Sustainability Will Never Improve Unless We Empower Suppliers

Suppliers who are treated well provide better data

Published: Tuesday, January 17, 2023 - 12:03

During the early 2000s, I was a recent software engineering graduate. Along with a friend and fellow graduate, I landed some project work with a major pharmaceutical company. The CEO, who had just signed up to the U.N. Global Compact, needed to know how sustainable the company’s supply chain was. He tasked the chief procurement officer (CPO) to audit the company’s suppliers—some 150,000 of them.

Back then already, supplier data were a struggle. The CPO needed to know who all these suppliers were and whether they complied with a list of principles to which the company had committed. It was our job to develop the platform from which this could be determined. Long story short, the CPO was able to gain the visibility that he required. This meant he could demonstrate compliance at the board level, making the project a success.

It was exciting for us to witness the role that data played in making supply chains more visible. In the 20 years that have followed, we’ve had the opportunity to explore this topic with some of the world’s biggest brands. If there’s one thing I’ve learned from this experience, it’s that good supplier data are a function of good supplier engagement. And importantly, the reverse is also true.

Experience in equals data out

Today, environmental and social governance (ESG) questions have become mainstays on the corporate agenda. As we learned when starting out, success in these areas requires visibility into supplier data. Traditionally, it has mostly been the CPOs who have faced the challenge of collecting and maintaining supplier data. In the current climate, there’s an opportunity for the broader business to support this area. What it takes is for leaders to fundamentally rethink the experience they offer to suppliers.

Receiving supplier data for ESG is straightforward, in theory. Suppliers own it. Manufacturers need it. The resolution would be simple, but for the technology that governs how the parties work together.

During the Covid-19 pandemic, digital transformation in procurement accelerated. Adopting best-of-breed technologies was triggered, and now the average supplier must log in to at least eight solutions to serve a single customer. For example, a different system might be required for each of the following processes: receive orders, submit invoices, access forecast information, see invoice payment status, submit quality information, supply risk data, complete compliance surveys, respond to sourcing events, and take part in performance assessments.

Apart from the burden on suppliers, each login also represents a data entry point. These data get spread across systems and quickly become duplicated, outdated, and inaccurate. Suppliers find it difficult to view and manage. Yet these are the data that big brands, with thousands of suppliers, use to inform their ESG decisions.

Expecting suppliers to log in to too many solutions is one of many ways in which businesses complicate the relationship. And it’s one of many ways in which they hinder the upkeep of good supplier data. Ultimately, supply-chain visibility suffers; so does ESG.

Forward-looking businesses are evolving their technology strategies to remove operational friction. This encourages a more satisfied supplier base that works better and provides better data. It creates an environment in which ESG thrives.

Known as supplier experience management, the principle is becoming increasingly popular among procurement leaders. It champions the idea of treating all suppliers like partners with their own business objectives, rather than as resources from which to just extract value.

The broader business must buy in

Successful supplier experience management requires a procurement-technology strategy that simplifies the supplier relationship. When fine-tuning this approach, CPOs must don their “supplier-first” and “data-first” hats. Can an environment be constructed in which suppliers can access many solutions with very few clicks? Concurrently, can they have fewer data entry points? By fixing the flow, procurement can help suppliers to help the function.

Executives can help procurement to help the enterprise. Leaders who foster a culture in which supplier experience is valued are crucial to making supply chains more visible. ESG stakes can be high, and CPOs can do with the right level of support.

When delivering a procurement-technology strategy, CPOs need the budget to purchase technology and train their people. The challenge lies in analyzing return on investment. Finance can help by understanding the value that a supplier-based digital transformation could offer, intangible as it may be. Integrating third-party technology can also be a challenge. IT leaders can help to transfer knowledge from successful integrations elsewhere in the business, such as from customer-facing teams.

Being in a position to operate sustainably requires the entire business to partner with the entire supplier network. Leading manufacturers recognize that their businesses need suppliers—all suppliers. A supplier-centric approach seeks to address the entire base of suppliers, not just a strategic few. This is the most reliable route to a transparent supply chain and better ESG results.

Supplier experience benefits everyone

The good news is that offering suppliers a better experience has a cumulative effect. Every department in the enterprise that uses supplier data is strengthened. In addition to sustainability outcomes, this also enables a resilient business model.

The uncertain landscape rising from events such as Covid-19, natural disasters, and war in Ukraine is forcing businesses to rethink how they build supply chains—from focusing exclusively on being efficient and lean to building resilience.

Gratifyingly, quality supplier data have benefits beyond ESG. The data also powers cybersecurity, fraud prevention, reputation management, and other key items on the corporate agenda. Better supplier relationships can advance the broader business, too. As in employee engagement, treating suppliers well can increase their productivity and loyalty. A recent HICX survey found that suppliers are 20 percent more likely to prioritize orders and go the extra mile for a “customer of choice”—a status worth having.

Ultimately, suppliers that are treated better can provide better data. And companies that empower their suppliers to provide better data can generate better ESG results. When leaders improve how their businesses work with suppliers, they unlock collaboration. Then the relationship can flourish to its full potential. It’s from this vantage point that businesses can help protect the planet.

About The Author

Costas Xyloyiannis

Costas Xyloyiannis is co-founder and CEO of HICX, a leading supplier-experience management solution. Costas founded HICX in 2012 to address the challenges of bad supplier data in the enterprise. He holds a master’s degree in computer science from Imperial College London and has 20 years of experience in helping some of the world’s largest companies take control of their supplier data and deliver a superior supplier experience. He strongly believes in the importance of data and supplier-centricity as a foundation for digital transformation in business, and is a regular speaker and contributor on this topic.