The Art and Science of Supplier Relationship Management (Part 1)

Spend Matters welcomes a guest post from Shin-Wen Kuo, Director, Customer Experience and Governance at Hewlett-Packard.

In today's increasingly complex global business environment, every organization is challenged to continuously innovate to deliver more value with fixed resources. In managing the supply base for the enterprise, the procurement team is uniquely positioned to do so, with the right investments. Enter Supplier Relationship Management.

Supplier Relationship Management is a discipline of working collaboratively with those suppliers that are vital to the success of an organization to maximize the value of those relationships. The focus is on developing two-way, mutually beneficial relationships with the most strategic supply partners in order to deliver greater levels of innovation and competitive advantage than could be achieved by operating independently.

How to foster supplier innovation? It's part art, part science
The science:

  • Establish a way to figure out who the passionate innovators are through a combination of objective and subjective evaluation criteria.
  • Set your organization's goals in such a way that they align with going after innovation (i.e., what gets credit gets done).
  • Place small bets at first to generate wins that can be used to create momentum for bigger bets. Invest in building organizational capabilities so that people know how as much as know what.

The art:

  • Define "innovation" in a way that is compelling for your organization while also being clearly understood by the constituencies involved. People hear "innovation" and assume it has to be something revolutionary that no one has ever done before. But in reality, some of the most valuable innovation is evolutionary, incremental advances achieved through deliberately applying information, imagination, and initiative to deliver greater or different value from resources.
  • Get the right team of people who have innovation in their DNA and can create champions and drive change.
  • Recognize successes in very visible ways. Often corporate cultures can be risk averse and focus mostly on concrete quarterly results versus longer-term investments that may be harder to measure before they are known. Create visibility of the successes that come from investing for the longer-term.

Note that which component you choose to emphasize, and when, is very dependent upon your organization's culture and change readiness. Also, at the risk of stating the obvious, suppliers have to be doing an excellent job on their basic business -- it's usually not worth investing in further innovation with a supplier who has performance issues in their core portfolio.

Stay tuned for tomorrow's continuation of this post, where Shin-Wen discusses HP's procurement journey.

-- Shin-Wen Kuo, Director, Customer Experience and Governance, Hewlett-Packard

Footnote: Shin-Wen Kuo led the development and implementation of HP's Strategic Supplier Development capability for Global Procurement. She has recently taken a new role focused on enhancing the customer experience for HP's 300K+ internal customers.

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