Collaborative Supplier Relationships Can Cut Procurement Costs

Author: Brady Behrman

In 2019, procurement professionals are faced with the challenge of an increasingly complex supply chain combined with pressure from their organization to cut the cost of procurement. Historically, supplier relationships were viewed as merely transactional. Suppliers were essential, but they were not partners, and the supplier relationship was inherently adversarial. Buyers wanted to pay less for more, and suppliers wanted to be paid more for less. A successful relationship balanced those incentives.

But, in recent years, buyers and suppliers have recognized that a purely transactional approach is rarely optimal for either party. Supply chain efficiency depends, in part, on the availability of information to both parties. Information exchange is best facilitated through collaborative relationships in which buyers and suppliers work together to build efficient systems. There is, of course, a human component to such relationships, but digitization through eCommerce applications, eProcurement platforms, and the integration of the two has a major role to play.

Cultivating collaborative supplier relationships is not primarily about making those relationships more friendly or ethical, but about building relationships that create value for both parties. Last year, the University of Tennessee published End-to-End Supply Chain Collaboration, a white paper discussing how businesses can improve supply chain efficiency and effectiveness. Their supply chain improvement model rests on six pillars: integration, synchronization, collaboration, digitization, waste elimination, and the use of platforms.

Businesses that achieve those aims can maximize supply chain value for both suppliers and buyers, but none of them can be realized to their full potential without collaboration. With collaboration based on common values, a commitment to efficient end-to-end processes, and reliable and predictable workflows, there is far more likelihood of realizing the true value of the supply chain than with purely transactional relationships.

In short, better supplier relationships can help procurement professionals to maximize their value to employers. In a blog post, eProcurement platform provider Jaggaer made similar points, detailing how improving supplier relationships unlocks procurement value, enabling more informed, collaborative, and faster supply decisions; the elimination of inefficiencies and excess cost; and collaborative risk management. Suppliers and buyers who collaborate are better able to find creative solutions to supply chain challenges.

It’s no surprise that an eProcurement platform recognizes the benefits of supply chain collaboration. As I mentioned earlier, digitization, integration, and the use of platforms are key to the cultivation of close collaborative relationships. On the buy-side, that means eProcurement. On the sell-side, eCommerce applications allow suppliers to provide the digital platforms buyers demand. The missing piece is often integration between buyer and seller platforms, integration that can facilitate the exchange of procurement data like purchase orders and invoices without error-prone manual labor.

Much of this can be summed up with one word: automation. Automation, built on platform integration, is an important enabler of collaborative relationships between buyers and suppliers, which, in turn, are critical to finding value in the modern supply chain.

About the Author:
Brady Behrman is the CEO and founding partner of PunchOut2Go. As an entrepreneur with experience and proven track record in building technology businesses that focus on client success innovation, Brady and his team help organizations of all sizes around the globe adapt to the ever-evolving, complex B2B Commerce & eProcurement technologies.