An essential aspect of having a fully evolved procurement process is the quality of supplier relationships, writes GECA’s Sarah Sannen and Kendall Benton-Collins.
Though an ancient practice, procurement, along with all the players involved, has recently been through a significant evolution.
From the ad hoc employment of ‘materials men’ to telling people what they can and can’t buy, and finally to becoming an essential part of an organisation’s strategy and risk management process. Procurement has moved from a purely ‘cost-cutting’ function toward a more holistic lens focused on economic, social and environmental benefits.
The days of competing on price alone are long behind us. For your organisation to maintain its social licence to operate and even be compliant with the law, there are many more factors that you need to consider.
An essential aspect of having a fully evolved procurement process in your organisation is the quality of your relationships with your suppliers. This means infusing your relationships with authentic dialogue, mutual respect and a spirit of inclusion.
Moving from checklists to conversations
The very term ‘supplier’ implies a one-way, if not parasitic, relationship. In reality, these are your business partners. Reframing the language may help to shift the power dynamic associated with ‘suppliers’ and encourage collaboration.
In the past, for instance, many organisations sent questionnaires to their suppliers that didn’t allow for nuanced responses.
Closed-form questions can result in a skewed version of your supplier’s reality and certainly doesn’t allow them to discover more about your organisation’s wider vision.
Practical steps you can take when reaching out to your suppliers can include using open-ended questions and setting up face-to-face meetings where possible. Remember to treat this as the development of a business relationship.
What are you both hoping to get out of this relationship? How can you meet your shared and different goals? Ensure that you invite feedback from your suppliers on your organisation’s performance. Use reviews to encourage both buyers and suppliers to adopt improvements for mutual benefit.
Have you communicated your organisation’s sustainability priorities? For instance, your cleaning service might revolve around your commitment to creating healthy spaces for people and planet. Do your suppliers share your vision? Do the people within your supply chain work in healthy conditions?
According to Edge Environment, most of their clients have found that more than 80 per cent of their impact is in their supply chain. Procurement practices are hugely impactful. You can make that impact meaningful by finding out how to support and strengthen communities and their environment.
Ask your supplier if they have a passion for a certain cause or if they are working to champion a social or environmental initiative in their local community. How can you help make this come to life? If your suppliers do something positive, don’t forget to celebrate this! For example, you can feature them on your social media channels or submit them for an award.
If your new approach to supplier engagement is met with resistance, remember that this is a valuable learning opportunity!
Seek first to understand and then to be understood – meet your supplier where they are rather than dictating requirements and solutions. It’s about moving from having separate to shared objectives.
Even the strongest business partnerships can come up against some issues. If you find something going on in your supply chain that goes against your values or is illegal, for example, there are steps that should be taken before ending the relationship.
The United Nation’s Guiding Principles on Business and Human Rights and the OECD Guidelines for Multinational Enterprises state companies should work with their supply chain to avoid, mitigate and remediate adverse impacts and use disengagement only as a last resort. It’s about engaging with the supplier and using your leverage to help address the issue whenever possible.
When looking to remediate a supply chain issue, you should first determine what leverage you have through your organisation’s spend, networks and good working relationship with the partner.
This leverage can be used to influence your business partners to improve the situation. It is important in this stage to work to understand your business partner’s perspective. What are the barriers to changing the situation? How can both companies work together to achieve this goal?
Sometimes, an organisation’s leverage may not be large enough to affect change. In this instance, there may be ways to increase your leverage or find new ways to drive change.
For example, Patagonia directly funds certain capability building projects in their supply chain, helping their partners improve their business processes. Similarly, many competitors share partners across their supply chains.
Bringing competitors together who seek the same outcomes increases collective leverage. In this phase, it’s vital to support and reward the improvements business partners are making and be sure to provide plenty of feedback.
If your supplier is still unwilling to change, the only option left may be to disengage. According to the OECD and UN Guiding Principles, organisations should provide their business partner with ample notice.
It is important to provide feedback on your reasons for disengaging as a last attempt to create change in your supplier’s future.
If necessary, report suspicious activity to local authorities or specialist organisations and remember that your supply chain is made up of people whose lives could be at risk. It is your responsibility to do what you can to protect the people in your supply chain.
The cleaning and hospitality industries have been identified as hotspots for modern slavery in Australia. Ensuring supply chain transparency will play a significant role in the future of these industries.
Creating a more sustainable and prosperous future requires us to invest in truly symbiotic connections throughout our supply chains. By working together, we can be a part of significant positive change. The great news is you don’t have to take this journey alone!
GECA’s Positive Procurement Pledge supports businesses as they explore and mitigate the environmental, social and economic impacts of their purchased goods and services.
*Sarah Sannen is operations and finance manager and Kendall Benton-Collins is strategic communications manager at GECA
This article first appeared in the July/August issue of INCLEAN magazine.
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