And there’s something else we can attribute to the COVID-19 pandemic: the decline in customer service.
Ask yourself: When was the last time you heard of a company working to improve its customer service? Since when are long call wait times acceptable? How many automated menus do you have to navigate before you reach a live agent? Have service levels dropped with your long-term suppliers? Are companies aware of how poor their customer service is?
Procurement leaders face challenges such as inflation, supply chain disruptions, changing regulatory and sustainability requirements, and volatile markets. They need supply chain partners that can help them address these challenges, not just add more.
The current state of customer service
Forrester tracks the US Customer Experience Index and shows a steady decline since 2021. Consumer-facing companies, manufacturers, and government agencies – organizations at all levels are ignoring the warning signs.
According to Zendesk research, 73% of consumers would switch to a competitor after more than one bad experience. So why do procurement professionals put up with repeated poor or disappointing service?
Faced with pressure on profit margins, in addition to staffing issues, suppliers are also taking cost-cutting measures. This often leads to automated or outsourced customer service systems that often fail to provide even a basic level of customer satisfaction.
This approach may be beneficial to your supplier’s business in the short term, but it is unlikely to be beneficial in terms of how procurement teams assess service levels.
Everyone has dealt with a frustrating customer service bot. Procurement professionals can’t afford service friction with their suppliers when millions of dollars are at stake.
The role of purchasing in the fight against poor service
The hard truth is that part of it may be your fault. Procurement teams need to recognize the role they play in declining service levels and rethink their approach to supplier relationships. This starts right at the beginning with the negotiation of supplier contracts.
All too often, procurement organizations take a short-sighted approach to negotiations and fall into the trap of focusing solely on price.
If you view the negotiation phase as an opportunity to build a long-term relationship based on win-win agreements, you can get better service and ultimately more value from your supplier. Service is a critical element of the value equation that is often overlooked.
Inevitably, poor customer service will continue until procurement teams demand better service. Fortunately, procurement professionals have the tools to demand better performance from suppliers.
Clearly define customer service expectations. Establishing your company’s expectations for the level of customer service is a critical step in negotiating and planning your negotiation strategy.
What service elements does your company need? The process of material and product procurement generally involves very detailed specifications, inspection and testing methods. However, the procurement of services and the service associated with a product are often very unclearly defined.
Clearly define the service levels you expect as an integral part of a solid supplier agreement and a long-term relationship that supports your business goals. Then communicate these expectations regularly and clearly to your suppliers.
Implement service level agreements (SLAs) to enable measurement of service levels. If you don’t incorporate service level agreements (SLAs) into your supplier contracts, you may be contributing to maintaining mediocre service standards. Examine your procurement contracts closely. Do they contain detailed SLAs that clearly address all of your service and performance expectations? If so, are they delivering the results you want? Where are the gaps and performance issues?
Improve the service level. After you have defined what customer service your procurement team expects from suppliers and communicated those expectations to suppliers, implement detailed metrics and regular supplier performance reviews to drive improvements.
Most suppliers welcome and respond to detailed and objective performance feedback when it is presented in a collaborative manner.
Rethinking the impact of customer service on procurement
It’s time to rethink your customer service. Taking steps to improve the service level of your suppliers will not only improve service, but also add value to your supplier relationships.
The added bonus is that you create a stronger and more resilient supply chain.
There is also an advantage for your suppliers: With the bar for service performance currently low, suppliers who prioritize customer satisfaction can quickly gain an advantage over their competitors.
Purchasing managers play an important role in improving service standards. It’s time to expect (and demand) higher levels of service from suppliers that add value to your business.
Mike Slomke is Director at RED BEAR Negotiation.
