supplier had some manpower troubles and we wanted to make sure that we were helping the suppliers not just transactionally, but also with their HR or people-related problems. Very much a cross-functional exercise and definitely not just focused only on procurement or supply chain functions. This is something that I think is engrained. Of course there are many transactional activities which are best done by an expert, for example in Procurement. On the other hand, if it is strategic, then we have forums where a cross functional team gets together to address those supplier-related topics.”
Charlotte agrees, adding, “It really has this cross-functional element to it – and as to where this will ultimately sit, I would say it sits in the centre of excellence, as they are the ones to collaborate with many different stakeholders. This could be a good starting point for wider collaboration and learning from others, such as from the HR function. HR have established the notion of great employee experience and there will be lessons learned here about how they approached it and best practices. That then translates to knowledge about how we could approach delivering that whole supplier experience. Who will lead it or what will come out of it? That is really still in the future, but right now, it’s a matter of bringing together all different stakeholders, reviewing lessons learned, and then having someone take the lead and actually starting – and maybe the centre of excellence is where it all starts.”
Charlotte concludes by emphasising the need to build internal trust with leadership, as she explains, “There is always a reason why they might say no. It may be that they are just not educated, or not fully aware, so I think by sharing these best practices, you can trigger a great conversation within your leadership.”
A big thank you to our guest speakers for this webinar.
Over the next two weeks, we’ll be diving further into the topic of Supplier Experience Management in terms of examples from the field, followed by a discussion around understanding the return-on-investment of world class supplier experience. For these two discussions, we will be joined by Adam Brown who is the Head of the Digital Garage at BT Sourced and Costas Xyloyiannis, CEO at HICX for the next session. For the final part of our discussion, we will be joined by Rob Bonner, Global Procurement Director at SHV Energy and Mary Beth Lang, who is the Chief Supply Chain and Procurement Officer at Kaiser Permanente.
