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How Sales can help Procurement succeed

Posted by Philip Kreindler on 01-Feb-2016 09:00:00

How Sales can help Procurement succeedI recently had the good fortune to interview Manuel Herrero, the VP Supply Chain Management of Bischofszell Food Ltd. The interview was a rare chance to find out how one of the most forward thinking managers responsible for procurement thinks about salespeople.

Just to give you a little background, Bischofszell Food Ltd. is one of the 19 manufacturing companies belonging to Migros – the number one Swiss retailer. The company is particularly well known for its iced tea, rösti, jams and convenience products. Migros is their biggest customer but they also supply other retailers - mostly as private labels - within Switzerland and abroad. Manuel is a member of the executive management team, responsible for supply chain management and procurement. He is currently attending the Supply Chain Management Programme at Cranfield University in the UK.

Manuel, what are the most important changes in the role of procurement? 

Procurement today has to play the role of a value creator, it needs to shift from being a sourcing office to a strategic role. We have to innovate continuously and expect our suppliers to help. Let me give you an example of a manufacturer who supplies cans to us. They came up with a way of making cans more cost effectively using two parts instead of three and could pass savings on to us. But this means change not just within Bischofszell but for our customers too. They supported us in meetings with our technology people but also with our customers to explain just how this change would deliver benefits to them.

Procurement has to take an end-to-end view of these business innovation projects. There are more and more people involved internally these days so procurement people need to have good communication and selling skills. In the past this was different, we were just a sourcing office, trying to negotiate the best price. That’s why I actually prefer if people on my team have experience in sales.

I am also trying to improve the attractiveness of a career in procurement. When I ask graduates what role they want within the organisation procurement is never in the top three. That has to change; I want to make procurement a more attractive option to high potential candidates.

Which skills and competencies do you expect from vendor representatives when evaluating the capabilities of potential suppliers?

I need them to understand the changing role of procurement and help us to succeed in that role. The vendor is the main key to success so they have to understand the end-to-end story and they have to deliver value. That means they must understand our competitive positioning and what could make us stronger.

Here is a good example. On 15 January 2015 the Swiss National Bank unpegged the Swiss Franc from the Euro and the value of the Swiss Franc soared. One supplier was proactive and called us on January 16 with a plan to gain a competitive advantage from the change in exchange rates. Other suppliers were not proactive and lost our trust as a consequence.

What are the 5 most important areas for vendor salespeople to improve?

I can think of more than five! Firstly I need them to understand our business. I expect them to come thoroughly prepared for a meeting, then to lead the meeting and be precise in what they say. And I want them to do more than just try to sell the product. As the relationship progresses I want them to try and forge more productive relationships and improve their level of performance year by year.

How well do salespeople ensure that what is promised is delivered? 

There are enormous differences. As far as I am concerned selling starts after you have sold because that’s what leads to the next contract. I would say 70% of salespeople leave it up to their organisation’s operational teams and the salespeople only show up again when the next contract is coming up. Only 30% hold our hand throughout the delivery phase. It seems that the bigger the company the more they have their teams that deal with delivery. The smaller the company the closer they stay to us even if there isn’t a contract coming up in the short term.

What tips do you have for an existing supplier to keep your business?

Deliver what they promise and don’t make mistakes. Make sure they have a really thorough understanding of our business and manage our buying centre. Then continuously improve service levels. Let our company feel that we are very important for them. I want them to be innovative and become an important link in the supply chain.

What are the reasons for selecting a new vendor despite a long-term relationship with an existing supplier?

We don’t want to look for new suppliers if we don’t have to, but when an existing supplier loses their capability to make us stronger and the relationship seems just like they are supplying a commodity, that’s when we start looking for alternatives. They have opened the door to alternative suppliers. 

We have to look at alternative suppliers continuously in case a relationship starts to slide but we don’t want to change unless we have to. When we do the final decision is based on value creation, the ability to help solve problems, reduce complexity and become more innovative.

When faced with the need to acquire a product or service, how do you identify and select the vendors you will approach?

I have to emphasise that if an existing supplier is good we don’t change. But as I said we have to maintain a list of alternatives so I encourage new vendors get on that list. When it comes to changing, we go to exhibitions, do plenty of desk research and talk to colleagues in other manufacturing companies. Our desk and field research are underpinned by our 360° evaluation process. 

How well do vendors use their sales approach to differentiate themselves from their competitors?

The vendors who realise they have to stand out through the way they sell are the ones who become more successful and grow their market share. Maybe only 30% actually do it well.

An example I can think of is a supplier of packaging who came to a meeting with the intention of explaining how we could increase sales of fruit based drinks. He brought our competitors product with him and showed us why their product was better. He went on to explain how his company’s innovative packing system for fruit-based drinks would help us increase market share. That impressed me.

Thank you for sharing these insights with us Manuel.

Note: I don’t think that every purchasing manager will be as innovative and forward thinking as Manuel. But I do think it is fascinating to hear what a thought leader in the world of purchasing thinks and I believe many purchasing managers will be thinking in his way in future.

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