Is your business driving your supplier engagements, or are your suppliers?

A businesses relationship with it suppliers can take various forms. Those that choose to build a partnership with their suppliers realise significant benefits and opportunities because of it. Whatever your businesses relationship with its suppliers, it is paramount to ensure that your business is driving the engagement at all times.

It is often very easy when working with large multi-national corporations to allow that supplier to drive the engagement, purely due to the sheer scale of their operation and the clients need to focus time and attention elsewhere. However, when operating in the regulated environment of supplier oversight, it is critical that an organisation is always steering the relationship and ensuring that it meets the business needs. There are four simple ways to achieve this:

• Proactive governance. The organisation must ensure that it is setting the agenda and discussion points for the relationship including definition and measurement of KPIs
• Challenge. An organisation must interrogate and challenge the data and metrics that they are reviewing from their supplier. KPIs should be relevant, measurable and evidence based
• Leverage. An organisation can use a suppliers scale to enable their business to get insights and innovation that they may not have the resources to achieve themselves
• Align. The organisation must pick suppliers that understand the culture of their business and what is important to them and are aligned in how they deliver services to the client organisation

A strong governance structure is the back bone to any prosperous partnership with a supplier. That alone does not deliver a successful engagement, nor will it ensure that an organisation is getting the most value from it. In order to achieve this, the organisation must make sure that they are proactively setting and driving the agenda. This means that inputs from the supplier should be tailored to what the business requires and not an off-the-shelf, one-client-fits-all solution. KPI’s and SLA’s must be clearly defined, dynamic in nature and reviewed regularly to ensure they remain relevant. What was appropriate at the onset of the engagement may not be so as the relationship matures and develops. If something is important to the organisation then it needs to feature in the governance materials that they review on a cyclical basis. Importantly, the business must make certain that the strategic thinking going into the governance meetings aligns with their business’s agenda. A supplier’s strategic roadmap should always feature in their materials. How their roadmap aligns to the client and what benefits it will drive for their business is imperative. If a business is working on a joint strategic initiative with a supplier it is important to understand where it features on the supplier roadmap and what its relative priority is compared to other changes the supplier is implementing.  A generic overview from a supplier can be useful but information that is relevant in the context of the client is powerful and adds significantly more value.

How a business operates with its supplier on a daily basis is just as important as how it engages with them through regular governance forums. KPI’s and SLA’s should be clearly evidenced, regularly assessed and discussed on a daily basis. These metrics should be continually evolving tools that drive performance and improve standards. If they become ineffective or no longer relevant then both parties should not fear discarding them or replacing them with more relevant measures. Constructive challenge from both parties is an effective tool in building a solid partnership; benefits of a proactive debate can drive up standards in both organisations and tap into new opportunities. Constructive challenge is also an effective tool in ensuring regulatory compliance. Supplier and client alike should both be invested in meeting their regulatory requirements of the relationship; demonstrable evidence of interrogating KPI’s, SLA’s and other metrics are clear indicators that the two parties are working to deliver the best outcomes for the engagement. An organisation should work with their supplier to create and maintain a joint due diligence diary, holding each other to account to execute these diligence requirements in a timely and efficient manner. This is further evidence of the right engagement model and approach to the regulations.

Often a business chooses to outsource in the first place to focus on their area of specialism. This leaves other areas of the operating model to suppliers who have the relevant expertise and experience required to deliver those services. A supplier’s scale gives opportunity for an organisation to leverage access to new technologies and thought leadership that they may not have the resources or time to invest in themselves. Large supplier business models will often have teams of resources whose dedicated job is to evaluate new technologies and innovations to understand more about what they can achieve. Whilst the supplier is very unlikely to look at this based on a specific client use case, the organisation can and should leverage the generic analysis and evaluation that the supplier has performed in order to understand if something could  be gained from further review by their own resources. Suppliers should be willing to share this research with their clients; firstly to strengthen the relationship but secondly because if a supplier implements a new technology, having clients who are familiar with the concept is hugely beneficial in helping it to be successfully adopted.

Lastly, but potentially most importantly, an organisation needs to select suppliers that align to their business. This can feature in a couple of ways; firstly they need to ensure that the suppliers they work with understand and align with their business objectives. This could be as simple as the supplier revenue growing as the client grows. It could be more complex where both have ambitions, for example, to meet certain ESG goals or to introduce more automation into their respective operating models. Ensuring alignment of business objectives will mean that both organisations are pulling in the same direction. This creates opportunities to leverage each other’s thinking and the impression that if their client wins they win. The second point brings us back to the start of the paper. What form of engagement does the organisation have with its suppliers, what is the culture of the business? Does the organisation look to partner with its suppliers or does it have a transactional relationship only? In some cases it may depend on the engagement and the services provided. Suppliers themselves will vary. Some will prefer to operate in different ways dependent on their own culture. Other suppliers will prefer an arms-length relationship with its clients, whilst others will look to foster and develop their partnerships. The initial engagement process must ensure that both client and supplier understand their respective cultures and rules of engagement. It is critical that they do not underestimate the impact failing to do so could have on their working relationship.

Supplier services are a critical part of any businesses’ operating model and are powerful tools in helping an organisation achieve its potential. In order to do this the client must be active in the engagement and work with the supplier to drive the direction of travel. Mirador Solutions is a specialist financial services consultancy and we can help you ensure your supplier management structure is best practise from policy through to process.