The future of product and service delivery will be focused on becoming both incredibly efficient in operations and flexible and agile to a changing customer landscape in an increasingly digital and automated world. Business models themselves will have to flex over time, adapting to the environment arising from emerging disruptive forces of competition and technology alongside perpetual political, social and economic changes too.
As your marketplace, customers and company change, inevitably your relationship with your suppliers will also have to change accordingly.
An effective supplier relationship will:
- Build an operational framework for maintaining effective working practices
- Achieve the best possible performance through ongoing improvement and active management of the relationship
- Maximising the mutual and reciprocal value of the relationship by ensuring the right people are involved in the process
- Using the right processes and technologies to deliver the right outcomes
- Manage changing expectations
- Minimise the risks of failure proactively
- Seek to demonstrate and reaffirm the value of the effective relationship on an ongoing basis
End-to-end service management
As we know, sourcing new suppliers is vastly more time intensive and not always possible so supplier cooperation models should be promoted, with suppliers urged to collaborate to provide a more streamlined end-to-end service that benefits both parties.
From a technology point of view, because of the simplicity of the multi-sourcing nature of cloud/digital, Service Integration and Management (SIAM) will become more important, and SLAs could be tied to desired outcomes rather than only performance. A major element of driving flexibility is the ability to alter/extend SLAs over the contract period.
It is important to consider a supplier’s overall performance, not simply the product service delivery. Some areas to discuss are:
- Qualified and measurable KPIs
- Worth of delivery (to your organisation) – The value delivered by the supplier, how important is it to your business
- KPIs linked to both service or product performance but also working relations, support and conduct.
- Net Promoter Score
Evaluation of the value of your relationships by considering all “elements of a value” across your supplier base will be critical to obtaining the best from your relationships. Areas such as the ones listed below could be incorporated into your contracts and business agreements.
- Improving productivity
- Net costs
- Reduction in uncertainty
- Risk management
- Ease of working relationship
- Ease of sourcing other suppliers
Your suppliers should demonstrate a strong relationship focus (rather than a transactional approach) and have a willingness to embrace integration with your goals. Some considerations would be:
- Skin in the game – To have “skin in the game” is to have incurred risk (monetary or otherwise) by being involved in achieving a goal.
- Agile and flexible contractual terms that enable change without penalty – an ideal solution for new businesses.
- Demonstrating strongly aligned business values and executing to achieve your outcome objectives
If doing a market comparison review, value-based elements like transparency, productivity and flexibility should be taken into consideration.
Comparisons within a market can be used to review elements like:
- Lean delivery – right resources aligned to right delivery and continuous improvements
- Automation – to help you achieve internal efficiencies.
- Flexibility – to your needs and market demand changes
- Transparency – openness and honesty in communications. Even (or especially) when operations are not smooth.
Suppliers Strategies and Risk Management
It is important to create detailed supplier strategies as to how you want to develop the relationship. In doing so, this practice looks beyond performance and the delivery of good sand services and takes into account all possible risks related to the supplier(s) that may cause problems. Areas that you could consider are:
- Audit and compliance
- Flexibility in governance
Supplier Selection Criteria and Deal Principles
With the trend to multi-sourcing and less reliance upon the flexibility of single supplier terms, particularly prevalent around digital and cloud services, how you go about selecting your suppliers will change.
The way you collaborate will become increasingly important to your success and we believe many RFP selection processes will adapt, at least in some ways to incorporate interactive, workshop-based Agile sourcing strategy that reflects a working relationship rather than a question-answer process.
Re-negotiate, Re-compete, and Exit
As many markets change, we’re getting used to adopting subscription models and many contracts may get shorter. This means exit planning and exit testing will become more important. Encouraging suppliers to “step up” to fulfil requirements rather than seeking new ones will become a priority, especially if you have identified a partner with whom you can effectively collaborate.