Is your procurement function on the cutting edge of procurement trends? If so, you're likely already differentiating your company from the competition through supplier enablement. If not, we’ll help you get there.
This transformative strategy – part of a broader shift toward humanistic business practices – can generate remarkable value for your organization. Plus, it can play a key role in laying the foundation for long-term financial growth.
By embracing this fundamental shift, you'll empower your business to seize opportunities that competitors might overlook. Regardless of where you are on the path to procurement modernization, we hope you’ll find valuable insights and actionable takeaways below.
What is Supplier Enablement?
At a high level, supplier enablement aims to empower your suppliers to boost their performance. It involves streamlining processes, enhancing communication, and fostering robust, mutually beneficial relationships.
Enabling suppliers can result in a more efficient, effective, and collaborative procurement process. But, to truly grasp the concept, it’s important to view suppliers not as another cog in the machine, but as your strategic partners.
By enabling your suppliers, you're not just enhancing their performance; you're bolstering your own. After all, they play a pivotal role in your business's success; mediocre suppliers lead to mediocre procurement efforts.
The Role of Technology in Supplier Enablement
In the digital age, technology is a driving force behind supplier enablement. From cloud-based procurement platforms to AI and machine learning, technology is transforming the way businesses interact with their suppliers.
Cloud-based Procurement Management Solutions
These platforms provide a centralized location where businesses and suppliers can collaborate, share information, and manage transactions. They streamline procurement processes, reduce errors, and save time. But more than that, they provide transparency, giving businesses real-time visibility into their supply chains.
Artificial Intelligence and Machine Learning
Emerging technologies, such as AI and machine learning, are automating even more routine tasks, freeing up procurement teams to focus on strategic activities. They're also providing insights into supplier performance, helping businesses identify opportunities for improvement.
These technologies are not just enhancing supplier enablement; they're revolutionizing it. The promise of gigantic leaps forward facilitated by AI in procurement is dramatic to say the least.
For example, in 2018, Boston Consulting Group created an AI-based procurement “Negotiation Coach.” A large manufacturer tested the prototype and achieved a 5% decline in total spending and a 30% reduction in the time spent in negotiations.
That’s just one example and AI has evolved at light speed since then; there’s no telling what the future holds.
The Impact on Business Performance
The benefits of supplier enablement extend far beyond the procurement department. By fostering stronger, more collaborative relationships with suppliers, businesses can unlock a host of benefits that drive value creation as well as cost reduction.
Empowered Suppliers Facilitate Cost Savings
One of the most tangible and expected benefits of supplier enablement is cost savings. By empowering suppliers with the tools they need to support you better, you’re investing in your future success as well as theirs. Below, I’ve outlined one of the many ways that supplier enablement reduces procurement costs.
Streamlined Supplier Communication
This immediate communication eliminates the need for lengthy email chains and time-consuming phone calls, reducing the administrative burden on the procurement team.
Furthermore, it allows for quicker resolution of any potential supply chain disruptions, minimizing downtime and associated costs.
The added transparency also fosters trust and supplier collaboration, which should improve negotiation outcomes and result in more favorable contract terms.
Enabled Suppliers Also Drive Value Creation
Supplier enablement goes beyond cost savings by driving value creation in procurement. It fosters strategic partnerships with suppliers, leading to improved quality, innovation, and efficiency. Enhanced supplier relationships can result in better product quality and innovative solutions, as suppliers are more invested in mutual success.
Furthermore, streamlined processes and improved communication can increase operational efficiency, reducing lead times and improving responsiveness to market changes. Thus, supplier enablement transforms procurement from a cost center to a value generator, contributing to competitive advantage and business growth.
Innovation and Quality Enhancement
Enabled suppliers with freed-up time resulting from efficiency gains are far more likely to introduce groundbreaking innovations in their products or processes.
By fostering a collaborative environment, you encourage suppliers to share their expertise and creative ideas. Consequently, this creates a fertile landscape for novel solutions that can give your company a competitive edge.
Moreover, when suppliers are fully integrated and understand a company's quality standards and expectations, they are more likely to deliver high-quality products
If you create a dynamic in which suppliers deliver disruptive product enhancements, improve product quality, and create a competitive advantage for your company, you’re winning the procurement game. The value created as a result of these factors is, in most cases, undeniable.
Improving Quality with Supplier Enablement
Supplier enablement can also lead to an improvement in the quality of goods and services. When suppliers are empowered and have a clear understanding of your business requirements, they're more likely to meet, if not exceed, your expectations.
To improve quality, communication is key. Make sure your suppliers understand your quality standards and expectations. Regular feedback can also help suppliers improve their performance. Consider implementing a supplier performance management system to track and evaluate supplier performance regularly.
