Are you looking to enhance your business’s supply chain management and drive sustainable growth? By harnessing the joint expertise and resources of both companies and suppliers, you can unlock the true potential of their supply chain, optimising cost management, process improvement, and product/service innovation.
Take the first step towards transforming your supplier relationships and unlocking the benefits of effective supplier collaboration. Read on to discover key strategies, best practices, and cutting-edge supplier management software that can empower your organisation to streamline operations, enhance communication, and establish long-lasting partnerships.
Supplier collaboration is a joint activity that increases the capabilities of the supplier and business, in areas of cost management, process improvement, and product/service innovation. For procurement managers, supplier collaboration is among the top priorities in today’s on-demand age where supply chain competitiveness is a value creator. To go about creating this value, procurement leaders need to make data-backed supply chain decisions.
However, while there is an enormous amount of data to leverage, it is siloed across departments and systems. The resulting incomplete, inaccurate and inconsistent information can prevent supply chain stakeholders from taking timely, astute actions. As a result, companies may not be able to:
- Maintain lower inventory levels
- Optimise warehousing and transportation costs
- Shorten lead times
- Reduce out-of-stock levels
- Gain visibility into demand and supplier performance
Suppliers also benefit from deliberate supply chain collaboration strategies. They can improve both core capabilities and cost-competitiveness, which can help them win more clients.
What can companies do to improve supplier collaboration?
As stated above, quality data can drive smart decisions related to procurement and supplier collaboration.
Information on vendors and their products, and their historical performance can help you identify gaps, areas of strength and assess supply chain risk more effectively.
A consolidated view of all supplier or third-party provider data can not only support decision-making but also centralize supplier and their lifecycle management.
Once there is a database of connected and consistent information, companies can automate collaboration and lifecycle management, enhancing supplier onboarding, communication and monitoring, while also saving time through self-service supplier registration and information-sharing for timely strategic actions.
Efforts to improve supplier collaboration also increase transparency and trust. For instance, more often and clearer two-way feedback can help create consensus among stakeholders and tackle issues jointly, ultimately ensuring successful, long-standing partnerships.
The benefits of efficient vendor collaboration are too great to ignore and must be pursued proactively. Here is a look at the strategies companies can pursue to improve supplier collaboration and management.
Pay attention to the essentials: Expectations, information-sharing and culture
Successful vendor relationships are not merely transactional, but a close, collaborative partnership. Documenting clear expectations from suppliers is critical to performance and friction-free engagement.
For example, McKinsey recommends contracting for performance, where contracts set out the metrics and acceptable quality levels, and establish a monitoring and reporting system for continuous improvement.
Information-sharing is an inextricable part of supplier collaboration. Companies should determine what data and designs they can share with suppliers without posing a risk to their intellectual property or trade secrets.
It is a widely held belief that cultural compatibility and fit are necessary for a strategic buyer-supplier relationship.
Complementary competencies and cultures can go a long way in ensuring smooth vendor collaboration and a sustainable partnership. However, even if the cultures don’t align well, companies can promote openness and transparent communication as ways to create shared value.
Invest in supplier management software
Supplier management software greatly simplifies tracking supplier data, purchase orders and performance – all in one place.
It can contain data from your business (ex: procurement system); data from suppliers (ex: feedback/survey forms); and data from external/third-party sources (ex: analyst reports).
Some of the functions the software can provide include:
- Defining criteria and processes to assess suppliers
- Segment suppliers into separate, discreet online workspaces, based on spend and nature of product/service
- Classifying suppliers as ‘preferred vendors’, ‘strategic suppliers’, ‘basic suppliers’ based on the extent of cost and order fulfilment risk
- Auditing suppliers using KPIs, metrics, tools, and scorecards
A digital-led transformation of vendor collaboration is underway. Sophisticated electronic sourcing tools, analytics solutions, and business collaboration portals offer benefits ranging from advanced spend intelligence and compliance assurance to category strategy development and sourcing events with suppliers.
A joint effort
For investments in technology and collaborative culture to work, procurement departments must form alliances with decision-makers at the top and across other departments.
Without this initial understanding and cooperation, other strategic vendor relationship management actions are bound to fail.
- The business folks must determine expectations about specifications, customer experience, and branding so that procurement teams can align or adjust purchase decisions to these requirements. Without such a mandate from the top, procurement departments will not be able to make the best possible purchasing decisions.
