Strategic supplier relationships have been strongly encouraged in private sector procurement for decades, but there has been little emphasis on supplier relationships in the public sector. The Procurement Act 2023 changes that.
One of the key features in the Act is the idea of supplier partnerships. Public procurement isn’t just a buyer/supplier transaction, it’s a partnership; a collaborative exercise that enhances contract delivery and delivers more overall value, including sustainability and social value for local communities.
Changes That Affect Supplier Relationships
Two of the primary changes require a change in mindset; a different way of thinking and approaching tenders and contract awards. Effective supplier management is also crucial in this new approach, as it involves finding, evaluating, contracting, and maintaining relationships with suppliers to align them with government goals and drive operational success.
1) Early supplier engagement
Early engagement is already considered best practice, but now it’s an official requirement in sourcing strategic suppliers. Identifying and evaluating potential suppliers during early engagement is crucial for building a strong supply chain and establishing mutually beneficial relationships.
Preliminary market engagement notices alert suppliers to an upcoming contract and invite them to participate in contract development. For instance, they can play an active role in research and events.
Early engagement provides suppliers with deeper insight into buyers’ needs. Research provides insight into the market, especially upcoming trends, and opportunities for innovation.
2) Transparency in the procurement process
The public is increasingly vocal about accountability in public spending. The government has responded by mandating transparency in procurement decisions, including the selection of strategic suppliers. This includes publishing regular progress reports so the public knows how procurement activities proceed and what is being done to bring poor outcomes up to standard.
Transparency is also required to keep suppliers in the loop, for example, projected demand and current inventory levels (so suppliers can prepare for upcoming requirements). Transparent communication is the best tool for conveying this and other contract information.
Evaluating prospective suppliers based on stringent criteria such as price, quality, and adherence to sustainability and ethical standards is crucial. This ensures that new suppliers meet the buyer’s requirements and align with their values.
Transparency also plays a role in social value and sustainability. The Act requires transparency in, among other things, ESG reporting and internal policies. This is important to align suppliers’ products or services with contracting authorities’ goals.
Focus on Sustainable Supplier Partnerships
Develop strategic supplier relationships with the long-term in mind. It’s the only way to get full value out of the partnership. Long-term supplier relationships are built on transparency, trust, collaboration, and shared goals.
Strategic suppliers are more than just partners. They’re reliable suppliers you can count on to deliver high-quality goods or services every time. They’re the ones you can trust with fairly complex, high-risk contracts, the ones with the most successful collaborations.
Managing relationships with key strategic suppliers requires high commitment and collaboration, as they provide critical high-risk or high-value goods and services.
Note: Strategic suppliers aren’t guaranteed contracts. Unless there are special circumstances, they must go through the same tender process as other interested suppliers. You can’t show undue favour or give them an unfair competitive advantage. If there are suppliers who are likely to deliver better overall results, they should be awarded the contract.
Strategic suppliers don’t take this personally. The focus is on the long-term benefits of the relationship, and that is stronger than winning or losing contracts.
Four Benefits of Supplier Partnerships
Strong supplier relationships provide a sense of comfort. You know you can count on:
1) Consistent quality
Their track record speaks for itself, as you well know. You also probably keep an eye on their other contracts, so you know they can meet various needs and work with various procurement teams. This demonstrates adaptability, an important quality in public procurement.
2) Stable, ethical supply chains
You should know your partners well; well enough to know that their supply chain is sustainable, ethical, and reliable. Supply chains shouldn’t have any hint of scandal. No association with modern slavery, no environmental damage, and no history of defective products.
Should challenges arise, you can collaborate with your suppliers to find a satisfactory solution.
3) Innovation
Collaboration, especially among teams that have established a culture of innovation, can lead to the development of new, more efficient, and effective business operations, services, or products.
Different perspectives provide different insights, which can get the creative juices flowing. Early engagement is a good time to collaborate on new ideas because innovation or new developments will change contract details, usually to the mutual benefit of all stakeholders, including buyers, suppliers, and the public.
Innovation is further supported by Innovate UK, which is a primary delivery body for the government’s Innovation Strategy. Small businesses, in particular, might want to check it out.
4) Stronger social value credentials
Suppliers must have social value projects on the go. Buyers with strong relationships with multiple suppliers can contribute to their success, securing several streams of ongoing social value. This aligns with national goals and demonstrates to local communities that the government is on their side.
How to Build Strategic Partnerships
Like all relationships, they require effort. Communication is particularly important. Miscommunication can derail a relationship faster than Clark Kent can change in a phone booth.
Keep open channels of communication and, if possible, appoint one person as the primary contact. Consistency facilitates clear communication. It’s also much easier to develop strategic partnerships with one or two people rather than an entire team.
If you’re going to be clinical – and as a government body charged with public funds, you must be clinical – use supplier data to assess performance, identify and manage risks, and take advantage of opportunities.
KPIs are a great source of data. You can see how suppliers perform with other buyers and different contracts. One iffy performance isn’t an absolute train smash – there could be mitigating circumstances you’re not aware of. You’re looking for a larger pattern that either demonstrates that iffiness is an anomaly or a habit. You can then keep them in the fold or kick them into touch.
Feedback is also important in building good relationships with suppliers. They must know their weak areas so they can improve. They must also know where they perform well, so they can optimise processes and tweak them to suit areas that need a performance boost.
Digital Technology Supports Supplier Relationship Management
Public procurement is undergoing a digital transformation. Technology is increasingly used to simplify processes, reduce costs, and enhance efficiency.
Online procurement portals are among the most used tech tools. Many portals are used to publish contract notices. Suppliers register on the platforms and receive alerts when new, relevant tenders are posted.
Some platforms, like Delta eSourcing, provide far more comprehensive services. For example, Delta has advanced analytics and integration tools, as well as tender and supplier relationship management options.
These platforms or portals are designed to simplify the procurement process, which includes streamlining interactions between buyers and suppliers. Delta also provides branded buyer portals where buyers can set up “hubs” for each contract. All contract data is stored in the hubs, and all internal and external stakeholders have access to the data. This is in line with the government’s transparency requirements.
Other digital tools provide supplier performance tracking and regulatory compliance services.
Contact Delta eSourcing to find out more about the range of tools that support good supplier relationships. While you’re at it, book a free demo and see for yourself how our services can benefit you.
