The Determine
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Empowering Decisions
March 21, 2019

Suppliers with influence put money in the bank.

Suppliers with influence put money in the bank.

Part 2 of 2: Trading your “alpha” tendencies for a more shared approach to success.

In this two-part series, Determine Chief Product Officer Julien Nadaud tells how one word — influence — can empower procurement strategies to literally put top value into the outcomes all parties, including suppliers, seek. In Part 1 he explored expanding supplier visibility into overall spend; in Part 2, he looks at two case studies showing why influence, value and collaboration are mutually inclusive.

The Procurement Maturity Curve: A Four Stage Hierarchy of Value

Case Study 2 — shows that supplier influence and value go hand-in-hand.

Generally speaking, supplier influence has grown with the realization that supply chains are critical to competitive advantage. Smart suppliers capitalize on this realization and expect to wield as much influence as their potential value can allow and their ability to manage their own supply chain can tolerate.

Suppliers that recognize the connection between value and influence will work to build both in parallel and will be driven to grow their market share through innovation, not straight leverage. These suppliers present key collaboration opportunities – and foster conditions where both procurement and suppliers can grow their influence at the same time.

RCI Banque was willing to put their words into action when it came to empowering supplier influence. When they automated their purchasing activity via the procure-to-pay platform (P2P), they reduced the time spent paying supplier invoices and sped up supplier compensation. By paying their suppliers sooner, and making the whole process more transparent and predictable, they vastly improved their supplier relationships. Although giving up cash sooner might have seemed like it reduced RCI Banque’s influence over their suppliers, it actually created an opportunity for them to become a customer of choice, receiving greater value-oriented investment from critical supply partners simply by leveraging automation to increase efficiency. People who hold the money may hold the power, but they are unlikely to have collaborative relationships with any of their suppliers – at least not for long.

Determine Procurement ROI Infographic

Case Study 3 — demonstrates why you cannot automate collaboration.

Technology can be your procurement team’s best friend, but only if you use it to convert strategy into action – or collaboration into value – by freeing up the right resources to engage with the right suppliers on carefully selected opportunities.

Most supplier relationships involve flexible, give-and-take of influence over the terms of the contract. As a result, procurement needs to increase their engagement to realize the total value of each agreement. This engagement must be direct, driven by an understanding of big picture enterprise objectives and be mutually beneficial.

The role of technology in such cases is twofold:

  1. Procurement must carefully decide which supplier relationships merit a collaborative level of attention (based on market intelligence, spend data, and related risk; and
  2. The vast majority of supplier relationships will need to be automated if procurement is to have the time to go strategically hands-on without increasing headcount.

Value of influence is limited if it is not lasting! That is the lesson your procurement team will need to bring into supplier relationship management strategies. If your influence is sustainable, it will flex enough to survive the ups and downs that are inevitable over the life of a contract.

Your willingness to be “down” in one situation creates the potential to be back “up” when circumstances change. Fighting for dominant influence at all times shortens its tenure and does as much damage as good to procurement’s results and relationships.

Maintaining a big picture perspective increases the number of teams working in parallel to create unified value – procurement, stakeholders, and suppliers – absolutely expanding the value, not dividing it.

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Be sure to check out Part 1 of this series if you haven’t already. If you want to learn how technology can help you be more collaborative with suppliers and other third parties, schedule a personalized demonstration of our modular, integrated Supplier Management Solution on the Determine Cloud Platform, or contact us with your questions anytime.

This story first appeared on the IACCM Contracting Excellence blog.

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