Procurement and Sales: will the twain meet?

A few weeks ago, I had the privilege of being invited to present to the sales organization of a company that is a key supplier into the Oil and Gas industry. The organization had on many occasions bumped up against supply chain/procurement professionals who were asking for very specific cost related information or generally making the process of engagement appear rather difficult from the supplier’s point of view. The question that was central to the organization that engaged with me was: How do we counter the line of questioning put in front of us, make the process simpler and move the conversation away from rate/profit to value?

The first thing that came to my mind when I received the invitation was how incredible it was that this company was proactively trying to figure how to engage with their client’s procurement organization in a meaningful way. In my time in this field of work, I have only had two other companies come to me and ask me to help with regards to sales organizations:

1) the first company wanted to help their sales organization learn about what procurement does in terms of analysis and preparation as they source various categories

2) the second, a client, investing in helping minority suppliers understand what they need so that they are competitive and deliver value in their proposals. 

While most of our discussions and training efforts are focused on providing education and insights for procurement professionals, it turns out there is a very large need to engage with the sales and leadership organizations of your supply base. If the sales/leadership organization of your supply base does not understand where you are coming from and what you/your company is looking for, it becomes very difficult for the parties to reach an agreement.  It is important for the customer to understand costs, market forces, financial ratios, volumes and general requirements for the category to develop a robust sourcing strategy. However, it is equally important for the supply base to understand their costs, market forces, general requirements and customer goals to make the proposal most competitive while still bringing in a fair and reasonable margin for their company.

As I teach the tools and methods to each of these organizations, invariably, the conversations include pointed questions and complaints including:

  •           Why should we give them insights into our margins/cost structures?
  •           We don’t trust the client
  •           They don’t talk to us or listen to us
  •           Technology may seem to be bring efficiency by way of streamlining a sourcing event, but it leaves tons of opportunity on the table as we no longer have conversations to collaboratively figure out how to continuously deliver value
  •          The customer randomly extends payment terms
  •          They ask for platinum plated solutions that they don’t need making our proposal expensive
  •          They send letters asking for across the board discounts of 20% or more

As sourcing folks our first instinct might be to counter each of the points with an explanation of how the supplier is not seeing things from the right perspective. In offering counter points and debating each item we are probably missing the basic point – listening to the supplier, understanding the underlying problem and then trying to make things better. In numerous instances around the world, my colleagues and I have found that just listening to what our partners have to say results in identifying phenomenal opportunities. 

During each of the sessions I had with the sales/leadership folks from each of these organizations, I spent a significant portion of my time sharing the type of analysis that procurement folks do, why they need to do it (fiscal, ethical, risk, competitiveness perspective) and discussing how they need to take a step towards trust, transparency and collaboration. Being competitive is in the best interest of the client and the supplier – one does not succeed without the other. It is in working together that we can find and realize the greatest value within the supply chain creating great growth and prosperity for each company. 

I was truly impressed that at the end of each session the sales/leadership folks stopped by to tell me that it was great to understand why procurement needs to do what they do and why it is important. While they said these wonderful things, the truly important thing was they were open to hearing the procurement perspective I was offering them. As procurement folks we need to ask ourselves whether we are doing enough to help our supply based understand what we are doing, why we are doing it and how it can help everyone grow.

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