Exploring Challenges Facing Buyer-Supplier Relationships

Let’s say client A was not fully engaging a contract with a supplier B. Instead, provided leniency in the enforcement of some clauses from the contract. Conversely, supplier B was providing services outside of the contract. For buyers and suppliers who have established relationships, this may seem like a good thing. But over a period of time, this may lead to the following challenging scenarios::

1. Internal Exits and Role Changes

When a project stakeholder on either buyer or supplier side leaves the organization, and a new person comes in to handle the contract, the relationship quotient developed so far may get thrown off balance. Without the capability to objectively assess historic and existing performance data that was being managed subjectively earlier, a gap in expected outcome versus realized value may appear, which may further widen over time, reducing efficiency and increasing risk exposure.

2. Enterprise Reorganization

When an enterprise reorganization takes place and new vendor management professionals take on their new responsibilities, chances are that they may not be familiar with the contract, neither managed obligations nor held suppliers accountable, never tracked service levels, and may lack familiarity with reporting – factors that may lead to a gap in expected performance and the actual output.

3. Poor Tracking Capabilities

Without the capability to track business transactions between a buyer and its suppliers, auditing becomes difficult, accountability is diluted and risk exposure becomes aggravated.

4. Lack of Ownership

When asked to identify which owners or business units have responsibility for the contract and certain moving contract parts; there is a lack of response from both client and suppliers. The lack of client and supplier owners for many obligations and service levels complicates efforts to maintain compliance and consistency across contracts. At this juncture, the need arises for following best practices in supplier relationship management, allowing organizations to identify owners of all moving parts, such as obligations and service levels, and ensure alignment with the company’s goals and objectives.

Moving forward with CLM

Gaps in the form of inadequate collaboration, documentation, and accountability inefficiencies, assumption-based decision-making instead of data-based, and unpreparedness in the time of uncertainties – all can lead to an adversarial climate in the buyer-supplier relationship leading to the loss of cost savings and innovation opportunities.

A supplier relationship management system, such as Sirion, can help put relationship and transaction parameters in an objective perspective providing a non-human face to view buyer-supplier relationship health indicators – devoid of human bias. It draws the spotlight away from the relationship shared by a few individuals and puts it on the buyer and supplier, forcing them to mind and address these gaps in outsourcing. Thus helping an objective evaluation of services provided by the supplier against the buyer’s contractual expectations on performance, ensuring maximum performance and value out of the business relationship.

Does the above resonate with your experience of managing outsourcing relationships? We’d love to hear how you strike a balance between trust and objective measurement in your supplier relationships.