The Importance Of Clarity Between Procurement And Supplier

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Communication is often touted as the number one procurement soft skill. But regular communication is all but worthless unless it comes hand-in-hand with clarity.

Why is clarity so important?

It’s important to first note that clarity is not the same as transparency – although, of course, this is also vital.

Supply chain transparency typically refers to a procurement team’s visibility into their suppliers’ practices and any potential risks, such as financial difficulties or a lack of compliance. Clarity, on the other hand, is about ensuring that both parties understand what they are committing to and what is expected of them.

Striving for clarity during the negotiation and contracting processes provides several benefits including:

  • Costs – clarity helps to build trust and respect between buyer and supplier, serving to foster more meaningful relationships, which in turn provides more opportunities for long-term cost-saving.
  • Efficiency – negotiations are quicker and more straight-forward when everyone involved knows exactly where they stand. There will be less back-and-forth between the two negotiating parties and fewer mistakes that need to be resolved in the future.
  • Innovation – understanding procurement’s expectations and the organisation’s drivers and priorities helps suppliers contribute more actively to the relationship, which drives innovation.
  • Service – the goods or services purchased will be of a higher, and more consistent standard, when the supplier understands every aspect of procurement’s requirements.
  • Disputes – addressing the meaning behind every clause in every contract seems laborious, but it’s worth it. In doing so, procurement teams reduce the likelihood of supplier disputes. If there is anything a supplier is unhappy with, it can be addressed and rectified before a contract is signed.
  • Stability – A lack of supply chain stability can result in delays, mistakes, and stockouts. Missed orders mean paying for expedited shipping, which can impact hugely on an organisation’s profit margins. Don’t underestimate the importance of clearly communicating delivery timeframes or making a contingency plan for when your organisation experiences spikes or dips in customer demand.

 How to improve clarity with suppliers

 1. Call for a clarity meeting

Once the first draft of a contract has been written, consider setting up a clarity meeting. The sole purpose of this meeting is to scrutinise and explain each clause within a contract to ensure that all stakeholders fully understand their roles and responsibilities and nobody is confused by any aspects of the agreement.

This is an opportunity to delve deeper into what certain KPIs mean, what is included in a retainer fee and what happens when either party wishes to terminate the contract.

 2. Make someone in your procurement team accountable for clarity

There’s no need for the same person to be responsible for ensuring clarity in each supplier relationship but in every case, someone should be held accountable and act as an ongoing point of contact. This means checking in regularly with the supplier, answering any questions they have, and ensuring they are comfortable with how the relationship is progressing. When confusion or disputes arise, this person should calmly address and resolve any issues as well as monitoring progress and providing ongoing feedback.

3. Limit procurement jargon

For many suppliers (perhaps SMEs in particular), procurement terminology can be confusing and misleading, if not downright daunting.

In some cases, the use of technical terms is unavoidable, but in many, it only serves to alienate suppliers. Procurement professionals should aim to limit their use of abbreviations and technical procurement language outside of their own teams to ensure full engagement and understanding from their suppliers.

4. Invest in supplier management solutions 

Establishing clarity between procurement and suppliers is particularly difficult if the relationship is long-distance and face-to-face meetings are few and far between. Cloud-based and SaaS technology aids collaboration throughout the supply chain and adds clarity to the processing and management of purchase orders, RFQs, etc.

5. Formalise the process of giving feedback

Providing regular, consistent, and clear feedback provides suppliers will complete clarity on where they are succeeding and whether there are any areas for improvement. During the contract negotiation process, set out a clear plan for providing feedback, such as supplier scorecards, KPIs, and regular check-ins.

Similarly, suppliers need to understand exactly what data and information are required of them, and how this should be provided.

RCSA Industry Awards – The Outstanding Client Award 

This year, the RCSA added a new category to its Industry Awards – the Outstanding Client Award, as a way of giving a shout out to great procurement and client relationships.

The prestigious RCSA Industry Awards provide the opportunity to recognise the best of best in the recruitment, staffing and workforce solutions sector in Australia and New Zealand.

The Outstanding Client Award recognises outstanding clients that work in genuine partnerships with recruitment and staffing firms to promote high quality, sustainable and mutually beneficial, recruitment and staffing outcomes, as well as those who promote strong and effective communication.

In Australia, the winner was Lion who, according to judges, obtained amazing value from the partnership with Programmed.

“Programmed are embedded in the fabric of Lion which creates a strong and sustainable partnership and Lion could not do this on their own. The predictive modelling, forecasting, building the talent pool, and rostering are a great example of workforce planning. The communication, reporting and transparency really helps to deliver on mutual outcomes and cement the relationship.”

In New Zealand Spaceworks Design Group was the winner. Judges commented on the very strong evidence of clarity and transparency between the client and agency, as well as clear expectations, trust, clarity, transparency, and efficiency.

“The innovative Dual Branded Videos is evidence of mutual trust and respect between the parties, a key outcome being the referral of direct candidates from Spaceworks to Lynx whilst building upon the mutual respect and trust between them.

“The assignment of a dedicated consultant to Spaceworks also ensured that communications remained concise and not subject to different interpretation.

“There are several excellent outcomes for Spaceworks and Lynx based on having a formal project plan and effective communication. Business advocacy was a great outcome for Lynx and in an environment where trust is paramount there is strong evidence of a mutual arrangement and respect which adds an important dimension to aid consistency.”

Matt Perfect, Principal at Impact Spender, said “I applaud the RCSA on this initiative to recognise good procurement practice among their members’ clients and encourage the achievement of ‘customer of choice’ status.”

The award winners were announced virtually on 29 June 2020, and more information can be found here.

About Author

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PASA (Procurement and Supply Australasia) is the leading provider of information, education and networking opportunities to procurement professionals throughout Australia and New Zealand. PASA supports the largest community of engaged procurement stakeholders in the region, through its renowned series of events, publications, training, awards and PASA CONNECT membership network. PASA is a trading name of BTTB Marketing Pty Ltd. BTTB Marketing has operated under the BTTB, CIPSA Conferences and PASA names for over twenty years. https://procurementandsupply.com/

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