Releasing the Potential from Strategic Supplier Relationships

Leading companies are exploring new sources of value creation by fundamentally re-examining their supplier relationships.

Accenture identifies the six actions in which procurement leaders across a range of industries excel, and proposes a Supplier Relationship Framework that will help organizations progress in their journeys toward high performance through excellence in supplier relationship management.

The volatility of recent years has eroded or exhausted many of the typical sources of value for procurement organizations. The financial crisis created a strong cost reduction imperative, driving supplier margins to an all time low in many cases. Many procurement leaders now have mature strategic sourcing capabilities with a significant proportion of spend sourced and consolidated or outsourced. The result is that year-on-year savings, the traditional barometer of procurement value, are increasingly hard to achieve.

Some procurement leaders, however, are forging a new value creation path. They are navigating the perfect storm of competitive pressure, volatility and maturing capability by fundamentally re-examining their supplier relationships. Leaders are proactively engaging with their most important suppliers to tap into their best ideas; identify growth opportunities; address environmental, supply and brand reputation risks; and strip out unnecessary value chain costs. In doing so, they are making an important contribution to the competitive advantage of their businesses and redefining the role of procurement.

Accenture undertook in-depth discussions with procurement leaders from a range of industries. Combined with our ongoing research into high performance in procurement and supplier relationship management experience, we have found that there are a number of similarities between the approaches taken by leaders to enhance value from supplier relationships.

Our many sources of information and insight suggest that leaders in supplier relationship management are highly effective at six actions:

• Segment suppliers based on market characteristics and internal drivers to determine the approach to supplier relationship management, partnering selectively to drive value.

• Measure supplier performance at the appropriate level of the organization and create incentives that align with these measures.

• Establish a value and innovation agenda and proactively work with suppliers to deliver it, developing their capability where needed.

• Work across the organization and effectively govern supplier relationships.

• Foster a culture of collaboration by investing in training and cultivating the right behaviors.

• Selectively build and evolve capabilities as traction is gained.

Although each journey is unique, in Accenture’s experience the following approach can be used to guide the journey toward high performance through supplier relationship management:

• Establish a common framework. People may have differing views and definitions; investing time upfront for alignment can pay dividends later. Accenture’s Supplier Relationship Management Framework provides a holistic approach and set of tools to help our clients unlock value from their key supplier relationships.

• Define the roadmap. It can take time to establish a robust supplier relationship management capability. It is therefore important that people understand the overall approach and the road map to be followed if they are to commit to and support the initiative.

• Pilot. Rapidly generating value with a few suppliers will generate the credibility and good news needed for broad commitment. Pilot wins generate advocates and success stories that can be leveraged as the capabilities are brought to other areas over time.

• Deploy more broadly in phases. Once an initial group of suppliers has been engaged, more suppliers can be engaged as additional staff is trained and knowledge is shared. At this point, the approach may need to be adapted to new tiers of suppliers.

Andrew Brimacombe is a senior manager in Accenture Supply Chain Management. He has more than 10 years of consulting experience focused on sourcing and supplier relationships, supply chain operating model transformation, and capability improvement. He has worked across a number of industries including oil and gas, mining, steel, life sciences, telecoms, financial services and public sector.

Byron C. Cotter is a manager in Accenture Supply Chain Management. He has more than eight years’ consulting experience focused on supplier relationship management, procurement capability development and procurement technology deployment. He has worked across a number of industries including oil and gas, mining, construction and infrastructure, and financial services. He is based in London.

Kris Timmermans is the managing director of Accenture's Global Sourcing & Procurement group. In the last 17 years with Accenture, Timmermans has led a large number of global procurement and supply chain transformations for companies in different industries. Some of his clients inlcude Volvo, Caterpillar, ArcelorMittal, FedEx, Asahi Glass, SigmaKalon, AB Inbev, FCI, Sanofi-Aventis, Coca Cola, TOTAL and Johnson & Johnson. He holds a master's degree in mechanical engineering from the Katholieke Universiteit Leuven and the Massachusetts Institute of Technology, Boston.