5 common communication issues

Editor’s note: Procurement Pulse is a monthly look at a topic or trend that is impacting the procurement function at organizations of all sizes. This month, we look at communication. If you are interested in future topics, you can see a full list of upcoming features on our Editorial Calendar.

Earlier this year, supplier experience platform company HICX released its Voice of the Supplier Survey 2024. The survey addressed many areas, but the overwhelming theme to come out of it was that a lack of communication is harming the supplier experience.

“We found that supplier experience is still a problem,” Costas Xyloyiannis, HICX’s CEO, said. “Presently, 59% of suppliers struggle to do their best for major customers, compared with 61% in the previous (2021) study. This very minor improvement is concerning. With supply chain resilience so critical to business success in today’s economy, it’s time this figure drops.”

 

Nearly all respondents (98%) said they need their biggest customers to communicate better.

For many procurement professionals used to working in silos pre-pandemic, the shift to more communication, both internally and externally, has altered the landscape of the procurement function. What are the biggest issues, though? Improving communication in these five areas will go a long way to improving overall communication and a more streamlined and efficient procurement department.

1. Procurement, stakeholders are not on the same page

Coming out of the pandemic, procurement gained a more visible role within the organization. But that role has come with new challenges. Internal stakeholders have varied challenges, from getting products and materials, to reducing cost. Procurement departments need to balance these sometimes competing agendas.

A recent report from Economist Impact sponsored by SAP Ariba addressed the elephant in the room: one-third of “C-suite executives lack the confidence in procurement’s abilities” concerning spend management and cost control capabilities.

“The survey points to deeper issues, including gaps in procurement’s visibility into stakeholder risks and priorities, limitations in creating accurate spend data, developing clear road maps, and forging deeper relationships with stakeholders. Collaboration and improved communication are crucial for building trust and sustaining engagement with procurement’s insights,” Baber Farooq, senior vice president for Market Strategy Procurement Solutions at SAP, wrote.

It is imperative that procurement professionals ramp up their communication efforts to effectively advocate for their, and the organization’s, needs in a way that the C-suite understands. This means speaking in terms they will understand, i.e. what is the financial impact of the decision. Explain how the plan will account for disruptions, compliance issues, or quality problems that could negatively affect the business.

2. Poor supplier communication

HICX’s Xyloyiannis said collaboration needs to be at the forefront of supplier management.

“Not nearly enough leaders are working with suppliers in a modern and helpful way. Rather, people are clinging to the idea of running supplier transactions, and then from this baseline, trying to manage suppliers. Don’t get me wrong, transacting is important. But in today’s landscape supplier collaboration is more important. It’s time, therefore, to shake up supplier management and put collaboration first,” he said.

To help in this area, the  Association for Supply Chain Management (ASCM) introduced a new Supplier Relationship Management (SRM) certificate earlier this year. The SRM Certificate program guides supply chain professionals on “how to cultivate and sustain strong supplier relationships to ensure long-term resilience and mitigate risk,” ASCM said.

“The last few years have taught the entire supply chain industry the critical importance of establishing close supplier relationships to help navigate unexpected disruptions and maintain communication to overcome obstacles,” said Lisa Sallstrom, ASCM executive vice president, product management. “When disaster strikes and businesses are left scrambling to find alternative sources for key materials and products, it becomes exceedingly clear that a strong and reliable supplier network is invaluable.”

3. Data is siloed

One of the biggest obstacles to improved communication is the lack of data sharing. According to Matthew Buckingham, vice president of business development & alliances, Focal Point, “the average enterprise collects data from 400 different sources, and data growth is surging at 63% a month.”

“As a result, it’s not surprising that data can easily become siloed across functions and systems. To bridge the gap, procurement teams often use Excel spreadsheets and email to collaborate with key stakeholders and gain approvals on critical decisions. With these decentralized processes, it’s harder to get a total picture of procurement health and opportunities for optimization. In addition, manual work can create errors that can quickly cascade. For example, an incorrect formula used to calculate the cost of working capital could lead to significant over- or under-spending,” he wrote in a recent article on scmr.com.

Data sharing is an important communication function. How often has procurement purchased items for the organization that are not needed, simply because it didn’t have insight into current inventory?

Technology is helping in this area, but organizations still need to break down the walls between procurement and other departments. Common examples include the IT department, which often will acquire what it needs without consulting procurement, or buyers that have preferred vendors that may be significantly more expensive than other options. Working in silos allows inefficiencies to grow.

“Dedicated procurement software can help identify signs of potential procurement fraud, such as a team member funneling excessive spending to one or a few suppliers, purchases of goods from companies with little online presence or at non-competitive prices and missing or altered documentation. The software provides data and analytics that reveal uncharacteristic spending and payment behavior, supplier performance issues, and more,” Buckingham wrote.

4. Compliance is confusing

One of the biggest challenges for procurement is the proliferation of regulatory and compliance challenges—both internal and external. Contract terms can be confusing, and if not communicated clearly, lead to higher prices or financial penalties. And the increasing focus on sustainability and ethical sourcing adds yet another layer of challenges.

“Not only are supply chain networks vast, but so too are the considerations relevant to the concept of ‘ethical’ or ‘responsible’ sourcing,” said Tom Plotkin, special counsel at law firm Covington. “When we think of responsible sourcing, we tend to think of the most critical human rights issues like forced and child labor, but there are myriad other considerations, like broader labor rights, safe and fair working conditions, and impacts on communities. There are also environmental considerations, ethical and governance considerations, and questions about the social impacts more generally. Taking all of these concepts into account and considering how varied and complex they can be when layered onto large global supply chains, scaling becomes the biggest challenge.”

Procurement needs to be aware of these challenges and regulations, and must convey compliance requirements to other departments. This extends to your suppliers as well. In the end, opening lines of direct and honest communication within and outside your organization to avoid non-compliance issues and misunderstandings remains the best approach to remaining in compliance.

5. Internal communication is non-existent

Ultimately, as the HICX survey found, many issues can be traced to communication, or a lack thereof. The root of those communication issues can often be tied to the priorities of the departments. The C-suite is focused on profit and loss; logistics on transportation costs; sales on inventory on hand. And procurement must deal with all of these demands.

Understanding your audience is the first step in this process. Tailor your message to the audience and avoid burdening it with unnecessary information.

Procurement, and supply chain in general, finally has a seat at the table, but without improving communication, that message is going to get lost. Good communication improves relationships with customers, employees and stakeholders. It also improves team chemistry. The end result is a more efficient organization.

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