As discussed in a previous post by Tony Fross, the concept of supplier experience management (SEM) would apply the principles of Customer Experience Management (CEM/CXM) to supplier related procurement activities. By focusing on supplier relationship attributes such as brand, products and services, a firm can optimize processes, promote innovation and create a consistently excellent experience across its supplier base. In practice, however, it appears that only a small number of firms have employed these strategies. One such example can be found at the leading online retailer, Amazon.
Amazon’s Vendor Flex Program
For some time, Amazon has been quietly creating enhanced partnerships with key suppliers to improve trade relationships and drive down costs. This specific initiative is known as Amazon Flex, and one such supplier is P&G. The program physically moves a segment of Amazon’s operations to the supplier’s warehouses. Cooperation at this level allows Amazon to increase the velocity through which it procures and fulfills orders while simultaneously removing costs in its operating model. P&G is able lower its operations costs and can benefit from creating stronger supplier relationships with Amazon. If prices and shipping times decrease downstream, Amazon and P&G can capture a larger share of the online household goods market with their enhanced model.
Suppliers can bring innovation, if you let them
Strategies such as theses, while unorthodox, demonstrate the potential that SEM brings to the industry. While procurement organizations must continually address aging technologies, inefficient processes and growing costs, they have the opportunity to leverage suppliers to create innovative products and services. Beyond strategic sourcing and improved ERP usage, procurement organizations need to build a culture that views suppliers as value bringers and partners. While the benefits could be large, the challenge will be ensuring that the organization is mature enough to take that next step. New and innovative strategies add strain and complexity to the organization and require agility, transparency, and ruthless efficiency in a company’s operations. Once firms achieve at this level of operation, they have the opportunity to dedicate the time and investment necessary to make concepts like SEM a core business strategy.