- Departmental/functional heads must also participate in procurement-related conversations. Without decision-makers, the possibility of spending outside procurement channels increases. This activity of sidestepping procurement processes is known as maverick spending, and when unchecked, can result in substantial additional costs. A robust procurement system, engagement with decision-makers, and a sound supplier management system drive synergistic vendor collaboration and create significant value.
Also, a collaboration between procurement and finance is seen in every organisation. However, many are yet to bring IT into the mix, and missing out on advantages such as:
- Supporting the company’s compliance requirements
- Simplifying the IT infrastructure to boost the pace of innovation
- Improving connectivity and collaboration with suppliers
In a digital age, the interdependencies between finance, IT and procurement are stronger than ever. They can transform supplier relationship management and support broad organisational goals, such as cost reduction, productivity improvement, compliance management, and cash flow optimisation.
Strategic supplier collaboration is a driver of business success
Any company that relies on third-party suppliers needs to take a strategic view of vendor collaboration and management.
A reactive approach – stepping in only during a conflict – wastes time and resources. It also damages the company’s reputation and perceptions among vendor communities.
Supplier relationship management should be strategic – beginning even before onboarding a supplier.
A proactive approach that looks beyond purchasing to establishing long-term partnerships is even more critical in an age where vendors are allies who help companies innovate.
Procurement has matured; companies must prioritise evolving their supplier relationship management to innovate, grow and sharpen their competitive advantage.
Next steps
Looking for a secure tool that allows you and your suppliers to work closer together?
Request a demo of Kahootz and find out why organisations such as the NHS, and Ministry of Defence are using the platform to communicate and collaborate with their key external partners.
Frequently Asked Questions
What is Supplier Collaboration?
Supplier collaboration is a collaborative effort between a business and its vendors to enhance their capabilities in cost management, process improvement, and product/service innovation. To achieve creating value, procurement leaders rely on data-backed supply chain decisions.
In a collaborative model, suppliers contribute to the overall value chain by improving time to market, controlling quality, and streamlining workflows. This deeper level of collaboration allows for more efficient delivery of products to consumers.
What Risks Do Companies Face When Data is Siloed?
When data is siloed, companies face several risks, including:
- Incomplete and inaccurate information
- Lack of timely insights
- Inefficient processes
- Increased costs
- Missed opportunities
To mitigate these risks, companies should focus on breaking down data silos, promoting data integration and sharing, and implementing robust data management and analytics strategies.
What are the Benefits of Supplier Collaboration?
Supplier collaboration is of great importance in today’s business landscape, as it allows companies to tap into the expertise and capabilities of their suppliers, driving mutual growth and success. You can achieve operational excellence, drive innovation, and establish long-term, sustainable partnerships by working closely with suppliers and sharing information and resources.
The benefits of supplier collaboration include:
- Increased efficiency and cost management
- Improved process improvement and innovation
- Enhanced product/service quality and delivery
- Strengthened relationships and partnerships with suppliers
- Increased visibility into supply chain performance and risk management
- Greater agility and responsiveness to market changes
- Improved customer satisfaction and loyalty
- Enhanced competitive advantage and business success
How Can I Improve Supplier Collaboration?
To improve supplier collaboration, take the following steps:
- Foster open communication and transparency: Establish clear expectations and foster open communication channels with suppliers. Regularly share information, provide feedback, and address any issues or concerns.
- Implement supplier management software: Utilise supplier management software to streamline tracking supplier data, purchase orders, and performance. This centralised platform can improve visibility and facilitate collaboration.
- Develop strategic partnerships: Move beyond transactional relationships and aim for strategic alliances with suppliers. This involves aligning goals, sharing information, and working together to drive mutual success.
- Embrace technology and automation: Leverage technology tools and automation to enhance collaboration and streamline processes. This includes using analytics solutions, electronic sourcing tools, and business collaboration portals.
- Promote cultural compatibility: Seek suppliers who align with your organisation’s culture and values. Cultural compatibility can facilitate smoother collaboration and a stronger partnership.
- Collaborate with stakeholders: Involve decision-makers from different departments, such as finance and IT, in procurement-related conversations. This collaborative approach ensures alignment and support across the organisation.
- Continuously evaluate and improve: Regularly assess supplier performance, identify areas for improvement, and implement feedback loops. This iterative process helps optimise collaboration over time.
By implementing these strategies, you drive innovation and achieve long-term success in supply chain operations.
