Has Covid-19 changed the value of supplier relationships?

It has been well-publicised that Covid-19 has accelerated change across every aspect of our personal and professional lives. This month’s Avencia Consults article discusses the importance of supplier relationships when faced with a crisis, what defines a strong supplier relationship, and how and when you should leverage these.

 

Thanks to David Brammer (Talent Leader), Marco Marambe (Director, Procurato), Charlie Gordon (Client Services Director, Avencia), and Louisa Newell (Talent Solutions Lead, Avencia) for their contribution to this article.

 

Businesses all over the world have had to adapt rapidly to accommodate and navigate the pandemic. Many have had to quickly address some of the most critical and challenging business decisions to date in an attempt to remain competitive.

 

The combined social and economic effects have demonstrated just how important strong supplier relationships can be, especially when faced with a crisis. (1) NelsonHall state ’more emphasis is being placed on building stronger relationships and using suppliers’ expertise as a source of competitive advantage’.

 

“The pandemic has highlighted the importance of having an established relationship with those who work within your industry. During the early stages of the pandemic, when everyone was trying to navigate remote working, our internal relationships would have been instrumental to a businesses’ ability to weather Covid-19. However, our external relationships will have helped businesses to become less insular with their thinking”. - Marco

 

Reimagining partnership strategies and looking for innovative collaborations was something evidenced around the world. The need for a swift response has resulted in cross-industry partnerships that show customers they are the priority.

 

However, some relationships are feeling the strain as Covid-19 continues to disrupt every aspect of our working lives. Pushing both internal and external relationships to their limits, with only the strongest remaining adaptable and agile throughout this everchanging climate.

 

“The pandemic has highlighted that many of us fail at maintaining our relationships on an ongoing basis, during both the good and the bad times”. - Marco

 

For many procurement teams, it has highlighted the increasingly complex supply chains of businesses which consist of multiple suppliers (2) and “as companies downsize, rescale, and reconfigure, many of these supplier relationships are disappearing overnight” (David).

 

The rise in economic uncertainty surrounding the pandemic has forced many businesses to investigate how they can become more financially stable. As a result, many are undertaking internal restructures in a bid to become leaner, leaving little opportunity to spend time on building and nurturing external relationships.

 

This is having a detrimental effect upon many supplier relationships as “the neglection of a supplier relationship can often be a hard dynamic to overcome” (David). And with strong supplier relationships often proven to lower costs and improve business efficiency, it could have a detrimental effect on the success of a business.

“If a strong supplier relationship has been formed during the pandemic, it will be because the supplier or vendor has recognised the importance of gratuity and equity, focusing upon building the partnership equilibrium above all else”. - David

 

“The virtual nature of business over the last six months has put our partnerships to the test. However, I am pleased that despite the limitations we have faced and continue to face, our relationships with clients, suppliers, and other third parties have gone from strength to strength during the pandemic. The mutual empathy shared, and a focus on wellbeing has levelled the playing field for customer and supplier relationships”. - Charlie

 

The increasing pressures on headcounts combined with the need to automate and accelerate innovation, has forced procurement teams to evolve rapidly. Many are now placing more focus on the importance of communication and the connection with suppliers, external partners, and internal customers (3).

 

“The bandwidth of a procurement team is always a fine line as they are usually introduced at the last minute. A strong company procurement function is one that realises the criticality of its services; one that has built up strong internal relationships and can understand what’s useful, what a strong relationship is and what’s a critical vendor. The team will also need to be set up to manage these relationships accordingly. If a procurement team is transactional and looks at everything as a tick box exercise, relationships will suffer”. - Marco

 

“Companies often drive their supplier relationships through what is needed by them without realising the full impact a good supplier relationship could have on their business. During a crisis, good supplier relationships are impactful as the supplier acts as the expert and recommends improvements or solutions without necessarily being asked for them” (Marco).

 

For many procurement and HR teams, partnering with a Managed Service Provider (MSP) has been imperative. Not only due to COVID-19 but also to address the immediate skills gap, regulatory changes, and the complexities of managing a remote workforce. There has been a clear recognition that engaging with a trusted MSP partner has proved efficient in managing essential operational processes, gaining visibility, flexibility, transparency, and control.

 

“We have seen increased engagement from leadership teams embracing Avencia as partners throughout the pandemic as we have built relationships based on trust, transparency, and adding value. As a result, we have been able to truly consult with businesses and deliver value where perhaps others have not. Open and transparent access to a business enables suppliers to provide enhanced solutions and intelligent insights. All of which will result in faster decision-making and minimal disruption”. - Louisa

 

A businesses ability to be successful in the current climate relies upon their confidence (and ability) to leverage these relationships. We often hear the sayings ‘if you don’t ask, you don’t get’ and ‘what’s the worst that can happen?’ and the same should be said for when it comes to leveraging supplier relationships – within reason. 

 

“You have to always pay a relationship forward. What I mean by that, is you can’t begin to try and leverage a relationship if one was never there, especially during times of crisis – it will be a losing battle”. - David

“To effectively leverage a supplier relationship, position yourself in the best possible way. Ask the right questions and gain an understanding of what both parties want -this will eliminate any potential risks”. - Marco

 

True trustworthy supplier relationships are an important and powerful tool. “Supplier relationships should be built up over many years, and not just when you need to leverage them” (Marco).

 

“It has never been more evident that vendor collaboration should be driven by relationships. They shouldn’t be driven purely around KPI’s, SLA’s, and commercials. They should instead be driven by partnerships and working effectively as a team; ensuring everyone is working together as one entity to deliver the business objective”. - David

 

As such, a strong supplier relationship can often be defined by the “affinity you have and how much they understand your business” (Marco).

 

This partnership can also be defined by “how comfortable you are with saying no and the quality of your relationships will determine your ability to do this, especially during crisis” (David).

Businesses who place focus upon building but more importantly maintaining both their internal and external relationships will remain agile and responsive and better positioned for the future. Covid-19 has proven that through doing this, they will be able to be better equipped when making rapid business-critical decisions.

In words of American Industrialist, Henry Ford, “Coming together is a beginning, staying together is progress, and working together is success”.

 

Bio’s...
David has worked in the people and talent industry for 14 years, gaining experience in talent strategy, people leadership, and digital automation. As a seasoned Head of Talent Acquisition, David is passionate about advancing inclusive hiring and AI-based technology, and he is best known for his natural leadership and engaging style, placing focus upon positive impact and change.

Marco has 14 years of experience in procurement, sourcing, and supply chain across various industries, including FTSE 100 Financial and Insurance services, ‘Big 4’ consultancies, and automotive manufacturing. He has held a range of leadership roles and completed projects, from direct sourcing of services and materials, to the management of indirect categories such as Professional Services, IT, and Corporate Services.

Marco founded Procurato; a procurement expertise company who can help clients with their supplier spend – procurato.co.uk, and is passionate about mentoring its teams and ensure they grow professionally and individually to ‘be the best you possible’, grow professionally and individually to “be the best you possible”

 

References: 

1. Samolyova, A. (2020, September 16) How Covid-19 is Helping Procurement Departments Overcome Some Key Challenges. NelsonHall Blog. Available Here. 
2. Oxford College of Procurement & Supply. (2020). The Advantages of A Well Managed Supplier Relationship. Available Here. 
3. Accenture. (2020). Covid-19: Managing the impact on procurement for resilience and growth. Available Here.