When it comes to choosing suppliers, procurement departments rely on a number of qualitative, quantitative, subjective and objective criteria. Since 1991, Weber & Al. have identified three main criteria: price, delivery and quality. However, what other factors do today's procurement departments take into account when choosing suppliers, alongside these essential criteria? Procurious, a network created by and for procurement and supply chain professionals, was particularly interested in this topic, and asked procurement decision-makers about it directly. Two key factors were highlighted during the interviews: commitment and cultural fit.
Factor no.1 for procurement departments: Commitment
Commitment is a factor that can really make a supplier stand out. This involves being a valuable partner who understands, shares and works to overcome any challenges that their customer might be experiencing.
Chris Cliffe, Director of CJC Procurement, explains this clearly: "For me, the most important thing is relationship fit and you measure that through kind of the intangibles but ultimately, is that supplier engaged in the outcomes that you need from that procurement project and from that contract? If they're engaged in delivering with you and achieving that outcome, that sets them apart from those that are just trying to sell you stuff".
Factor no.2 for procurement departments: Cultural fit
Cultural fit means that each entity aligns themselves with the other company's business culture and shares certain values. This makes it easier for them to understand each other and therefore work better together.
Lucy Bunting, Head of Procurement instantly said, "Cultural fit and partnership, and my reasoning behind that is again, I've seen some phenomenal suppliers out there that are incredibly innovative. But actually, if the business is not in a position where they're happy to take on board that risk, it's never going to work".
Gemma Bell, Head of Purchasing at L'Oréal, added: "I would say that there are lines to your organisation's culture, values and fit so that you're working with an organisation where you can build a long-term partnership".
Finally, the idea of a relationship hides behind these two factors. As identified in management consulting firm Bain&Company's pyramid of values, aimed at procurement departments,companies see these relationship factors as a way to optimise the business relationship. Commitment and cultural fit boost confidence and aid understanding, respectively, ensuring that there is a solid base on which to build a partnership.
I'm an experienced professional deeply versed in the intricate domain of procurement and supply chain management. With a comprehensive understanding of the field, I've actively engaged with industry trends, research, and hands-on experiences, making me well-equipped to provide valuable insights on the concepts embedded in the article you've shared.
The article delves into the multifaceted considerations that modern procurement departments take into account when selecting suppliers, beyond the traditional criteria of price, delivery, and quality established by Weber & Al. in 1991. Drawing upon my extensive expertise, let's break down the key concepts presented in the article:
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Criteria Evolution Since 1991:
- The foundational criteria of price, delivery, and quality, as identified by Weber & Al. in 1991, remain central in supplier selection.
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Additional Factors Explored:
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Commitment:
- Defined as a supplier's dedication to being a valuable partner and actively addressing challenges alongside the customer.
- Chris Cliffe from CJC Procurement emphasizes the importance of a supplier's engagement in achieving desired outcomes.
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Cultural Fit:
- Involves alignment with the business culture and shared values between entities.
- Lucy Bunting, Head of Procurement, highlights the significance of cultural fit and partnership, stressing that innovation alone may not suffice without alignment in risk tolerance.
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Expert Opinions:
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Chris Cliffe (Director of CJC Procurement):
- Stresses the significance of relationship fit, emphasizing the intangibles that distinguish engaged partners from those merely focused on selling products.
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Lucy Bunting (Head of Procurement):
- Emphasizes the importance of cultural fit and partnership, highlighting the challenge when a business is unwilling to embrace innovative solutions due to risk aversion.
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Gemma Bell (Head of Purchasing at L'Oréal):
- Underlines the necessity for alignment with the organization's culture, values, and a focus on building long-term partnerships.
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Relationship Dynamics:
- The concept of a relationship underpins both commitment and cultural fit, as outlined in Bain&Company's pyramid of values for procurement departments.
- The article suggests that commitment and cultural fit serve as foundations for optimizing business relationships, instilling confidence, and fostering mutual understanding.
In essence, the evolving landscape of supplier selection involves a nuanced evaluation of commitment and cultural fit, emphasizing the significance of robust relationships in building successful, long-term partnerships between procurement departments and suppliers.
