RELATIONSHIP MANAGEMENT: AVOIDING THE CHASM
Sourcing Consultant
You’ve just completed the negotiation and contracting for a supplier solution or service. You’re happy where things landed, and you like the solution and the supplier providing it. Your supplier sales team exits, and their service team enters. Now you must focus on avoiding the great chasm of promises made and promises broken while you desperately wait for the attention required before the renewal comes due.
As we mentioned in our last Seprio Summer Series installment, AI Cannot Replace Us , strong, productive relationships with your key suppliers are fundamental to Seprio’s Supplier Governance Operational Model. Ideally, you want a bond with your supplier that is an extension of your team, one focused on both your strategic direction and your operational excellence. Your investment deserves a supplier that is willing to keep an eye out for innovative ideas that can give your company a competitive advantage. Let's take a look at two important elements of communication necessary for your company to get maximum value from your suppliers once the money has changed hands.
Getting the most out of what was promised
Supplier relationships can be tricky to navigate. On the one hand, you need to be tough enough to make certain that systems and services perform as promised. On the other hand, this needs to be balanced by forming a healthy relationship that gets you added value from your investment now and in the future.
In Seprio’s Supplier Governance Operational Model we extensively cover appropriate service level agreements (SLAs) and key performance indicators (KPIs) for a given supplier service. Your organization, no doubt, has some familiarity with these measures in your current contracts. But what happens when these measures are not met? Unfortunately, many companies report they do little with this information after the fact. This is often a result of fear that the relationship with the supplier could be harmed. You have the notion that there is a finite number of times you can ask for a remedy to an issue before you are deemed a “pest” and are relegated to the pile of customers not worth the trouble.
Too often, the results of SLA reviews are aggregated and pulled out at renewal time. They become justification for moving on to another supplier and another solution. While at times appropriate, this is not without switching cost issues, such as lost productivity, recurring implementation costs, and additional money spent on higher-priced alternatives. If this reads as lost profits to you, it should.
Leading edge companies understand the importance of fostering strong relationships with key suppliers on issues and needs. Most believe strongly that building a bridge is preferable to burning it down.
What does this look like?
In the case of unmet expectations, this should be a call to your sales or service representative AT THE TIME the incident occurred. Making suppliers aware that there is an issue affords them the opportunity to monitor it more closely and implement necessary measures before a small issue becomes a big issue.
Everyone has a horror story where customer-facing applications are down at mission critical times. While not always addressable at first occurrence (IT folks look for patterns and recurrence), early awareness and communication have the best chance of keeping the issue small before you have lost revenue. The idea that you’ll lose a good supplier because you are a nuisance is simply a fallacy. I’ve worked on both sides of the fence, and I assure you that only in the most extreme circumstances (involving more than just issue reporting) will a supplier walk away from business. It simply does not happen.
Still, there may be times when operational snafus lead to larger supplier abrasions and require extra “help” from levels up the chain. Our Supplier Governance Operating Model advocates strongly for an assigned alignment of your top-level executives with their supplier counterparts for all key strategic supplier relationships, just for such instances.
Getting the “extra value” bump – strategic alignment
The value you receive from your key suppliers should not end up with them performing as promised. That should be the bare minimum. Your company invests a lot of money in key systems and services, and salespeople spend a lot of time in the “courting” phase of your relationship talking about being “partners”. Hold them to that. In the case of strategic suppliers, they should be as accountable for your company reaching its strategic goals as employees are. Hence, the term “strategic” suppliers. You should make them earn the title. This is the segment that is often lacking.
Goal-based strategy markers (a form of KPI) are a way to monitor progress in your relationship, in this respect. How well are your key suppliers providing you with innovative recommendations? How often are they pulling you into conversations as they develop their roadmaps? Are they supporting your strategic direction aptly with their planned product development?
Having your executive and management team engage key suppliers at a level that gives them visibility into your operational and strategic plans not only has the best chance of your operational needs being met but cements a relationship that will be more responsive to your strategic needs as well.
Closing the Chasm
Creating and fostering healthy supplier relationships is a diligent process. It requires timely communication at all levels, regularly. But the rewards can provide you with the often elusive, distinctive or competitive advantage all companies desire. And that is not only giving you the expected value for your money, but extra value for your money.
A strong supplier management program that prescribes and fosters a healthy communication channel at all levels of your organization, both presale and post-sale, will pay dividends well worth the effort. And the chasm between promises made and promises kept closes.
Please join us next week as the 2025 Seprio Summer Series starts it’s final stretch, where we explore Performance Management.
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