2 min read

How to Improve Supplier Performance in a Supplier’s World

Suppliers are becoming increasingly important and powerful—it can feel like a supplier’s world. CEO of Fine Tune, Rich Ham, reiterated the importance of this awareness when he declared: “It’s time to sound the alarm.”

So, what can procurement practitioners do with this supplier power struggle? How can procurement practitioners improve supplier performance in a suppliers’ world? We must learn how to play ball on their turf. Today we offer a plan that allows you to win, even when operating outside your comfort zone (facing supplier hostility) while living in a supplier’s world.

2022 – The Year Suppliers Pushed Back

In 2022, what was once a buyer’s world quickly became supplier-centric. Gone are the days when suppliers jumped at the chance to serve every buyer who puts in an RFX. Instead, they have become selective in who they will work with and even hostile, particularly to organizations that they consider pushy, unorganized, or rude. You could say that suppliers in 2022 have decided that they’ve had enough and decided to stop allowing themselves to be pushed around.

Procurement is always asked to do more with less, and the expression “s*** rolls downhill” comes to mind, as those impossible requests from the C-Suite are getting pushed onto suppliers. The difference between now and previous years is that suppliers no longer care and are no longer vying for procurement’s business.

They have reached their limit. Also, they’re sensing their newfound power, as the supply chain has become stretched and unreliable, so suppliers now have the upper hand. And they’re pushing back.

How to Improve Supplier Performance – Important Tips

So, what can we do? Here are a few valuable tips for improving supplier performance.

1. Make It Easier on Suppliers

Rule number one for improving supplier performance: Don’t make them angry. And don’t make their lives and jobs more difficult than necessary. Why not make it easier on them—starting with surveys.

Surveys are constantly asking for the same information, and that’s just the beginning of why everyone tires of them. Suppliers receive surveys too often.

Supplier portals can also be a terrible experience, especially if your company’s information collection process is a huge time suck. A good rule of thumb for deciding where you fall on the scale is to ask yourself if it’s longer than you would want to spend. If so, it’s also longer than they want to spend to potentially win a contract with you.

If you must send a survey (or, even worse, a spreadsheet), make it as streamlined and straightforward as possible to fill out. And if there is any question, why not try your supplier portal out yourself to ensure it works and is easy to navigate.

2. Be Reasonable in Negotiations

Inflation has hit everyone. Calculate how much inflation you expect in areas impacted by shortages.

I’m not saying roll over and take whatever suppliers want to give you. But if you’re too harsh right now in driving a hard line, suppliers will ghost you and move on to someone else that will negotiate or agree to their present terms. Avoid this by getting creative and finding other areas in your contract to apply leverage and different contract terms. You can hedge your organization against inflation by dividing and conquering, even if it’s a pain.

One great question to ask yourself during all this is: “Does my function have the bandwidth to onboard a new supplier?” If the answer is no, you better come to that negotiating table prepared to make a few allowances.

3. Focus on Supplier Relationship Management

Have you ever heard the saying, “It’s not what you know, it’s who you know?” Well, it’s true. Relationships are important. We’ve discussed the importance of—and how to improve—supplier relationship management. It’s a crucial cornerstone for procurement success.

Bottom line: By integrating the optimal technology, processes, resources, and tools needed to keep your organization in step with your suppliers, you can create stronger, more loyal, and longer-lasting relationships.

Want to learn more? Join the Foundry today.

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