Like most CEOs, my role at Scout encompasses everything from improving our product offerings to growing our customer base to making strategic financial decisions—and everything in between. With so many duties to juggle, it isn’t surprising that CEOs often overlook sourcing. But when CEOs partner with procurement, they can dramatically increase their business’s profitability while maintaining growth goals and reducing risk. The key to sourcing success? Executing a strong digital supplier strategy.
As the rate of modern business accelerates and industry challenges become increasingly complex, CEOs must collaborate with their sourcing and procurement organizations and actively empower a digital supplier strategy. By positioning sourcing as a strategic business driver—and enabling procurement teams with the right technology—CEOs can take a proactive approach to mitigating third-party risk, while gaining a competitive advantage and strengthening the business.
Here are the top three truths that every CEO should know about digital supplier strategy:
1. Company performance and savings are inextricably linked to supplier strategy. Supplier performance directly impacts business outcomes such as cost, risk, value and compliance. With new requirements like General Data Protection Regulation (GDPR), CEOs can no longer afford to overlook the importance of supplier strategy and must equip their sourcing teams with the tools they need to drive optimal supplier performance. This requires technology that facilitates greater visibility into the supplier lifecycle, full transparency into sourcing processes, and increased collaboration across the enterprise.
Effective supplier strategy demands that sourcing teams have access to the data they need in order to understand supplier impact and identify areas for savings. The right solutions can also relieve some of sourcing’s burden by streamlining and automating their workflows to drive team productivity and ultimately reduce costs and mitigate risk for the business.
2. Suppliers are driving digital transformation and innovation. The CEO is responsible for supplying the organization with modern solutions that enable the business to adapt to a rapidly evolving market. Sourcing teams play a direct role in supporting this digital transformation by identifying areas for Supplier-Enabled Innovation (SEI). An article in Procurement Leaders states that “with 25%-45% of revenues coming from product innovation and up to 65% of innovations sourced externally through external partners and suppliers, SEI represents a treasure trove of opportunity.”
To tap into this opportunity, CEOs must partner with sourcing on an ongoing basis and map out a clear path to digital transformation and innovation that aligns with corporate goals and Key Performance Indicators (KPIs). By contracting with forward-thinking suppliers and empowering SEI, CEOs can gain a competitive advantage for their business and achieve digital transformation within their organization and supplier network.
3. Properly managing supplier risk is mission-critical. How are you managing your suppliers? If you’re like many organizations (and I speak from experience), you may be using a haphazard system involving spreadsheets, email chains, and clunky ERP software with a UI that hasn’t been updated since the 90s. Manual and outdated processes like these decrease visibility into your supply chain and increase risk to your business. With a greater chance of data inaccuracy due to human error, your business is vulnerable to breaches – take a look at what happened to Quest Diagnostics last June.
Today’s enterprises are only as strong as their weakest vendor. That’s why it is absolutely essential to find a solution with built-in supplier management capabilities like supplier performance tracking, evaluations, and feedback mechanisms. CEOs must protect their business by taking a risk-based approach to supplier management to ensure that their vendors meet industry standards for security and compliance.
If you’re looking to run a successful enterprise today, your supplier strategy can no longer be an afterthought. One way to support your sourcing organization is to empower them with the right technology to help streamline their supplier strategy, automate workflows and enable greater visibility into operational processes. With sourcing’s ability to make massive impacts to the bottom line, it is both your responsibility and your opportunity as CEO to partner with them in order to achieve better business outcomes.