Supplier relationship management can mean many things, and peoples understanding of what it looks like in practice certainly varies. In fact understanding of the individual words varies.
Supplier: Is this someone who simply provides a product who needs to deliver to an agreed quality, time and cost, or is it someone providing a service, who we need to rely on and work closely with.
Relationship: Is this a master/slave relationship, a big stick approach, often without the carrot, or is it one where there is respect, trust and commitment from both parties.
Management: Not my preferred word (although there always needs to be an element of management) but is this managing the performance down to the letter of the contract, or managing the relationship so that both parties are successful.
We all know of relationships where Supplier Relationship Management is simply about managing performance, at all costs, where the client thinks they are doing a good job but in reality, they are losing out in the long term, and the supplier is not happy, not adding value, and wanting to move elsewhere.
But we also know of those where there is a good relationship, where the client realises that the supplier is the expert, that they add value, and that by having the right relationship makes life better for the client. This type of relationship is also of benefit to the supplier, with more freedom to use their expertise, more freedom to innovate, and more chance to grow the service and income.
Back to the words, Supplier, Relationship, Management.
Supplier is perhaps not putting enough importance on the role. Most suppliers, certainly in Facilities Services, are in fact the expert in the service they deliver and being seen as a service partner rather than supplier may help the relationship.
Relationship is key, but it has to be two way. Too much focus is on the client to drive the relationship, but the potential benefits to the Service Partner can be significant, but more on that later.
Management is really something that should not be needed, as long as both parties understand the relationship and their responsibilities. If things are having to be managed then perhaps the relationship is breaking down or has not been given a chance to blossom. Perhaps guidance rather than management is better in terms of relationship.
So, this relationship does need to blossom and has to start with a good understanding of each other, our aspirations, what we like and don’t like, what our interests are, and how we can help each other. This relationship often starts at tender stage, but is often not given the chance to prosper as too much focus is given to what the client wants. I liken this to filling in an online dating application (or so I am told). You input what you are looking for in a person, your likes, your dislikes, your red lines (i.e. your RFP questions) and you get a match and meet on your first date, only to find that the other person did not get the chance to specify what they were looking for. Awkward moments follow you have completely different interests, you don’t get on and the relationship just does not get going.
Some of the best feedback I have had when running tender exercises is when potential service partners have been engaged before tender documents are sent out. Sessions to let them know about the company, it’s vision, it’s culture and to put a face to the name and start to understand what good looks like. It helps both parties see if they could be a match, and certainly helps in developing the tender responses. It also ensures the client tenders with service partners they think they really do want to do business with.
The best supplier relationships are when both parties are in agreement with what is to be delivered, they understand what good looks like for each other, and they trust each other. It is in these circumstances that we see the delivery of added value or the ‘essence of the contract’.
In supplier management practice there are 3 elements, which should be kept separate and should not be confused.
Relationship Management: responsible for the overall client relationship with the supplier. It represents the internal customer of the services. It defines the overall business requirements & ensures that the supplier satisfies them.
Contract & Financial Management: the contractual owner of the relationship with the supplier. It ensures that the contract reflects the business requirements of the client & that the supplier delivers the benefits defined in the business case.
Service Management: the operational owner of the relationship with the supplier. It ensures the smooth day to day delivery of the product/service from the supplier, within the agreed risk, cost, quality parameters.
Back to something I mentioned earlier about relationship, and how there is a benefit to service partners driving the relationship too. There was research conducted by Business Services Growth, which looked at the various types of relationships between client and service provider. It looked at what makes a trusted partner and identified the benefits to a supplier of becoming a trusted partner. That research showed that only 24% of cross-industry clients (only 6% in FM) considered their service providers to be trusted partners and over 50% considered their service providers contract to be at risk of not being renewed (even through tender). It also identified that those trusted partner’s clients are 9 times more likely to buy additional services, and trusted partner service providers have up to 3.5 times more wallet share.
So, a few thoughts on what might just help in establishing the right relationship:
- Start the relationship process before the tender process. That way you will have appropriate service partners on the tender for building the right relationship.
- Has your procurement process identified the right supplier or the cheapest?
- If you procure cheap why should you expect added value?
- Understand each other’s businesses.
- Share your vision, strategy and objectives.
- Understand each other’s objectives for the contract. After all, a client objective may be to save money and a service partner will be looking to make money. This misalignment needs to be understood and accepted.
- If you are buying a service, you may have decided to do that as you are not the expert. Respect the service partners expertise.
- As a client you are the expert on what the outcome needs to be in your business, so share your understanding of what good looks like. You must be aligned.
- Remember, relationship management is related to the overall service relationship, and should not be focussing on the detail.
Finally, something I have seen often in football management and in business. Management drives short term success. Leadership and collaboration drives long term success. Supplier Relationship needs to be about leadership and collaboration to realise the full benefits.
ABOUT THE Guest Author:
Martin is an experience senior facilities services professional. He spent 31 years at The Co-op, primarily as Operations Manager and finishing as Head of Hard Services at group level. Martin took the vast experience gained during this time and set up g2Gsolutions Limited, an interim management and consultancy business. Martins aim through g2G is to develop vision, strategy, service and people to help drive the FM industry through good and towards Great.