Putting Suppliers at the Heart of Business

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PUTTING SUPPLIERS AT THE HEART OF BUSINESS

In their recent article “It’s time for CEOs to put suppliers first” for Fortune.com, authors Christian Schuh, Wolfgang Schnellbächer, Alenka Triplat, and Daniel Weise check off the many ingredients that created a recipe for disaster for international business leaders in recent years. When combined, the U.S.-China trade war, the COVID-19 pandemic, rampant inflation, and the Russian invasion of Ukraine served up a bitter dish to make us feel like we are living in an “age of crisis.”

These immense challenges wreaked havoc for CEOs running global companies with worldwide footprints. As supply chain disruptions rippled across industries, and bottom lines and profit margins took a hit, many CEOs, as the authors observe, were “quick to make their excuses, claiming these were unexpected ’black swan’ events that could never have been predicted.”

But could these events have been predicted? Should CEOs have been better prepared?

“In a word, yes,” the authors write. “None of these events [were] a ’black swan’ event, a term coined by bestselling author Nassim Nicholas Taleb to describe a random, highly improbable occurrence. On the contrary, they were what the business writer Michele Wucker has called ’gray rhino’ events: highly probable, highly predictable, high-impact but neglected threats that were charging toward companies like a crash of rhinos.”

The authors — all partners at the Boston Consulting Group and coauthors of the book “Profit From the Source: Transforming Your Business by Putting Suppliers at the Core” — point to past events, such as Russia’s 2014 annexation of the Ukrainian region of Crimea and previous pandemics, epidemics, and outbreaks, that foreshadowed our current “age of crisis.”

So, why were leaders of some of the world’s largest multinational companies caught off guard by these events? Why didn’t they see or hear the crash of the charging rhinos?

“In our view, it is because today’s CEOs are too introspective, too focused on the here and now, and oblivious of what is happening in the rest of the world,” the authors proclaim. “Research from Harvard Business School found that CEOs spend only 1% of their time with their suppliers. Given that suppliers account for more than half of a typical company’s budget, this is not only impractical, it borders on the absurd.”

Lest we forget: suppliers are critical gears in an organizational ecosystem. “When they stop, the company they supply stops, too,” the authors correctly assert. Suppliers are the lifeblood of the company — providers of “mission-critical components,” not to mention “commercial intelligence” about competitors and current trends. “As such,” the authors write, “they are a window to the world beyond the confines of the corporate headquarters.”

So, what can CEOs do to predict and prepare for future supplychain disruptions?

“They should put suppliers at the very heart of their business,” the authors declare. “For too long, these vendors have been marginalized, treated as dispensable, come-and-go providers of goods and services who can be hired in good times and fired in bad times. At a personal level, CEOs should make supplier relations their leadership imperative by spending more time with them. In particular, they should nurture one-on-one relationships with the CEOs of their top suppliers, the 20 to 40 companies that account for half of their supplier budget. So often, CEOs are surrounded by corporate yes-men.”

In a nutshell, supplier CEOs occupy a unique position. “Unencumbered by institutional loyalties,” the authors write, they “can tell CEOs what they should hear: How it really is. At a companywide level, CEOs should raise the profile of the chief procurement officer and revamp their procurement function, which ’owns’ the corporate relationship with suppliers.”

At SAMA, we couldn’t agree more. Suppliers are key in their ability to deliver value to their customers. And the CEO should know who their strategic suppliers are, and they should be in contact with them. But there are many people that a CEO should be in contact with — everybody wants a piece of their time. Most large companies have thousands of suppliers. Being strategic about identifying the important ones and developing relationships with them, deciding how and where to focus one’s time — this is the central challenge for a CEO (and the exact challenge of a SAM program, as well).

Which really gives rise to the question, “How can the CEO do this at scale?”

For answers to this question, look no further than AVI-SPL, co-winner of SAMA’s Excellence Award for Outstanding Mature Program of 2022. As you will read later in this issue, AVI-SPL, a Tampa-based provider of collaboration and audio video technologies, is a perfect example of how quickly a SAM program can take flight when there is unilateral, internal buy-in. From the moment the senior leadership proposed the program and AVI-SPL’s Board of Directors sponsored it, there was unanimous support from the entire executive team — the CEO, COO, CFO, EVP of Technology & Innovation, and EVP of Sales and Marketing — to promote the program and advocate for its growth as active and engaging participants.

One of the main ways AVI-SPL achieved such success — at scale — was through their development of a Customer Advisory Board (CAB), which included senior leaders from customer companies. Each of AVI-SPL’s Global Accounts was asked to participate in the CAB, giving them exclusive C-suite access to strategy discussions, oversight, peer-to-peer knowledge exchanges, and community building. Aligning in such a symmetrical way builds trust, relationships, and joint value creation, and it’s the reason why the C-suite of AVI-SPL’s strategic accounts see them as trusted advisors.

In AVI-SPL’s case, they applied their CAB — as the name suggests — to their customers. However, SAMA spoke with Betsy Westhafer, CEO of The Congruity Group, an organization that builds and deploys Customer Advisory Boards, and we asked: Can the same reasoning and structure behind CABs be applied to suppliers, too?

“Absolutely,” Westhafer said. “It’s bidirectional. The goal is to have mutually beneficial, consistent, and valuedriven dialogue. Whether that’s between the C-suite and their strategic accounts or between the C-suite and their strategic suppliers, the goal is the same. How can we work better together now and into the future, and how can we strengthen the relationships in the process? We believe there is no better way to insulate your organization from black swans, gray rhinos, or any other impending disruption than with a commitment to having these types of insightful conversations,” Westhafer concluded.

If more CEOs followed this example of putting, as the authors suggest, “their suppliers and their procurement function at the heart of their business,” we at SAMA agree that “they too can stay one step ahead of their rivals.” n

Adapted from “It’s time for CEOs to put suppliers first,” published at Fortune.com, by Christian Schuh, Wolfgang Schnellbächer, Alenka Triplat, and Daniel Weise, partners at the Boston Consulting Group and coauthors of the book “Profit From the Source: Transforming Your Business by Putting Suppliers at the Core.” https://fortune.com/2022/06/27/ceo-suppliers-firstsupply-chain-crisis-uncertainty-economy-world-business-leadership-bcg/