Procurement success a two-way street

Better communication with suppliers and stakeholders can lead to improved business performance, despite a recent study which found that many procurement teams find it difficult to gain cooperation with colleagues in other departments.

Normally the issue is poor communication. The CPO Agenda ‘Efficio Grassroots Survey’ of 175 procurement executives found that communication with their business stakeholders and external suppliers was severely lacking.

The benefits when procurement people are able to talk freely with their colleagues in other functions include mutual understanding of respective skills and roles leading to better business results.

Poor communication, on the other hand, can handcuff procurement’s ability to influence the end-to-end procurement process, reducing it to a contract management function while other departments manage the procurement process themselves. It can become a vicious circle when procurement suffers from a lack of respect, which, in turn, limits interaction with other functions.

With suppliers, the potential benefits of effective communication are similar. They often complain that procurement people fail to share forecasting information with them, for example. They are kept at arm’s length and not informed of upcoming production schedules, but are still expected to deliver on time no matter what the level of demand. Surprisingly, our survey found that almost two-thirds of respondents never met with 20 per cent of their suppliers. Clearly, this a recipe for potential disaster.

In the challenging economic times we currently face and with many suppliers struggling with tight margins, it makes sense to provide them with as much information as possible. That way, they can fulfil their obligations and you are more likely to receive the service you require. Simply increasing the amount of communication with stakeholders and suppliers may well produce tangible benefits.

A new approach to communications is needed, which can be achieved by CPOs through the following steps:
• Segment stakeholders and you supplier base so you can prioritise your targets
• Investigate a new approach to communications with stakeholders and suppliers in a new sourcing project
• Meet stakeholders bi-weekly or even weekly, together or separately, to get them onboard and ensure you understand their fears and concerns
• When negotiations are complete, produce a list of options with the relevant business cases attached rather than presenting a single solution
•  For suppliers, good communication means regular meetings to share information, deal with any issues and explore ideas about how the relationship can be improved
•  Account meetings should begin within a month of contract signing, especially for new suppliers
• Make sure your message is clear
• Make sure you tell them “what’s in it for them
• Your approach to your stakeholders should be very flexible
A report on the full results of the Efficio Grassroots Procurement Survey is due to be published in March 2011.

Read more here.