A Point of View

Developing an Effective Supplier

Engagement Strategy
Abstract
Businesses often need to adopt new procurement operating models to remain competitive or achieve their wider strategic goals.
However, frequently when implementing new models, the need for supplier engagement is forgotten. Neglecting the importance
of the support of suppliers in a procurement change initiative invites failure. A supplier engagement strategy reduces that risk.
This paper advocates a three-pronged approach to supplier engagement: The identification of categories, or waves, so that the new
model is rolled out in a way that increases the chances of it being successfully adopted; creation of a communications plan;
allocation of resources to a skills development plan for cooperating suppliers.
The proposed wave approach makes use of a simple supplier profiling method that forms the basis of the entire supplier
engagement strategy. Its effectiveness stems from the fact that it avoids the use of complicated data that is difficult to obtain and is
often unreliable.

Effectively Managing Operational Change

In a competitive business environment, there is pressure to ensure that procurement and supply chain performance is maximized.
This may entail ensuring that CSR objectives are cascaded, introducing a new S2P system, the introduction of simplified and
standardized processes, or perhaps the outsourcing of purchasing activities.
Business leaders will reduce their chances of success by failing to get the support of one of their most important stakeholders, their
suppliers, at an early stage.
To help organizations carefully consider the role of suppliers while dealing with critical changes, this paper suggests a strategy for
effective supplier engagement.
It advocates a wave-like approach to working with suppliers. Using a simple questionnaire, this approach categorizes suppliers into
different segments by considering their past experience and their attitude and aptitude to implement the new model.
To effectively engage suppliers, organizations need to communicate with them clearly, consistently, and confidently, before making
any concrete plans. This communication must be tailored to answer and justify the questions and obstacles that the different
categories of suppliers might have.
There is a need to allocate a portion of the project's budget to support suppliers, and offering to train and develop their staff
significantly raises the chances of success. Assessing their training needs doesn't need to be elaborate. They can be anticipated by
analyzing the initial questionnaire.
The supplier engagement strategy is critical to the success of the implementation of any new procurement initiative. Managers
need to identify the best way to secure the supply market's ownership as early in the project cycle as possible. That will create a
sound foundation for the implementation of such a project.

Creating a Sound Foundation

Without a sound foundation, the probability of a successful implementation is seriously compromised. Business leaders need to be
clear on what the target operating model will look like. They also need to give careful consideration to any changes to the
organizational structure, processes, and procedures before starting a discussion with the supply base. It is wise to have a blueprint
of the new ways of working. Any evident absence of clarity will contribute to a lack of supply market confidence and reluctance to
embrace the proposed changes.
Suppliers are one of the key stakeholders of any supply chain initiative. The business case should recognize that the failure to gain
supplier ownership of the proposed new systems and processes presents a key risk to successfully changing or improving the
operating model.
Take the implementation of source-to-pay (S2P) technology, for instance. It is an end-to-end process that integrates all functions from
understanding what is required to payment of invoices. Unless the support of key suppliers is secured before embarking on the
implementation process, it is unlikely that the project will be deliver all its anticipated benefits.
In the absence of a significant business justification for suppliers, their support might require a fair bit of persuasion. The enormous
investment that supplying firms need to make may outweigh the short-term commercial benefits and they might decide to cease supplying
altogether. Straining relationships with suppliers may jeopardize operations and force managers to reconsider the project.
Allocating a budget for supplier engagement is part of the strategy to mitigate the risk of a lack of ownership. The budget needs to include
costs associated with communications, training and skills development, and any investment in suppliers' technology and software. A second
step in the risk-mitigation plan is to be clear which suppliers need to be on-boarded to build up a critical mass that will enable the
implementation to be justified. It is a mistake to assume that there will ever be 100% supplier adoption of the new ways of working, but
there needs to be clarity on the breakeven point of supplier uptake.
The decision about which suppliers to focus on needs to reflect the wider strategy of the organization, particularly relating to any existing or
likely commitment to responsible procurement, and any supplier rationalization policy. Smart implementers use the supplier engagement
strategy as an instrument to achieve broader objectives.
Finally, the designation of a senior level champion who will be the public face of the initiative is critical to the success of the implementation
plan. The individual filling the role needs to be credible, empathize with the supply market, and ensure that suppliers feel that their 'voices'
are heard.

