Posted by  Lance Mercereau  Published on  5 Jul 2016
  • Supplier Performance
  • Spend Analytics

"Procurement teams that seek to create more business value from their vendor relationships establish long-lasting trust by sharing insight."

Much has been written about the benefits of spend analytics to procurement professionals but what about the company’s suppliers? 

Procurement teams that effectively use spend analysis to better understand how they are purchasing with suppliers have a stronger, mutually beneficial relationship.  This results in higher returns including greater business outcomes. 

Naturally, as a procurement leader, your focus is how to best use spend analytics to benefit your company, not necessarily that of the supplier.  But it doesn't hurt to factor this in once you are up and running with your data initiative especially when you are looking to deliver more than just cost savings – and buck the profession’s trend and look at ways to grow your company. 

This is where the term "innovation" often comes in. The challenge for many (traditional) procurement leaders is not embracing new ideas but how to make them a reality in their organizations where implementing change is difficult.

Here is a link to a useful guide, Supplier Performance Management: Is it Time for a New Metric?” to co-innovating with suppliers that may interest you if you want to create extended business value from your supplier.

Procurement teams that share insight with their suppliers such as business strategy, procurement goals, vendor feedback and more, perform better than organizations that have a transactional relationship with companies they merely buy from.   

We have clients that extend their spend analytics to their suppliers.  Why? Because the benefits are mutual, such as:

  • When negotiating contracts, both parties focus on the strategic goals of both companies and prevent being bogged down in the fight for small cash wins. 
  • By sharing data, both parties spend more time establishing a true partnership, delivering value at all times and less time on gathering spend data required when discussing contracts, rebates, etc.
  • The sharing of data also provides both companies with complete transparency on the health of the relationship, so any issues such as supplier performance can be addressed in near-time, as opposed to once or twice a year, which makes issues management easier.
  • A partnership of equals establishes trust, which benefits both parties because they are more likely to help each other during times of difficulty.  For example, if a supplier is financially struggling, the customer may be open to extending payment terms for a defined period of time.
  • Creating a supplier ranking or benchmark helps them know how the customer perceives them. This dashboard, provided by the customer to all suppliers, ensures supplier performance information is based on data, not just opinions.

Spend analytics, and the data that is revealed, benefits the buyer and supplier of products and services.  Procurement teams that seek to create more business value from their vendor relationships establish long-lasting trust by sharing insight.  So, the next time you look at your suppliers through a dashboard, ask yourself how well do they know you.  The answer may be a wake-up call to re-establish a stronger partnership for everyone’s benefit.