One of the most powerful opportunities for a CPO to create a strategic advantage is to secure "customer of choice" status with a key supplier. The problem is that suppliers consider only 5% of customers (and only one-third of their key accounts) to be true customers of choice. To achieve customer of choice status, customers need to build true supplier partnerships.
Supplier Relationship Management
Build a World-Class Supplier Relationship Management Program
Without effective supplier relationship management, procurement organizations are missing a tremendous opportunity to capture expected sourcing savings as well as extract additional savings from suppliers:
- Up to 75% of the value promised by strategic sourcing (e.g. ensuring suppliers perform to agreed upon terms and conditions) can erode within 18 months of signing a contract.
- Additional savings of approximately $100–200 million can be saved annually by collaborating with suppliers on cost savings innovations.
- Supplier-led innovation can create new sources of value for the organization in terms of efficiencies, growth opportunities, and cost savings.
What the Best Companies Do
The best companies segment suppliers into tiers in order to reduce time managing for performance and rededicate resources to manage for value.
The best companies use standardized scorecards and supplier feedback programs that enable them to more efficiently track and evaluate supplier performance with an eye toward improving the entire portfolio.
The best companies work to understand how their suppliers view them and how they can make it easier and more compelling for suppliers to contribute high-quality innovations that are relevant to top business objectives.
The best companies collaborate with key suppliers by focusing only on a few projects that both parties consider urgent and relevant to their overall business strategy.
The best companies reduce supplier risk and price volatility by targeting resources against suppliers that can add the most value and design effective governance models across the supply base.
How We Can Help
Contact us to learn how to develop a best-in-class supplier relationship management program with our automated scorecard platform, best practices, and training.