Clarity of the new ways of Designation of empathic

Recognition of suppliers as
working, champion
key stakeholders
e.g., processes and procedures

ê
!
Budget allocation Recognition of risk from lack Adoption of a strategic
of engagement approach

Figure 1: The Foundations of Supplier Engagement

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Supplier Profiling
Using a 'big bang' approach to supplier adoption is unlikely to be effective. Such an approach demands significant resources and loses the
benefits of lessons being learnt that could be used to avoid replicating mistakes. Most of all, it fails to recognize that tailored journeys to
ownership are necessary, as every supplier is different.
A phased approach is recommended, with suppliers being on-boarded in waves. Of course, that begs the question, 'How do you segment
the different waves or categories and what criteria do you use to assess each individual supplier to see which category they fit into?'
Some advocate the use of spend analytics to categorize suppliers. However, the reality is that relevant spend analytics may be unavailable.
Those approaches fail to recognize that a frequent justification for the implementation of a particular solution, such as S2P, is that it will
provide clarity of spends. Further, even if the data were available, it would be difficult to justify the time invested to analyze and develop a
wave plan that might maximize adoption.
A simplistic, pragmatic approach can achieve the same outcome and be completed more rapidly by profiling suppliers as 'users', 'converts',
'willing novices' and 'late adopters'.
A supplier questionnaire that probes actual experience and motivation can be used. This approach to profiling also feeds into the
communications and the skills development plan.
1. Users' have already adopted the new operating model being contemplated. They will face minimal change to their existing
ways of working
2. Converts' are existing users of a similar model to the operating model being considered for implementation
3. Willing novices' are businesses which see the merits of using the proposed operating model but have no experience with it
4. Late adopters' lack enthusiasm to transition to the new operating model
This simple approach to supplier profiling will ensure that key messages and training modules are tailored to match the differing needs of
the supply base.
'Users' should be the focus of the first wave. Early dialogue with this group can minimize risk to the organization and help it learn lessons
from previous adoptions. Users can also act as exemplars to other suppliers by sharing their success stories and the evidence of tangible
benefits they have gained. They become not only a target for supplier engagement but their story has the potential to be part of the
communications message itself.
An example of a User would be a supplier who has already adopted the use of 'green specifications' when the host organization seeks to
introduce these, or a supplier who is already using the same S2P platform the host is planning to introduce.
The advantage of working with Users in the first phase is that they have existing policies and tools, appropriately trained staff, and
appropriately designed processes. This allows them to quickly implement the proposed model. This is perhaps one important reason why it
is a good idea, for example, with S2P implementations, for organizations to refine processes to fit out-of-the-box solutions when they
implement a new model, as opposed to opting for major customizations. The out-of-the-box approach allows other participants in the value
chain to implement the solution with ease and without incurring major investments all over again.
The second wave should comprise of 'Converts' – those suppliers who have already gained experience of working with other organizations
implementing a similar procurement model and, building on that previous experience, can be expected to embrace the new model. For
example, a Convert may have adopted a CSR policy but has not yet shifted to the use of 'green specifications'.
'Willing novices' should be the focus of the third wave. They may already have a desire to trade electronically but not yet implemented the
necessary systems, or they may be interested in pursuing CSR objectives but do not know where to start. This group will likely require
significant hand-holding and reassurance.
The obvious benefit is that Willing Novices have been convinced, even though some staff may feel uncomfortable with the proposed
changes and resist. Willing Novices might also find it easier to adapt to the implementer's proposed processes, as they will not have the
legacy of having changed systems and processes for previous customers. Nevertheless, expect some of those within the organization to be
skeptical.
The final wave comprises of 'Late Adopters'. The buyer organization will need to demonstrate patience and might question the necessity to
get this group to adopt the new model. A factor in deciding how much attention should be given to Late Adopters should be the sheer
volume of transactions between the individual organization and the buyer. A high-level Pareto analysis should help identify whether the Late
Adopters fall into the group of 10% of suppliers who have 70% of the organizations transactions. Because if they do, they should be targeted
– getting them on board is critical to achieving the business case.

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At first glance, it might appear that the wave approach focuses on just one wave of suppliers before moving on to the next. However, like
waves hitting the shore, as one wave hits the shore the next wave is already building up. So all waves are worked on simultaneously, albeit
with differing emphasis. Similarly, there is no way of anticipating the size of each of the four groups or the time that must be allocated to
persevering with them. It depends on how large the supplier base is and individual suppliers' willingness to change.
It should also be noted that the wave approach is based on the assumption that contracts are not currently being renewed. If however,
contract renewals are taking place, these sourcing strategies should be used as a parallel first wave to win suppliers' commitment at the
negotiation stage. Wasting resources inducting suppliers who are unlikely to gain future business will lead to the perception that the
organization lacks a coherent strategy.

Communications and Training and Skills Development

A communication plan needs to be considered as soon as the implementation of a new procurement model is mooted. Figure 2 illustrates
the components of a communication plan.

