Many buyers, in my experience, take it for granted that their suppliers will happily sign up to new technology and process initiatives, whether that is a new P2P system, auctions, a risk management approach, or something else. But the supplier can say no, or participate in a manner that is not genuinely helpful. So it is worth remembering that suppliers do have a choice, and indeed it is likely that being a “customer of choice” will be an increasingly important objective for many organisations and procurement functions.
How should buyers therefore look to sell the benefits to their supply base of embracing process or technology change? (And these are, of course, also valid points that technology providers should remember, even if they’re primarily making their sale to the buyers, not the suppliers.)
What do suppliers look for and think about when the buyer introduces a new requirement, and what benefits might they perceive?
Clearly, the supplier will be positive if they see this as a real opportunity to increase their business with the buyer. Often the buyer positions it more as an avoided negative – “if you don’t agree to use our e-Sourcing platform, you won’t be able to bid for our work”. But turning that around into a positive is a more motivating way perhaps of presenting this. “Using our e-Sourcing system will give you access to bid for more of our work”.
A slight variation of this is the opportunity to win more business with the wider customer organisation – but maybe not the current individual buyer / unit / cost centre. So systemising supplier information, for example, may lead to the whole buying organisation being aware of a good supplier that is currently only serving one part of the organisation. That can be a major positive for the supplier.
On other occasions, it may be that the technology gives the supplier access to totally new business with totally new buyers. Various networks and platforms make that offer. “Sign up to our platform and we’ll give you access to customers you’ve never even heard of” is essentially the pitch there. In a somewhat different manner, pre-qualification platforms can provide suppliers access to buyers in a particular industry that they may not currently count as customers. So a single customer can present that as an opportunity to the supplier, even if the realisation of that opportunity is going to come from other buyers.
A further benefit for the supplier can arise from their own efficiency savings. An effective supplier network, allied with e-Invoicing processes, can for instance reduce the cost to the supplier of the whole end-to-end transactional purchase-to-pay process, from creating purchase orders, sending them (physically or electronically) to the right person, checking that they’ve arrived, invoicing, chasing payment, funding the late payment, and so on.
The subject of supplier payment for network activities is a contentious one, but whether and how the supplier pays, selling the benefits to the supply side is a sensible move for buyers to take. Both in terms of relationships, and minimising any future price increases (as suppliers look to compensate for their higher costs), it is much better for the buyer to present the positives to the supplier rather than simply issuing an ultimatum – “join the network or else!”
A benefit to suppliers can also arise through the opportunity to develop a relationship or an improved relationship with the buyer. This factor is being emphasised by both network providers and, increasingly, “add-on” options, which take social media-like model to buyer / seller interaction. That certainly has the potential to enable closer relationships, and suppliers (and buyers) may perceive a value to that, through less friction in the working relationship and perhaps the chance of building further business volume and value.
Those are perhaps the main factors to consider. But our general point is that ultimately, the supplier will make their own assessment of the benefit – or otherwise – they gain from their involvement in the new technology or process. If the buyer is powerful and the supplier needs to preserve the business, they may continue to participate even if they don’t see the change as a step forward, If the result of a process change or new technology is simply additional cost being loaded onto the supplier, they will in most cases find ways of recovering margin elsewhere.
So clearly, if the buyer can demonstrate that the supplier will actually gain from their involvement, there is more chance of a co-operative approach, better value from the supplier, a harmonious relationship, and a happy supply base.