SIG Summit dispatch: The importance of the customer-supplier relationship and the COVID-19 crisis

As part of this week’s digital SIG Procurement Technology Summit, I attended Breakout Session No. 9: “Becoming a Customer of Choice or How to Avoid Hearing ‘You’re Fired!’ ”

In the online panel discussion moderated by Mike Morsch, Vice President of Procurement & Supply Chain at CDK Global, representatives from both the customer and supplier worlds discuss what customers should be doing when working in today’s COVID-19 environment — and what they are doing to support and encourage suppliers, especially startups with limited time and resources.

So, how do you “bid” to become a customer of choice and keep the attention of an in-demand supplier? Let’s review.

Amanda Prochaska of HPP Inc.

According to Amanda Prochaska, President of High Performance Procurement, a customer of choice can be a key focus for suppliers. When suppliers hear from their customers in times of crisis such as the COVID-19 pandemic, suppliers are apt to be more loyal to those customers. Personal contact from customers who are seeking to learn how you are doing and to express empathy really builds that loyalty.

When the time comes, that supplier will likely be more loyal to you as a customer and put better resources behind your account when the opportunity arises. If you as a customer take a proactive approach, you’ll be able to form those lasting bonds with suppliers. Reaching out to your suppliers to ask how they are positioning themselves in the marketplace to see how you can jointly solve and build an agile, trusting relationship is a way to get a win for both companies.

David Little of CDK Global

The question of cost came up — as in: Does it cost you more to become a customer of choice? According to David Little, Senior Director of Global Strategic Sourcing and Vendor Management for CDK Global: It does, because you are doing more.

Whether it be not challenging the supplier as much around pricing or being more reluctant to refuse things that cost you more as an organization, becoming a customer of choice can realistically cost you more. So how do you make that business case in your organization? Communication. You may need to approach senior management and urge them to accept a price increase or ask for something outside of the norm, but if you want to build a fact-based case for that supplier and become a customer of choice, the communication will be key.

Sarah Scudder of Real Sourcing Network (RSN)

When it comes to becoming a customer of choice for young suppliers, Sarah Scudder, President of Real Sourcing Network (RSN), notes the benefits of putting a program in place for them. While it may not be an easy task to implement such a program, doing so is definitely worth the time and energy. Three benefits include sustainability, a unique solution perspective and developing a reputation for supporting young suppliers.

From a solution perspective, this can allow you to work with the supplier to build very custom, unique solutions by collaborating more openly and really partnering with the suppliers. When it comes to a reputation for supporting young suppliers, this will put you ahead of the game as you become the first customer the supplier asks to test and pilot new innovations — which will put you ahead of your competition. In all, there’s been a shift in the market where young suppliers are able to select the customers with whom they want to work, Scudder said.

Canda Rozier of Collabra Consulting

So if you’ve put a program into place for young suppliers, should you also give preference to local or young suppliers, especially in times of crisis like during the COVID-19 pandemic? For Canda Rozier, Owner and President of Collabra Consulting, who was most recently SVP Global Procurement & Real Estate at NTT Security, it depends. While there are cases where you as a customer of choice absolutely want to support the startup, you need to go back to the requirements and what you are trying to solve for. While some younger or local suppliers may not meet the requirements you have, many are more agile and willing to pivot. They may be a little more creative and willing to sit down with you to look for collaborative solutions and partner at a grassroots level. At the same time, choosing the right supplier is less about whether or not the organization is a young or small supplier and more of what they are doing for you and what the nature of the relationship is.

Further, when it comes to considering vendors that are younger or local during times of crisis, should you soften your approach when it comes to vendor risk management? According to Canda, the initial reaction is no — there are very few cases where you should decide to cast aside governance and risk assessment and management. However, it is incumbent on companies and customers alike to be agile and flexible, focusing on what is critical to business with governance.

Panel discussion

With that being said, how do you as a customer bring suppliers along during a change in strategies or during a crisis like COVID-19?

Echoing David’s earlier remarks on the additional cost of becoming a customer of choice, Amanda emphasizes communication.

“How would you treat your employees?” she asks.

You would keep them abreast, be open and honest, have empathy and work to figure out solutions together. As such, you should look at supplier relationships in the same way.

That being said, will suppliers really not sell to you if you are less than a customer of choice?

While there was certainly a time where suppliers would always sell to you, David notes that big realities move suppliers to allocate resources to only their best customers. If you as a customer can empathetically and tactfully proceed together with the supplier to make the best possible scenario, you may move up from being a “B” customer to that “A” customer.

In all, whether or not you are ready to focus on becoming a customer of choice in this marketplace, the way that suppliers view customers is changing.

To learn more and attend other SIG Procurement Technology Summit sessions, register now. The Summit continues today and Friday, and check out the OnDemand options to see previous keynote speakers and breakout sessions.