Statement of Change Change

Agreement of
technology readiness impact Channel plan
key messages
requirements assessment assessment

Figure 1: The Foundations of Supplier Engagement

There needs to be some signaling that change is anticipated and that the organization intends to 'work with' the market as opposed to
'enforcing it on suppliers'. That early reassurance will pay dividends later and demonstrate that the organization has a strategic approach.
The categorization of suppliers as 'Users', 'Converts', 'Willing Novices', and 'Late Adopters' is part of a first-stage change impact assessment.
This assesses what the implementation of the proposed model will mean for suppliers. It requires an understanding of the technology
needed to implement the new model, which should be set out in a 'Statement of Technology'. If suppliers are not clear about how the
changes will impact them, it will not be possible for them to give the necessary commitment.
This wave approach proposes that a questionnaire be used to profile suppliers; it makes sense to use that same questionnaire to establish
supplier change readiness.
The change readiness assessment will draw on the change impact assessment and statement of technology requirements to contribute to
the categorization of suppliers. Regardless of suppliers' engagement with the proposed model, it is likely that all these groups will need
some form of training to adjust to this new way of working. The survey should also include questions for a 'training-needs assessment'.
Categorizing the supply market is an acknowledgement that each category of suppliers will have different needs. The 'communications
plan' therefore needs to develop key messages that are specifically tailored to match the needs of each category.
The key messages also need to clearly demonstrate the business justification from the supplier's perspective. It is useful to complete a risk
assessment 'in the shoes of the supplier'. That will help anticipate the barriers that each supplier might face.
Having agreed on the key messages, the next stage is to determine the most appropriate communications channels to use.
The 'channel plan' should reflect the number of suppliers to be communicated with, their location, language, culture, and the complexity of
the information to be conveyed. While YouTube may not have been previously used in supplier communications, it provides a useful tool
and enables multiple views of the same communication. Equally, webinars can be effective in responding to supplier questions. The trick is
to marry the channels to the needs of the audience and the complexity of the information being conveyed, as opposed to adopting a 'one
size fits all' approach. It is also important to ensure that communications are viewed as an integral part of the 'training and skills
development plan'. Figure 3 illustrates the steps of such a plan.

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 Change impact Testing of
Training delivery
assessment effectiveness

Development of skills Creation of training plan

framework • Learning objectives defined
Review of lessons learnt
• Draft and test framework • Training channels defined
(strategic)
• Agreement on allocation of • Training materials
training responsibilities development

Training needs
Gap analysis
analysis

Figure 3: Training and Skills Development Plan

The training-needs assessment should not only address training in the proposed new solution, but also changes to policy, processes, and
procedures. One of the concerns suppliers' staff will have relates to the fear of whether or not they will be able to cope with the new ways
of working. The implementing organization needs to take those fears seriously as a failure to overcome them will jeopardize achievement
of the business case. Developing a skills framework is a good starting point. Next, the framework must be thoroughly tested through
dialogue with suppliers, especially 'Willing Novices', so that there is an understanding of potential barriers to implementation from a
training and skills development perspective. Finally, the implementing organization should clearly decide how much responsibility for
support would sit with it.
Figure 4 draws together various strands of the supplier engagement strategy, specifically, creation of a sound foundation, supplier
profiling, and development of a communication plan and a training and skills development plan.

Clarity of the new Converts Users

Recognition of Designation of
ways of working,
suppliers as key empathic
e.g. Processes and
stakeholders champion
procedures Supplier
Profiling
Risk of lack of Adoption of
Budget allocation engagement a strategic
recognized approach
Late Adopters Willing Novices

Agreement of
Channel plan
key messages

Statement of Change
Change impact Skills framework Training needs
technology readiness Gap analysis
assessment development analysis
requirements assessment

Training plan Training delivery Testing of Review of

developed effectiveness lessons learnt

Figure 4 – The Supplier Engagement Strategy

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Recommendations
Here are a few things organizations should keep in mind when introducing a procurement change initiative:
1. Recognize that the lack of supplier engagement is a major risk to realizing the business case benefits
2. Adopt a strategic approach that reflects the wider strategic direction of the organization, for example, supplier rationalization
3. Understand the Target Operating Model, including changes to structure, policies, and procedures
4. Allocate a budget for supplier engagement
5. Understand what the impact of the new model will be on suppliers, particularly in technology investment and skills development
6. Understand the suppliers' change readiness
7. Adopt a wave approach to supplier engagement, making use of supplier profiling
8. Ensure the wave approach works in parallel with a communication plan and training plan
9. Use the same supplier questionnaire for profiling and the training needs assessment
10. Tailor supplier communications and support to the profiles of the suppliers
11. Start early and allow time – winning suppliers' hearts and minds cannot be rushed

Forming a Winning Team

Lack of supplier engagement and ownership represents one of the greatest risks to the implementation of a new procurement model.
However, this is because such initiatives represent significant change to suppliers themselves.
To avoid failure, it is important to start early and allocate enough time – winning suppliers' hearts and minds cannot be rushed. Waiting until
the project goes live will severely undermine the success of the initiative.
While there are many approaches to supplier profiling, the simple method described in this paper is effective as it combines communication,
training, and skills development plans within the project plan.

About the Author

Dr Gordon Murray
Dr Gordon Murray is a strategic procurement specialist with more than 28 years of experience as an award winning procurement
practitioner and then 14 years of working in procurement advisory. He has written several peer-reviewed academic papers on strategic
procurement improvement.
Gordon holds a PhD in Strategic Procurement Improvement and an MSc with distinction in Purchasing and Supply Management.
He holds a corporate membership of the Chartered Institute of Purchasing and Supply (MCIPS)

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