New Data Report

Background

New data proves cost avoidance is missed without supplier-stakeholder feedback.

The Situation

It’s hard to reduce supply chain costs.

It’s challenging to reduce supply chain costs year-over-year.

[yop_poll id=”1″]

No matter how much supplier contracts are squeezed – pushing for flexibility, enforcing contractual rights, renegotiation, or even exerting leverage – pricing diligence fails to deliver prior year savings.

Said another way, price ain’t delivering what it used to.

Not all Procurement functions are struggling. Some are delivering expectations by reframing how to reduce supply chain costs.

Go from:

Cost-savings via price.

To:

Using feedback to avoid supply chain costs.

Background

Why Feedback?

Too many suppliers make incorrect assumptions.

Most suppliers assume they deliver a superior customer experience.

When suppliers operate under a false sense of confidence, the Procurement function is forced to manage:

  • Stressful quarterly supplier review meetings.
  • Increased workload on non cost-saving activities.
  • Strained relationships with their internal stakeholders.

Net, a lot of work and minimal progress towards reducing costs in the supply chain.

The Cost

It’s a BIG number!

Contractual management will not reduce the number of suppliers making incorrect assumptions about their performance. This yields costs that can be avoided.

Poor supplier performance can erode up to 4% of a B2B customer’s profit.

How much cost can you avoid?

ie: 0.5=$500 million

Poor

Excellent

The Impact

Limited access to innovation.

In addition to the cost you can avoid, consider what happens when your internal stakeholders’ expectations are not delivered by the supplier.

If you’re unable to document the issues, your Procurement function will remain stuck in the middle of the classic “he said…. she said” impasse. The over confident suppliers will continue doing what they did yesterday. Leaving frustrated stakeholders who demand the under-performing suppliers are replaced stat!

Although inefficient, this scenario prevails in many Procurement functions.

Why? Because only 5% of B2B customers receive their suppliers best.

Stakeholders

Best Personnel

Supplier Innovation

Best Innovation

Supplier Operations

Best Operations

“CPOs still need to reduce costs. Unless you come up with ways to innovate, you’re not going to do it.”

Bill Michels at the CPO Rising Summit (link to article)

A New Way

Calibrate your suppliers.

Since 2015, Procurement functions have used getSayDo to document supplier-stakeholder feedback. The resulting data from our customers validates the need to calibrate suppliers, while identifying how to achieve optimal supplier-stakeholder alignment.

Across 14 supplier categories, only 14% are delivering the value expected by stakeholders.
(Reminder: 80% of suppliers believe they deliver a superior customer experience.)

SayDo Scores by Supplier Category

Furthermore, the related feedback comments are evenly distributed between favorable and not-so-favorable. One can only imagine how much cost avoidance is being overlooked.

Stakeholder Comments on Suppliers

Justify

Save time. Save money.

Feedback isn’t new, but technology has evolved the approach. Some Procurement functions are using dated processes:

Traditional Approach

>15 hours per supplier relationship

Traditional Feedback Process

Over time, the traditional approach yields one of four outcomes:

No Feedback Process

No feedback process — Procurement relies on their gut.

Face-to-face Feedback Process

Anecdotal feedback process — Procurement relies on water-cooler discussions.

Annual feedback process — Procurement relies on a point-in-time survey.

Time Intensive Feedback Process

Time-intensive feedback process — Procurement relies on a time-intensive process.

Our team manages hundreds of key supplier relationships. In 2016, we only managed to collect feedback on four (4) of them. There’s just not enough time to do it, and do it right.”

Director, Procurement ($15B annual revenue)

getSayDo reduces the time commitment by 93%.

<1 hour per supplier relationship

getSayDo Feedback Process

“If it can’t be measured, it can’t be managed.”

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Calculate how much time and money you can save.

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Close

Use feedback to avoid cost.

Cost avoidance traditionally focuses on price (i.e. competitive bidding, rate reductions, negotiations, etc.). getSayDo helps Procurement evolve this traditional view. Specifically, by documenting the health of your supplier base, and making it easier to determine how the organization and its suppliers should behave going forward. Every unfavorable behavior that is avoided yields more productive outcomes, and thus, a healthier supply chain.

The benefits, both “one-time” and “recurring”, will provide an on-going basis of cost avoidance that makes it possible to reduce cost in your supply chain.

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