P@35 – Do you have the right SPIRit with your vendors to SEEk sustainable performance? (Part II)

In a previous post, we saw that companies should SEEk (Social, Environmental and Economic) Sustainable Performance by getting the GRIP on it (Growth, Responsibility, Innovation, Productivity). This will only be possible if vendors are fully part of this complex journey.

How could a more scientific Procurement function help? Does your company have the right SPIRit with its vendors?


Supply:

- Globalization and/or internationalization will remain for a long while. And what is good for business generates a lot of complexity and risks for many areas of the organization included for Procurement associates who should pro-actively help the top management in such strategic context (even without immediate savings) by quickly and efficiently adapting and opening the supplier panel. In any new country or region, while the organization is still often under construction, success is even more linked to the performance of those new vendors. Creating open and collaborative relationships with the key new suppliers is critical to success.

- Relocalization / reshoring for economic reasons or pure commercial strategy will persist. Once again, when adjusting the supplier panel, Procurement professionals can decide to be a) pro-active or b) re-active; they can choose to be a) strategic or b) just a support function .

- Resilience of the supply chain (the ability of the supply chain to overcome and/or continue to operate when a significant impact happens) can create a competitive advantage in many sectors. We all have in mind so many examples of serious disruptions linked to one missing purchased product/component, or due to a failure of an external service provision. Improved resilience is linked to deeper industry collaboration, strong quality mgmt., better traceability and robust mitigation of supply chain risks (especially mono sources of supply).

- Transportation, warehousing and distribution (W&D) business is going through a massive transformation.  With the boom of online sales, more attention should be put on the industry of small parcels, and ultra-personalized deliveries. Will Amazon ever use drones? They apparently took it very seriously. If it is not the case for W&D, at least, drones have already become a great source of productivity for many service provisions. Drones can really help to reduce the TCO and will be a game changer in several sectors. We should ask EasyJet that has already tested security checks of the planes with drones.


Productivity:

Vendors can dramatically impact on productivity, margin and cash flow. Beyond ensuring sustainable competitive prices and cost optimizations, Procurement has a key role to play in sourcing and integrating the most capable suppliers within the organization in order to improve the Total Cost of Ownership. Procurement should be involved in all outsourcing business cases. Buyers should improve their Lean Six Sigma skills to focus on process/continuous improvement with the vendors and internal customers.


Innovation:

Procurement has a big responsibility in capturing and integrating the external innovations coming from a wide supply network.

For this reason, Supply Relationship Management programs have a bright future; it implies a big change of mindset in the vast majority of organizations. I am happy to see several gurus revising the SRM approach and referring to Collaborative Business Mgmt., Trading Relationship Mgmt., Vested way, Return On Relationships etc... Setting up the proper relationships with our suppliers is a key success factor for innovation. Aeronautics, automotive sectors know a lot about it. In order to create a new and disruptive service, Amazon and P&G had to set up a complex commercial relationship. We can’t no longer see a clear distinction between vendor and customer as it has evolved to a business alliance.

Breaking the traditional procurement mindset and processes, Crowdsourcing will give a big help.  Many companies are in the process of testing the approach. P&G, Mars have been far beyond in developing their own web page dedicated to external innovation.

Circular economy should emerge soon with massive impacts on our distribution channels, production processes, supply chains and supplier panels.

Will Analytics soon become reality? While big data is strongly growing in marketing and sales, there is still a good step to take in Procurement. On a single click, will we get soon complete analysis of past data and future trends? We could immediately analyze our company spend, a supplier, a supply market, a specific value chain, any raw material and costs. We could have predictive risk analysis, or CSR dashboards related to a specific supply chain, etc...

Responsibility:
In many cases, our company is highly linked to vendors that have a huge responsibility and impact in term of conflicting materials and minerals. Sadly, too many people still die because of their work. Procurement really needs to check how vendors perform in term of working conditions, labor rights, Diversity & Inclusion, environment, corporate governance, corruption. In many firms, as a first step, CSR is linked to risk mgmt. and reputation.  It is much better when CSR is part of the company strategy in order to bring value to final customers.

In order to SEEk sustainable performance and have the GRIP on it, does your company have the right SPIRit when managing and collaborating with its vendors? What are the key priorities of your Procurement function to better support business and company performance?