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The State Of Supplier / Customer Relationships

July 13, 2010

Are buyer-supplier relationships becoming more collaborative? Are the views of value and performance used by Procurement extending beyond the traditional measures?

According to the results of a recent IACCM survey on Spend Management, the answer is a tentative’yes’. 46% feel that ‘Overall, our trading partner relationships today are stronger, more collaborative, more innovative, and more mutually-beneficial than they were 24 months ago’. This mirrors a perspective that was evident during the 2010 IACCM conferences, when buyers felt that the recession had in many ways brought them closer to their suppliers.

Certainly, the survey results show that large numbers of today’s Procurement staff believe that they have responsibility for supplier success and that this includes the need for ‘building relationships and credibility’ and contributing to trading partner collaboration and satisfaction’.

Yet interestingly these positive indicators are not reflected in the tools or methods that procurement groups are using. For example, an overwhelming majority use spend management software and well over half have sourcing tools. But well under a quarter have automated supplier relationship management. And while there is overwhelming (and hardly surprising)  support for the statement  ‘Achieving price concessions is a significant objective of procurement in contract negotiation”, less than 30% indicate that their organization measures trading partner satisfaction.

From previous research, we know that the supplier view is that the recession generally marked a deterioration in relationships. In part, that may simply be because they found themselves at a substantial disadvantage in negotiation and unable to resist unilateral demands for concessions. Our evidence suggests that some suppliers had only themselves to blame for the way things turned out. But regardless of this, it is clear that progress in relationship management skills and techniques remains slow.

(For follow-on this discussion, see https://tcummins.wordpress.com/2010/08/06/the-bottom-line-on-sourcing-procurement-software/)

6 Comments
  1. Hi Tim –

    Great post, it’s really got me thinking and resulted in the below post on our blog.

    One thing that has always intrigued me with contract management is segmented focus on either the sell-side or buy-side contracts – while ignoring the implications of advancements in tools/focus/strategies available to people on the other side of the table.

    In B2B transactions, every sales agreement has a procurement department on the other side, and the opposite is true for procurement agreements. On the procurement side, there is a focus on maximizing relationships through close managing of contracts and achieving a wide variety of concessions (not just in price). Procurement departments are getting an increasing array of tools at their disposal to better manage and derive value from their contractual relationships. Often this value is derived from extensive negotiations.

    Yet on the sales side, companies & contract departments are often focused on moving towards automated & standardized contracts – inherently assuming minimal negotiation – and often a lesser focus the company-wide visibility into the concessions made during negotiations. Ironically, this leads to the procurement dept. of a customer understanding the concessions better than the company itself!

    Obviously, I think standardizing terms where you are able is great, but what kind of impact do you think better procurement tools & tactics will have on the ability of B2B companies to automate & standardize their contracts on the sell-side?

    Justin
    http://bit.ly/cm3Tuf

  2. Tim

    Valid points. As we’ve discussed in the past, collaboration is often more lip service than a committed initiative. And tough economic periods, like the one we just went through (are still in?) strain even those most committed to real buyer-seller collaboration.

    However, the idea somehow that online sourcing and procurement tools are enemies to collaboration is misguided for three key reasons (possibly more):

    1) online sourcing tools bring a transparency and openness to negotiations that is often lacking from offline negotiations.

    2) leading online sourcing tools enable greater buyer-seller collaboration during the negotiation process, often times allowing suppliers to provide alternative bundles, delivery schedules, or product or process innovation recommendations that can enhance the value of the good/service being purchased and take cost out of the system — without negatively impacting the supplier’s profit margins

    3) finally, we must be careful not to confuse the negotiation with the relationship. Such online tools speed sourcing cycles 50%-70%, giving buyers and sellers more time to focus on collaboration and relationship management. (In fact, we’re seeing far greater demand for our supplier collaboration and management solutions from those companies with online sourcing tools than those without.)

    Bottomline: I agree that buyers and sellers need to put more commitment into their collaboration oaths. But online negotiation tools and collaboration can not only peacefully co-exist but actually can enhance one another.

Trackbacks & Pingbacks

  1. The Contract Management Paradox « Pramata Corp
  2. The Bottom Line On Sourcing & Procurement Software « Commitment Matters
  3. The Bottom Line On Sourcing & Procurement Software « Commitment Matters
  4. The Contract Management Paradox | Contracts Intelligence Blog

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