Supply chain snarls, rising prices, a challenging economy… and bad customer service? Procurement professionals have to deal with a lot these days.
Procurement teams have been feeling the strain, and research backs it up. According to Forrester, service levels have been on the decline since 2021. And yet, Zendesk research shows that 73% of customers would move to a competitor after just one subpar experience.
Yet most procurement professionals feel like they have to tolerate this bad service. What began as a necessity during the COVID-19 pandemic has lingered too long — resulting in negative impacts on supply chains, procurement operations, and ultimately your company’s bottom line.
Recently, RED BEAR Managing Director Mike Slomke shared his insights on how to combat this decline with SupplyChainBrain, in his article, 3 Ways to Combat the Demise of Customer Service.
Keep reading to explore Mike’s insights for reviving customer service levels.
So how did we get here? While the pandemic may have been the catalyst, the reality is that procurement teams have played a significant role in the gradual degradation of service levels.
Over time, the relentless focus on cost-cutting has often led to compromises in service quality. This narrow focus has pushed service standards to a breaking point, where both procurement teams and suppliers are stuck in a cycle of diminishing value.
As Mike notes in his SupplyChainBrain article, “The bottom line is that poor customer service will continue until procurement teams demand better service. Fortunately, procurement professionals have tools that can be leveraged to combat the decline of service levels from suppliers.”
As Mike notes in the article, “Procurement professionals can’t afford service friction from their suppliers when millions of dollars are on the line.”
Service levels are established at the negotiation table — the very foundation where strong supplier relationships are built and tested. At RED BEAR, we emphasize that robust relationships with suppliers are crucial for crafting creative, win-win agreements.
By focusing on collaboration, procurement professionals can unlock new opportunities for innovation — like service improvement — leading to outcomes that benefit both parties.
Too many procurement strategies are laser-focused on driving down price, often at the expense of other critical factors like service quality. This approach is how we arrived at the declining service levels we see today. To reverse this trend, procurement teams must rethink supplier negotiations through the broader lens of value-based procurement, where service quality is not just an afterthought but a central element.
Keep reading for three ways procurement teams can secure better service levels from their suppliers.
For the last four years, procurement teams have been passively watching service levels decline. It’s time to adopt proactive strategies that ensure suppliers meet expectations.
Here are three strategies for value-based agreements that can help reset expectations with suppliers, drive accountability, and sustain improvements:
Clearly defining your company's customer service expectations is essential when planning your negotiation strategy. While materials and product procurement usually involve detailed specifications and testing, procuring service terms often lacks the same level of clarity and detail.
As Mike notes, “Clearly define the levels of service you expect as an integrated part of a robust supplier agreement and long-term relationship that supports your business goals. Then clearly communicate these expectations to your suppliers frequently.”
Don’t skip Service Level Agreements. Revisit your existing, upcoming renewal contracts, and new contracts. Make a plan to ensure SLAs are a part of your overall supplier agreements moving forward.
MIke’s advice? “Examine your procurement agreements closely. Do they include detailed SLAs that clearly address all your service and performance expectations? If yes, are they delivering the results you want? What are the gaps and performance issues?”
After setting and communicating your expected service levels, use detailed metrics and regular performance reviews to drive supplier improvement.
In Mike’s experience, “Most suppliers will welcome and respond to detailed and objective performance feedback presented in a collaborative manner.”
These three strategies are just the start for improving service levels and building better supplier agreements. Taking a value-based approach that prioritizes long-term customer relationships and win-win agreements not only addresses immediate procurement challenges but also lays the groundwork for sustained success.
Want more? Be sure to check out Mike’s SupplyChainBrain article here.
If you want to go beyond the article and start your own procurement negotiation training journey, be sure to connect with the expert team here at RED BEAR.