SIG University Certified Sourcing Professional (CSP) program graduate Kate Burke outlines the necessary points for creating a strong, healthy, and productive relationship while ensuring your company has a clear path of intention and expectation.
Supplier relationship management is often overlooked during Procurement’s negotiation and contracting phases. Since the negotiation and contracting phases are just the beginning of the relationship, significant value can be driven by incorporating a governance framework into the contracting phase and instilling a collaborative relationship early on. Starting with a win-win mindset and a documented, agreed-upon governance framework will allow the business to focus on achieving the value of the contract, reduce noise, and enable quicker resolution of issues.
First, sourcing professionals and business stakeholders should enter the negotiations and contracting phase with a collaborative mindset. It’s important to establish appropriate bargaining ranges for your company, but equally important to enter it with a mindset that both parties need and want each other’s business. Establish trust by practicing solid communication skills and being truthful yet firm with your business’s needs. Learn who the supplier's key points of contact are during this phase and work to build mutual trust. Distrust or a sense of exhaustion from the negotiation only delays and hinders value realization once the deal is in effect.
Then, ensure a well-designed governance framework is built into the contract. A contracted governance framework is the most critical lever to ensure companies receive the most value from their suppliers. Frameworks should be intentionally designed, contracted, and communicated to both suppliers and internal stakeholders. By incorporating and agreeing upon clear terms up front, both the supplier and business understand expectations of one another and have clear guidelines for managing the relationship throughout its life. It enables the business to focus on achieving the value of the contract instead of getting bogged down by unclear management terms. Several factors should be considered when designing successful governance frameworks:
Service Level Agreements (SLAs) and Key Performance Indicators(KPIs) should be well-rounded and documented in the agreement. Clearly define the SLAs and KPIs in the contract. Ensure a complete understanding of those definitions from the business and supplier. SLAs and KPIs should factor in the quality and timeliness of the product or service but also include objective measures of the relationship's health. Contract levers, including credits and issue resolution paths, should be agreed upon for missed SLAs or KPIs. Credits should not be viewed as a savings opportunity but as a lever to drive supplier action.
Back SLAs and KPIs with contracted reporting requirements. Set expectations for what will be reported, how it will be reported, and the cadence at which reporting will occur. Requiring the supplier to report on performance enables data-backed decisions and discussion and drives accountability of performance.
Clearly define the issue resolution process and escalation paths within the contract. Issues should be defined for a range of severity levels. Agree upon an escalated resolution path for each level. Engage senior executives from both parties for severe issues and handle low-severity issues through regular checkpoints. By clearly defining the issue severity level and escalation path, sourcing professionals can help reduce noise and drive efficient resolution.
Relationship checkpoints and communication expectations should factor in the frequency and type of checkpoints that need to occur between both parties. By incorporating the cadence of checkpoints into the contract, the business can ensure appropriate attention, both internally and from the supplier, is put into the relationship. In performance and investment-based contracts, strategic business reviews should occur quarterly to review escalated issues, drive continuous improvement, and share strategy.
Key personnel should be identified upfront. Incorporate guidelines on how long that personnel will remain on the account. Include language that allows the business a say in replacements. Contract proper knowledge transfer requirements. Ensure clarity and an escalation path to handle key personnel issues and skill mismatches.
Supplier relationship management must be at the forefront of a sourcing professional’s mind when negotiating and contracting – both in the contract language and at a relationship level. Sourcing professionals have become critical to business success, and these two considerations are vital steps to drive the most value. While price reductions are always a favorite focus, it is all eroded when contract commitments cannot be managed.
The Certified Sourcing Professional (CSP) Program is a 10-week course that focuses on the hard and soft skills of sourcing, including strategic sourcing and outsourcing methodologies, as well as best practices in negotiations.
Kate Burke leads software and investment supplier management at MassMutual. She has experience standing up large outsourcing deals, M&A transactions, and negotiating significant software purchases with start-ups and established conglomerates. Before joining the Procurement world in 2017, Kate held roles. She led transformations across business lines and technology, which has built strong business acumen and her ability to collaborate with stakeholders seamlessly. She is a skilled and experienced negotiator specializing in technology and professional service engagements. Kate holds an MBA from the University of Massachusetts.
SIG University Certified Sourcing Professional (CSP) program graduate Kate Burke outlines the necessary points for creating a strong, healthy, and productive relationship while ensuring your company has a clear path of intention and expectation.
Supplier relationship management is often overlooked during Procurement’s negotiation and contracting phases. Since the negotiation and contracting phases are just the beginning of the relationship, significant value can be driven by incorporating a governance framework into the contracting phase and instilling a collaborative relationship early on. Starting with a win-win mindset and a documented, agreed-upon governance framework will allow the business to focus on achieving the value of the contract, reduce noise, and enable quicker resolution of issues.
First, sourcing professionals and business stakeholders should enter the negotiations and contracting phase with a collaborative mindset. It’s important to establish appropriate bargaining ranges for your company, but equally important to enter it with a mindset that both parties need and want each other’s business. Establish trust by practicing solid communication skills and being truthful yet firm with your business’s needs. Learn who the supplier's key points of contact are during this phase and work to build mutual trust. Distrust or a sense of exhaustion from the negotiation only delays and hinders value realization once the deal is in effect.
Then, ensure a well-designed governance framework is built into the contract. A contracted governance framework is the most critical lever to ensure companies receive the most value from their suppliers. Frameworks should be intentionally designed, contracted, and communicated to both suppliers and internal stakeholders. By incorporating and agreeing upon clear terms up front, both the supplier and business understand expectations of one another and have clear guidelines for managing the relationship throughout its life. It enables the business to focus on achieving the value of the contract instead of getting bogged down by unclear management terms. Several factors should be considered when designing successful governance frameworks:
Supplier relationship management must be at the forefront of a sourcing professional’s mind when negotiating and contracting – both in the contract language and at a relationship level. Sourcing professionals have become critical to business success, and these two considerations are vital steps to drive the most value. While price reductions are always a favorite focus, it is all eroded when contract commitments cannot be managed.
The Certified Sourcing Professional (CSP) Program is a 10-week course that focuses on the hard and soft skills of sourcing, including strategic sourcing and outsourcing methodologies, as well as best practices in negotiations.
Kate Burke leads software and investment supplier management at MassMutual. She has experience standing up large outsourcing deals, M&A transactions, and negotiating significant software purchases with start-ups and established conglomerates. Before joining the Procurement world in 2017, Kate held roles. She led transformations across business lines and technology, which has built strong business acumen and her ability to collaborate with stakeholders seamlessly. She is a skilled and experienced negotiator specializing in technology and professional service engagements. Kate holds an MBA from the University of Massachusetts.