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Why Supplier Engagement is Critical for Business Success

Published: January 25, 2021

Every day, retailers must juggle the complexities of doing business in an everchanging marketplace that is riddled with dynamic competition, innovative technologies and now, due to the pandemic, unprecedented health and safety protocols. To outperform and stay ahead, it is critical for retailers to prioritize and engage the stakeholders who equip and empower them with the tools necessary to overdeliver on increasing consumer expectations.

While significance is placed on employee engagement and shopper satisfaction, there is often less focus given to the value that suppliers create in the retail equation. However, for many organizations (especially for retail businesses in Grocery, Convenience, and Drug channels), supplier engagement is just as crucial to their success. Retail organizations, at the most basic level, require reliable suppliers to provide the products and services they need to create value for customers.  

Today, employee engagement is known as one of the most important indicators (and propellants) of work satisfaction. In the same vein, supplier engagement has become vital for retailers who prioritize strong, healthy supplier relationships built on shared priorities and objectives.  

But there is often a lot to think about in identifying, defining, and implementing an effective approach to supplier engagement. And that starts with gaining a deep understanding of what it means for suppliers to be engaged, and why this is vital for the success of retailers.

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What is Supplier Engagement?

Supplier engagement is understanding and implementing strategies that create mutually beneficial retailer-supplier relationships. It is a conscious decision by a retail organization to invest more in creating healthy relationships with its suppliers, rather than merely thinking about them in terms of the mechanics of procurement.

The basis of supplier engagement is people management and having the right teams in place to make working together better. This is important because people perform higher for organizations they feel emotionally connected to. In fact, this is the reasoning behind employee engagement and why engaged employees are such a powerful advantage for organizations that value them.

Therefore, it stands to reason that when retailers prioritize their suppliers as not only valuable partners but people with real interests and goals, they can unlock unprecedented value in their supplier relationships.

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Why is Supplier Engagement Important?

Retailers that are able to emotionally engage their suppliers can reach a coveted relationship level that creates value in the form of incremental resources, funding and insight.

Suppliers play a critical role in a retailer’s strategy; it is up to retailers to ensure that they are actively engaging suppliers and communicating to them the resources that they need to achieve their objectives. Suppliers have significant funds to invest with retailers including over and above trading terms, and the onus is on retailers to engage suppliers for their fair share.

Suppliers can provide great insight into the capability and effectiveness of a retailer’s business; retailers must leverage these learnings to improve their overall performance. Moreover, retailers provide direction to hundreds of suppliers every month around the importance of the shopper and their basket. Engaged suppliers are critical here, as they are better positioned to help retailers in reaching their shoppers most effectively.

Retailers able to foster partnerships built on trust, responsiveness and accountability will significantly attract and retain suppliers that will contribute to a retailer’s competitive advantage.

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The Benefits of Supplier Engagement

Just as engaged employees contribute to a business’ commercial success, suppliers who are actively engaged contribute to the competitive advantage of their retail partners. Some of the ways in which they do this include:

  1. Higher performance: Engaged suppliers perform at a much higher level, compared to disengaged suppliers. Knowing they are regarded as valued partners encourages engaged suppliers to bring passion and interest to their retail partners. This often leads to growth and innovation for the retailer.
  2. Greater supplier investment: Suppliers that are emotionally engaged are more invested in the success of the retailer. They produce higher quality work with minimal supervision and are less likely to make late, incomplete, or sub-standard deliveries.
  3. Greater support and value: Retailers that cultivate engaged supplier relationships enjoy the best of the supplier’s services. The supplier will often allocate them the best resources and expend greater efforts in meeting their retail partner’s objectives. They provide multi-dimensional support and are often willing to go beyond contractual obligations. These suppliers are also more likely to be flexible and are more accommodating in the event of unforeseen challenges.
  4. Long-term cost advantages: In the long run, engaged suppliers may even save their retail partners money. Engaged retailer-supplier partnerships require less staff to service the relationship, may offer better unit pricing over time, and achieve lower costs of waste and rework.  

By implementing good supplier engagement practices, it becomes possible to not only indirectly influence supplier performance, but retailers can also start to enjoy a truly synergistic relationship with their suppliers. The journey from collaborative to engaged supplier-retailer relationships begins with listening and a retailer’s commitment to prioritize the voice of their suppliers.

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How to Establish and Maintain Good Supplier Engagement

In striving for engaged supplier relationships, a retail business must first understand what level of investment their most valued partners have in their business today. Retailers who know exactly what their suppliers need from them are better situated to deliver on those expectations in striving for mutually beneficial partnerships.

It is important to keep a running conversation about the performance of the relationship, provide praise where deserved and identify what isn’t working where necessary. The conversation should not be just one-sided either. Often, discussions surrounding feedback concentrate on evaluation of the supplier’s performance. However, it is equally as important to receive feedback on how the supplier evaluates its relationship with the retailer and where things can improve.

Advantage ReportTM is the world’s leading 360º feedback system developed to aid retailers and suppliers in measuring, tracking and strengthening their business-to-business performance. The world’s top retailers rely on Advantage Report to gain a holistic view of their supplier partnerships in order to focus on areas for improved engagement and commercial impact.

Advantage is devoted to helping businesses strengthen partner engagement through data, insights, and action planning. Connect with an Engagement Advisor today.


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