Can brands save profits without squeezing suppliers?


HICX CEO Costas Xyloyiannis says brands can save costs without compromising on resilience by building strong supplier partnerships

With inflation driving down sales, manufacturers can only push costs up so much and they’re feeling the pinch. While the reflex for many will be to squeeze suppliers, this isn’t the solution. Pressuring suppliers to drop prices only limits the resources with which they can work. This blocks the value that manufacturing brands can draw from these businesses, such as dependable supply and information that prevents risk and attracts opportunities.

So, how can brands protect their profits while also remaining productive, compliant, and inventive? Through trustworthy supplier data: the foundation on which brands can work together with all their suppliers towards cutting costs without conceding these vital goals.

Get good data early

When better to establish dependable data than the moment each new supplier is integrated? Data is at the heart of every good supplier interaction. Without it, suppliers are likely to have difficult relationships in the future, making it harder for them to provide essential information related to areas such as sustainability risk and to propose innovations that contribute to building brand reputation. But suppliers who have strong relationships with their customers are more inclined to go the extra mile – a recent HICX study shows that if they are low on stock, suppliers are 20% more likely to prioritise an order for a customer-of-choice.

The best supplier data is in the form of a “single source of truth”. When data is considered trustworthy, brands can make the working relationship significantly easier. This simplifies what it takes to receive helpful stock, information, and ideas.  Underpinning these goals is reliable supplier data, the collection and safeguarding of which should be established early.

Getting this right also requires brands to control how changes to the data are managed. There is a simple analogy with removing plastic from the world’s oceans – it’s pointless cleaning what’s already there while neglecting to address future pollution. Rather, invest disproportionately in preventing future plastic from entering the water. The same is true with supplier data. A ‘single front door’, through which all new data and all changes to existing data must pass, is essential. That door has both a technical and a governance role: it disables any other systems from making changes and governs who can make changes and under what circumstances.

Communicate impactfully

With supplier data in top shape, brands can then communicate better with all their suppliers. Too often, they send long surveys to suppliers in order to receive information with which to manage risks and opportunities. And too often, the task is irrelevant to many of the recipients. For example, an initiative to determine how many product packaging suppliers in the US comply with sustainability regulations might go to every packaging supplier in every country – including those who sell boxes for shipping. Each of these businesses would have to engage with the survey to determine whether it applies to them. This costs time. Big brands might not directly feel the consequences, but logic dictates that it will be harder for these suppliers to give them quality information and work efficiently.   

Thankfully, the reverse is also true. Brands that receive and store accurate supplier data – including contacts, plant-level, global and local data – properly and at the start of each new relationship can communicate better with their suppliers. This creates the perfect conditions in which to find cost-savings together while keeping sight of compliance risks and ways to innovate.

Remove all friction

While it’s sensible for brands to steady these communication issues from the outset, suppliers face many other bugbears. Late payments, unrealistic expectations and confusing technology are just some of the challenges. Brands can invest in supplier relations by understanding the friction points that their people, processes and technology put on suppliers. And by adopting truly supplier-friendly mindsets and technologies through which to work with all supplier – from day one.

It’s one thing to onboard a handful of strategic suppliers in this data-first, supplier-friendly way, but if brands do so across the network, they can successfully reach their goals at scale. Every supplier should be treated as a partner. This way of thinking, encouragingly, is being led by forward-thinking brands such as Mondelēz International, Unilever and Mars. We need more manufacturers to join the movement of collaborating with all their suppliers from day one. And as we weather the cost-of-living crisis the way to solutions will be through mutual success.

Costas Xyloyiannis is cofounder and CEO of HICX, the 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’ experience in helping some of the world’s largest companies to take control of their supplier data and deliver a superior supplier experience. Costas 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.

This contributed article has been written by a guest writer at the invitation of Procurement Leaders. Procurement Leaders received no payment directly connected with the publication of this content.

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