Driving Innovation through Supplier Enablement
Finally, supplier enablement can be a powerful driver of innovation. By fostering a collaborative environment, businesses can tap into the expertise and creativity of their suppliers, leading to new ideas and solutions.
To drive innovation, consider involving suppliers in the early stages of product development. This can provide valuable insights and lead to innovative solutions. Also, create a culture that encourages and rewards innovation. This could involve setting up innovation challenges or offering incentives for innovative ideas.
Supplier Relationships and Collaboration
As companies strive to improve their supply chain resilience and sustainability, they are exploring various strategies to strengthen their relationships with suppliers. Here are some of the key trends and practices:
Supplier Diversity Programs
Major companies like Google are increasing their purchases from diverse suppliers. Businesses that are at least 51% owned and operated by individuals or groups of individuals who are part of a traditionally underrepresented or under-served group.
To overcome the challenge of finding diverse suppliers with sufficient scale and capabilities, companies are pairing diverse suppliers with established suppliers in a formal mentoring relationship. This approach is designed to provide the diverse supplier with measurable opportunities to grow capacity, gain capabilities, and take on roles in senior management.
Investing in Suppliers
Companies are investing in their suppliers to secure deliveries and meet green targets. These priorities are a result of disruptions in global supply chains and growing consumer pressure on brands to meet established environmental standards.
Regardless, supplier enablement is a win-win strategy that benefits all stakeholders. There’s nothing to lose if you approach it strategically and thoughtfully.
More companies are offering supply-chain financing to their vendors, a tool that allows them to pay their bills later while also providing suppliers with faster access to cash. This can boost the cash position of both buyers and sellers and help manage increasingly complex supply chain issues.
Some auto companies are moving to automate aspects of their parts purchasing processes to allow their purchasing teams more time to manage complex supply chain issues. This involves setting up approvals and target settings in advance and then allowing the parts to be bought by a computer.
While this approach can streamline the purchasing process, companies must maintain open lines of communication with their suppliers to prevent misunderstandings.
Digital Transformation of Supplier Networks
Companies are also embarking on digital transformations of their supplier networks. This involves implementing digital tools to manage supplier relationships and transactions, reducing paperwork and manual processes.
The goal is to have all supplier-related information in one portal, making it easier for companies to manage their supplier relationships and for suppliers to interact with the company (more on that below).
Supplier Enablement Strategies
Supplier enablement is a critical aspect of any business, and its successful implementation can lead to significant improvements in efficiency and profitability. Here are some strategies for implementing supplier enablement:
Supplier Collaboration and Innovation
A key part of supplier enablement is fostering collaboration and innovation with your suppliers. This involves creating an optimal way to communicate with your suppliers based on their needs and identifying the best possible solution, which varies from supplier to supplier. It's essential to put the devised strategy into action to obtain desired outcomes.
Addressing Supply Chain Emissions
Supply chain emissions represent a significant portion of a company's emissions. Therefore, it's crucial to engage suppliers in wide-scale decarbonization efforts. This can enhance efficiency, transparency, and resiliency across the value chain, and build credibility among key stakeholder groups.
Supplier Relationship Management (SRM)
Supplier relationship management is a systemic approach to managing work with suppliers who provide materials, goods, and/or services to manufacturers.
It focuses on establishing strategic supplier collaborations benefiting companies and improving cost savings. An SRM program generally consists of supplier segmentation, supplier strategy development, and supplier strategy execution.
Improving the Supplier Selection Process
Understanding your suppliers is essential for selecting the right partners to work with. This involves:
- Learning about their capabilities and value-add opportunities
- Understanding their quality systems and how they categorize their products
- Knowing where you fit into their business hierarchy
- Asking about their operational capacity to ensure they can meet your needs
The Wrap-Up: A Glimpse into the Future
As we navigate the future of procurement, supplier enablement will undoubtedly play a pivotal role. By fostering stronger, more collaborative relationships with suppliers, businesses can unlock a host of benefits that improve overall business performance. From cost savings and improved quality to driving innovation and enhancing efficiency, the advantages of supplier enablement are extensive.
However, implementing supplier enablement isn't a one-off project. It's a continuous journey of improvement and collaboration. It requires a shift in perspective, viewing suppliers not just as vendors, but as strategic partners. It also calls for the adoption of emerging and best-in-class technologies, from AI to cloud-based procurement management platforms.
As we move forward, businesses that embrace supplier enablement will be better positioned to navigate the dynamic landscape ahead. They will be able to adapt to changes more swiftly, make more informed decisions, and ultimately, drive business success.
Remember, the future of procurement is not about negotiating lower prices and better contract terms. Rather, it’s about shifting your mindset toward value creation through collaborating and strategic sourcing. As you stride over the horizon into the future, you’ll find supplier enablement, happy, healthy, and relaxing in the shade.