Michael Power: «The value of partnerships»

PurchasingB2B @purchasingB2B (from the June 2017 print edition), Michael Power. Image: Dorothy Jakovina

«Procurement, like other areas of life and business, is driven by strong relationships. Procurement professionals looking to develop such relationships with suppliers received no shortage of great advice during this year’s ProcureCon Canada conference, held in Toronto in April. The fourth-annual event saw speakers address procurement’s changing role inside their organizations through themes that included innovation, technology, supplier relations and the future of the profession in the global economy.

»According to Vitold Horodecki, chief procurement officer, North America with Capgemini, one of the keys to developing those strong relationships with suppliers is to challenge and be challenged—don’t surround yourself with those who will simply agree or toe the line, he told the audience during a discussion called Partner Up: Strategic Sourcing and Supplier Relationships. “If someone is a ‘yes man,’ he’s not a strategic partner,” he said. “We want someone that will say, ‘you guys can do better.’” If a supplier feels that an organization’s policy is inadequate, it’s better if that supplier expresses their dissatisfaction with it.

»As in any business relationship, it’s important that both sides—supplier and buyer—are able to make money if that relationship is to be successful. Squeezing a strategic supplier too much can lead to trouble, Horodecki noted. To ensure that happens, there must be healthy and open discussion with a supplier, said Horodecki. It may even benefit the relationship to open the books and share spend, P&L and other financial information. Horodecki cautioned against expecting that a supplier will be able to swallow costs in order to give a buyer the lowest possible price. “They need to make a living,” he said. “If you think that your supplier can survive with no money, then you have no supplier and your supplier will file for bankruptcy pretty quickly.”

»Innovation through collaboration

»The theme of using supplier relations to push innovation forward came through during another session at the conference, entitled Prepare For Liftoff: Getting Innovation Off The Ground By Leveraging Supplier Relationships. The multi-member panel looked at themes that included finding innovative suppliers in new markets, encouraging existing suppliers to be a potential source of new products or services and collaborating with startups. The panel outlined several reasons why innovation was important to contemporary procurement and supply chain. The answer depends on what industry a particular procurement professional is in, said Christopher Marko, strategic sourcing and category manager with Shaw Communications. Revenue can erode year over year because customers expect to pay less for more, he said. Marko also encouraged the audience to consider key resource constraints within a given industry.

»“We’re constantly looking at when we’d move from the technology we’ve adopted today to the next technology that’s coming forward,” he said.

»His organization works with several of its key suppliers to identify what they will deploy in the next three to five years. “It’s very important to understand, what are the key constraints in your business,” he said. “I encourage you to look at adjacent industries that are facing similar constraints to the ones you’re facing and look at how they’ve overcome them. And engage your distinct suppliers—set targets for them to help you improve your performance per constraint.”

»Fellow panelist Dimitrios Manolopoulos, senior director, strategic sourcing and IT, National Bank of Canada, said that customers want innovative ways to deal with the bank, which pushes the innovation the bank looks at. At the same time, operational efficiency is an industry metric that banks are measured against. These pressures drive the bank to seek out innovative solutions, he said, and the internal infrastructure must adjust to that. To determine return on investment on innovation, Manolopoulos said that, when existing suppliers make suggestions, the bank tries to have those suppliers limit the proposal to a 12- to 18-month timeframe showing ROI.

Speakers at ProcureCon Canada look to vendor partnerships and innovation to drive procurement forward.

»One of the main constraints on innovation is that it’s hard, noted Marko. Some projects take a long time, the process is messy and they may still fail before they get off the ground. There can also be a lot of testing involved, which can cause anxiety. “Sometimes you’re on this roller coaster ride where the product looks good for a couple of weeks and then, all of a sudden, there are some major challenges,” he said.

»“One key thing is, you don’t want to bet your business on an untested product so you have to have that long-term view.”

»While there’s a perception out there that innovation costs a lot of money, panelist Jack Bradley, VP of supply chain and inventory, Strongco, said that perception is false. Many suppliers are out there driving innovation, he said. He also recommended visiting suppliers regularly. “Don’t wait for them to come to you,” he advised. “Get up, off your butt, and go out and see these people. Go to trade shows and conferences and you can learn a lot, but the easiest way to do this is the old fashioned way.”

»Bradley also stressed the importance of keeping the customer in mind when chasing innovation. Every company has customers—so if you’re going to take something to the boss, ensure that it’s customer-facing. “If you want a quick hit on something that’s innovative, put something in front of your boss that’s customer facing and prove the customer service and you’ll have a better chance of success,” he said.

»Meanwhile, panelist Ryan Fernandes, director of supply chain at Sun Rich Fresh Foods, stressed the importance of getting as many stakeholders as possible on board before launching an innovation. Whether a sales team, operations or the finance department, everyone in an organization impacts innovation in some way and getting their buy in increases the chances of success, Fernandes said.

»Manolopoulos stressed the importance of curiosity in driving innovation, noting that those lacking curiosity won’t know who is out there or who the startups are. As well, when considering partners, the ones that appear like “renegades” are the ones that you want to get close to because they’re the ones looking to to bring change, he said.

»“The renegades are the ones that are trying to change things, and they may not be following all the procedures but if you get tighter with them you’ll know what the future entails,” Manolopoulos said

»While procurement has a tendency to look at things from a vendor or category perspective, Manolopoulos recommended viewing things as an ecosystem—from end to end. There are multiple vendors and categories within those ecosystems that can bring new suppliers that organizations can consider because they specialize in certain areas or do things more efficiently.

»Marko also supported the idea of “guided curiosity,” and recommended challenging vendors with that guided curiosity. Look at disruption and encourage stakeholders to always bring a disruptor to the table, he recommended. “You want to do research into your market space and understand what are the guiding principles that lead to success and then go back to the supplier base and challenge them,” Marko said.

»Fernandes recommended the audience looking to the RFP—a simple tool that everyone uses—to seek out innovators within an industry. Rather than simply asking a yes-or-no question about whether they consider themselves innovative, present vendors with a problem and let them come back with a solution, Fernandes suggested. “A lot of times you’ll see the innovators in the mix that truly stand out, that don’t give you the generic answers, that have actually taken the time to think it through, that are thinking differently,” he said.

»Overall, the conference offered a wide range of insights and advice across its five main themes of supplier relationships, the global economy, technology, innovation and developing talent. Those procurement professionals looking to drive value for their organizations would do well to look to improving in all of these areas.»

Innovation and ideas

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