Three Supplier Conversations You Need to Have Now

Published August 30, 2021

Category: Management | Sourcing

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Written by: Edmund Zagorin
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Edmund Zagorin

Edmund Zagorin is a procurement thought leader obsessed with the power of recommendations to fix broken processes and supply chains. Prior to founding Arkestro, Edmund worked as a consultant focused on data-driven supplier negotiations for large healthcare providers, contract manufacturers and multi-campus retail brands. Edmund is widely recognized as an expert on the emerging role of machine learning and artificial intelligence in procurement and has presented executive briefings on this topic to leadership teams.

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Suppliers are mission-critical partners for business success. Unfortunately, too often, an “arm’s length” relationship creates problems that are revealed only after it’s too late.

When suppliers feel conversations only occur after poor performances, the opportunity to have a productive, collaborative conversation may already be over.

That’s why regular conversations with your suppliers are critical. It’s important to ask them questions about how changing business expectations are impacting their operations. For example, you may wish to ask:

  • “What are your goals?”
  • “Where are your gaps?”
  • “How can we (the buyer) help you proactively solve problems?”

1. Talent

According to Deloitte, there are currently over 500,000 vacant manufacturing jobs. They estimate that of the 4.6 million jobs created in manufacturing between 2015 and 2025, 2.4 million will go unfilled due to skills gaps.

According to a Society of Human Resource Management report, nearly 27% of all manufacturing workers are set to retire over the next decade, taking their technical skills and specialized industry knowledge with them.

No supplier is immune to the national talent shortage, regardless of their specific sector. For some product categories, the ability to recruit talent may significantly affect their future performance.

Because your supplier’s future performance will impact your company’s operations, difficult questions need to be posed:

  • “How are you thinking about your talent strategy over the next five years?”
  • “How does your talent strategy align with your digital strategy?”
  • “Do you currently have any job openings?”
  • “If our HR team discovers qualified candidates that could be a fit for your business, would you like us to forward them your way?”

Asking relevant questions builds trust and promotes an open and collaborative relationship. It also gives you the opportunity to assess your supplier’s recruiting preparedness. Suppliers with excellent recruiting strategies will be preferred business partners.

2. Cybersecurity

Sean Peasley, Deloitte’s partner on risk, warned, “adversaries are…agile and will use different methods to try and gain access, so companies must consider cyber risk early in every procurement process to be sure the proper protections are in place.”

Every supplier has a threat profile. Your suppliers’ threat profiles will inevitably add to your business’ cybersecurity risk. So, there’s good reason to have a discussion around prevention and recovery. Some sample discussion questions are:

  • “If there’s a hack and you cannot access any of your digital systems, what is your recovery plan?”
  • “How can we help?”

You may discover you and your supplier share critical data, perhaps even financial account-level data, that you’ll want to get locked down.

While the threat to connected devices and firewalls is certainly worrisome, the greater risk is from scammers who might falsify purchase orders, phish for supplier account information from buyers, and falsify RFQs and RFPs to infect suppliers’ computers.

If your supplier is worried that they are vulnerable, or simply lack the resources to accurately assess their vulnerabilities, the following suggestions can reduce both their threat profile and yours.

Develop a password policy. A supplier password policy that asks people to regularly change and strengthen their passwords is an important first step toward better cybersecurity hygiene.

Create a back-up and up-time plan. While hacks that steal money are dangerous, the ones that destroy information and render machines unusable are disastrous. If your supplier’s data is not properly backed up and there isn’t a plan in place for restoring their systems, you have an opportunity to build trust by helping them develop back-up and up-time plans.

Identify a non-email-based channel. A potential hacker can get into an employee’s inbox and gain full access to emails that contain valuable financial and account information. However, there is protection. Information can be sent through safer digital channels, making it more difficult for the hacker to access and safer for the supplier and your company.

3. Digital Collaboration Technology

The recent flurry of tariffs has added urgency for manufacturers, distributors and channel partners to provide additional layers of visibility into their orders.

If suppliers and buyers can collaborate on projects in real time, the opportunities for visibility are significant.

Start Having Smart Conversations

Speaking with your suppliers solely when there’s a crisis or you need something from them won’t build strong, enduring relationships. Be a savvy partner and drive deeper collaboration by keeping an open dialogue and not being afraid to ask vital questions.

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