Developing good strategic supplier relationships is fundamental to the future of procurement, according to our recent study, “Procurement 2025: Is digital transformation driving more effective procurement?”.
If strategic suppliers are to play an increasingly important role, selecting these partners through high-quality strategic sourcing processes will be critical. Technology can help to facilitate this by smoothing the process for data exchange and providing clear segmentation of supply bases.
Just over half (52%) of organizations surveyed do not formally segment their supply base. This suggests there is work to be done to select these suppliers through well-designed sourcing processes before the benefits of supplier collaboration can be fully realized.
Strategic supplier relationships of the future
Almost two-thirds (63%) of the 225 CPOs and procurement leaders surveyed for our report expect suppliers to have greater influence in the future, with 64% agreeing that the industry will become increasingly reliant on partner support to meet its objectives. Organizations also believe that in order to get that support they will need to be prepared to give something away in return.
When responding to how strategic supplier relationships should be typified in the future, longer-term commitments, early engagement and visibility of future demand featured among the top four responses. Interestingly, these three factors are in the hands of the client. In return for extending these to supply partners, companies want transparent and open-book commercials, which was cited as the principal characterization of such relationships in the future. Transparent commercials, if set up correctly during the sourcing process, enable total cost optimization through benchmarking across the supply chain.
More work to be done
Truly strategic suppliers are those with whom businesses develop two-way, mutually beneficial relationships that deliver a greater competitive advantage over the longer term for both parties than could be achieved by operating through a traditional arrangement. It is only possible to have a handful of such relationships. Despite this, just over half (52%) of organizations surveyed do not formally segment their supply base. This suggests there is work to be done to select these suppliers through well-designed sourcing processes before the benefits of supplier collaboration can be fully realized.
Ultimately, trust and communication will play a vital role when employing new technologies to help facilitate more strategic relationships. Over half (58%) of respondents identify lack of trust by either one or both sides as a barrier to working with strategic partners, while nearly two-thirds (63%) cite lack of sufficient communication as an obstacle. These issues will clearly need to be addressed before any improvement can be made to the way businesses and strategic suppliers work with one another.