If the public sector is going to improve the way it buys goods and services, then public organizations need to improve the way they’re seen by their supply base, according to leaders who attended the June Public Spend Forum Public and Social Sector Best Practices Exchange meeting. Representatives from nonprofit organizations and all levels of government from across the globe gathered to discuss a variety of topics, including the competencies needed by the public procurement workforce, what metric or metrics they use to measure their performance, and innovative approaches to training.
But one thread that connected much of that wide-range discussion, to my mind, was supplier perception. Professor Joseph Sandor of Michigan State University put it most succinctly when he listed the three overarching enablers of the top organizations in the country, and number one was supplier perceptions—how suppliers see their customers.
Sandor said that of all of the issues that can come between a supplier and a buyer—cost vs. value, trust and communication, quality and technical support—the number one issue where suppliers think buyers fall short is concern over their profitability.
“Suppliers don’t believe we’re concerned about them,” he said. “And the reason I’m emphasizing this is that when we talk about metrics, very few people measure what I think is most important thing, supplier perception. Or they measure it haphazardly, but it’s not a genuine metric that senior management appreciates.”
Professor Sandor stressed that by tackling that issue, organizations can actually help improve their supply base: “You can’t assume the supply base is going to exist in level you need without making strategic investment.”
The question of supplier perception and supplier development permeated the discussion. One executive from the Department of Defense noted that building relationships with suppliers is key to his department’s success.
“As we execute contracts over time tend to go back to the same vendors, and build relationships with those vendors,” he said. “So we have to look at how we are driving down costs and creating efficiencies over time on the contractor side, as well.”
One federal procurement leader raised the point about socioeconomic targets, where agencies are required to spend a certain percentage on disadvantaged small businesses. But, he argued, the percentages have gone up as the number of total contracts have come down.
“So what are we really measuring there, what’s the goal?” he asked. “Our goal should be to create viable innovative companies that can do something innovatively and efficiently. I like to do business with companies that invest in themselves. I believe that’s something material as it relates to the supplier base. And in terms of metrics, that’s something we should look at. That reinvestment is going to make supplier base better for me and service my needs. I’m looking at it from the status of a business relationship.”
Of course, when it comes to metrics, one executive noted that perhaps what’s most important is how procurement can best serve the mission of the organization.
“What metric is most important is what’s important to the chief executive,” he said. “In terms of the value proposition, the goals and objectives, it’s what the the chief executive needs to have done that’s the key indicator. I don’t know where that fits in here other than customer satisfaction. But it’s how we can show procurement has contributed to the overall enterprise.”