Last Wednesday, I reviewed Ariba’s new whitepaper entitled “Supplier Nominated Savings: Accelerating Savings through Strategic Partnerships.” Though I pointed out much value in the whitepaper, I did write that the approach seemed more like an RFP than a true collaboration.

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Apparently, I wasn’t the only one.

In response to a related post on Supply Excellence (Ariba’s blog), the Hackett Group’s Pierre Mitchell commented that supplier nominated savings programs are most effective when they are not “narrowly defined,” cautioning procurement organizations not to disguise the “price reduction wolf in a collaborative sheep’s clothing.”

Ariba followed up with a second post on Friday, trying to clarify the “win-win” nature of good supplier nominated savings programs. While the follow up was valuable, I think that there was something that could have been said more simply. And, actually, it is the most critical piece of a successful supplier nominated savings program. So I am going to help Ariba articulate it.

What is it?

It is communicating the benefit to the supplier.

What is in it for them?

An extension to the term of the contract?

A larger percentage of the business?

A bigger profit margin due to lower costs for the whole supply chain (not just the buyer’s organization)?

Oh, you didn’t think of why the supplier should be excited about a supplier nominated savings program?

You should be thinking about it. After all, the goal is to motivate your suppliers to help you.

“Bring us cost savings, and you will get _____.” And the blank cannot be filled in with “the privilege of our business” or “a thank you letter.”

I’m explicit in my advice. You need to be explicit when communicating the benefit to your supply base.

Charles Dominick, SPSM, SPSM2, SPSM3

Charles Dominick, SPSM, SPSM2, SPSM3 is an internationally-recognized business expert, legendary procurement thought leader, award-winning entrepreneur, and provocative blogger. Charles founded the Next Level Purchasing Association in 2000, oversaw its incredible growth, and successfully led the organization to its acquisition by the Certitrek Group in 2016. He continues to blog and provide advisory services for the NLPA on a part-time basis as he incubates his upcoming business innovations. Charles is also the co-author of the wildly popular, groundbreaking book, "The Procurement Game Plan: Winning Strategies & Techniques For Supply Management Professionals."

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