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Monday, May 16, 2016

The Relationship Pendulum Swings between Procurement and Sales

Guest Blogger
Kelly Barner, Editor, Buyers Meeting Point
Traditionally speaking, procurement and sales have been ‘uneasy bedfellows.’ We each represent our organization through an important interaction that may or may not result in an ongoing relationship. Even if a deal is struck, there is likely to be a change in the point of contact on one or both sides. Procurement may hand off to budget holders within the business and sales may hand off to technical or account managers.

And yet, for the duration of the sourcing/sales/negotiation processes, procurement and sales bear the majority of the responsibility for exploring the potential benefit of helping their organizations work together on an ongoing basis.

Over time, the nature of these processes, and the relationships that result from them, have changed significantly. One of the most meaningful changes has been the perception of the relationship between procurement and sales. Unlike the curve we typically associate with maturity or evolution, the changes have come in the form of a pendulum swing.

Starting Point: Casual Supplier Relationships
Before formal procurement, each organization had buyers that were responsible for the acquisition of goods and services from suppliers. In the natural course of doing business, buyers formed relationships with their sales representatives. Certainly, some portion of the relationship was due to procurement wanting to get a preferential deal, and some of it was due to sales putting a little extra effort into the deal to win the buyer over, but for the most part, relationships sprang up organically. The supplier would be in the office to demonstrate something new or check inventory, and over time details would be shared on both sides: vacation plans, hobbies, and kids’ sports.

Swing 1: Relationship Deconstruction
Then strategic sourcing hit the scene and all such ‘relationships’ were declared counterproductive and unethical. Procurement was trained to see ‘value selling’ as an effort by suppliers to bypass structured decision making processes. Companies passed formal guidelines that set boundaries for dealing with suppliers. No more lunches or golf outings – even charity ones. No more holiday gifts or easy familiarity. The casual nature of buyer supplier relationships was blamed for preventing the buying organization from objectively making business decisions and establishing supplier performance expectations. While some savings wins were achieved, the downside to all of this ‘objectivity’ was that something intangible – and beneficial – was lost.

Not only was the sourcing process taken out of the hands of the buyers, the people who would be using the product or service, and put in the hands of centralized procurement, the sourcing process itself – known to suppliers as the sales process – was forced through an eSourcing solution. This also confined contact between procurement and suppliers to orchestrated review sessions, allowing some face time but preventing relationships from forming, even by mistake.

Swing 2: Formal Supplier Relationships
In an effort to repair some of the damage, and regain lost value, supplier relationship management (SRM) caught on as a movement, driven by procurement and made the most of by suppliers. While some face time was better than none, many of these sessions were structured in accordance with carefully designed performance scorecards. No selling allowed – just reviews of quantitative performance scores and feedback from internal users, collected in advance and delivered in aggregate form.

While SRM was a move in the right direction for procurement and sales, it was a process change. What was really needed in order to redefine the nature of the relationship between sales and procurement – and the value created by it – was a mindset change, or a philosophy change.

Swing 3: A Return to Equilibrium?
Over the last couple of years, supply base collaboration has become the order of the day. And while procurement got our feet wet by attempting to collaborate with suppliers selected through existing strategic sourcing processes, we quickly learned that a relationship-oriented mindset has to exist from the very beginning: moving the line all the way back to the beginning of the sales process.

Not for all categories of spend or demand, mind you, but for the ones where a collaborative relationship creates a benefit for sales and procurement, value selling is back on the table for suppliers. No longer do their responses have to fit exactly in the boxes we give them – there is room to move and differentiate their company’s solution without threatening the objectivity of the process procurement was established to facilitate. And while sponsored lunches and golf outings may be gone for good, the occasional conversation about vacation or the local Little League team probably wouldn’t do any harm – it might even improve how the category is managed.

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