By Stephen Bentley, Chairman, Granby Marketing Services
Business is all about relationships. One of the biggest obstacles to achieving this is procurement – not only does it focus solely on cost reduction, but it breaks down these relationships to the point where they become purely supplier or procurement orientated.
When this happens, suppliers naturally become so far removed from those who they have the closest relation with - who understand the wider relationship and the added value that can be provided - that the relationship becomes incredibly fragmented. As a result the ability to demonstrate added value diminishes and decisions become based on finances, rather than what makes the most sense for the businesses growth and sustained development.
Babies and bathwater come to mind when I think of supplier relationships that cease through a procurement exercise. Admittedly, if you are supplying a commodity product or service then it is difficult to demonstrate the added value or special knowledge that will equip you with a strong USP. But in the service provision world it is very different.
Without doubt every supplier should be able to demonstrate a 'value for money' ROI for the client, whether it is in the public or private sector. They should go out of their way to shout this from the rooftop, not just at the closing stages of a contract but all the way through it, with regular status meetings that consistently re-affirm the values and contribution they have provided to their clients brand (assuming everyone accepts that large or small, they have a brand).
It is commonly assumed that procurement professionals always have a mandate to demonstrate savings. That said, sometimes it is not possible without punishing the service provider to such an extent that future investment is restricted and therefore likely to end the relationship.
The key to working with the client and their procurement team is transparency of information and plenty of it. When a supplier assumes that they have had the contract for a few years they often get complacent. They think that they don’t have to make a concerted effort to put forward a decent presentation of their case. As a result, they are risking it to the unknown, that someone on the selection panel will understand their value and that they may have a higher weighting to the selection voting than their regular contact.
Occasionally I have won business on this basis where I knew that the client preferred the outgoing supplier but the rules of procurement meant that they had to change.
Change is not always a good thing either. Clients have to understand that some suppliers who end up developing specialist skills have done so through the delivery of their contract. Asking a new supplier to have the knowledge base and bankable years of experience may mean that procurement has done a job in reducing costs but ended up with a detrimental service that could have a higher cost of reputational damage than any costs saved. This is probably the hardest position to reconcile from both client and supplier. To make a change the client should have comparative case studies, a clear testimony and the financial robustness to gain effective due diligence.
As service providers, we look to harmonise with our client’s plans and ambitions. It is important to understand where you fit in their cycle and them with yours. It should come as no shock or surprise that some expansion or contraction of capacity is required, both need managing with the same standard expected of you.
So is procurement and obstacle to long-term relationships? Yes. But that’s only if you don’t use the process to demonstrate clearly your proposition and value. It’s not a guarantee by any means. There will be cases where this doesn’t work, but that is the inevitability of business. However, if you remain transparent and avoid getting too bogged down with the notion that the process is simply a cost cutting exercise and focus on the service, the team and a cohesive, collaborative approach to delivery, the strength of your relationships will be far easier to maintain.