Are they capable of having a relationship?
The supplier may be willing but what if they are not capable of having such a relationship? This is not uncommon and many organizations are simply not organized or structured in a way that enables this to happen, and despite all the best will, attempts to establish a relationship will fail. Things that need to be in place for this to happen, and so provide indicators of the likelihood of success, are:
• clear and visible executive support within the supplier;
• supplier has organized itself so as to free up resources for the relationship; and
• visible cross-functional working and communication.
FIGURE 13.5 Supplier preferencing and portfolio analysis combined to show supplier willingness for a relationship
If the supplier appears incapable of building a strategic relationship (despite what the key account manager might tell you), then there are just three options here:
• Work with them to get them to change and develop.
• Manage them instead of building a relationship.
• Find another supplier (if practical).
Commitment, cooperation and collaboration
So, to bring this to a summary, effective strategic relationships are born out of commitment, cooperation and collaboration. Commitment flows from the individual, organizational and motivational factors, if these things are present then there will be a natural commitment by parties to build and maintain a high performing joint relationship. Commitment is an output, but it is an activity also and one that operates at both an individual and company level. It is about decisions and action clearly being made in support of a long-term joint relationship. The visible or tangible signs of commitment are important as it is these that parties seek in the other in order to commit back. For example, if we say we are working together with a supplier but our behaviour is opportunistic and we seek to avoid committing to anything that will build joint relationships then we are just paying lip service to a stated intention; this will soon become obvious to the supplier who will fail to respond. However, if we back up our stated desire for joint working with real action then we are demonstrating commitment. In practice this can take many forms but might include, from our perspective:
• making our resources available to them to help them, perhaps with no immediate benefit to us and perhaps even without charge;
• investing time and energy in the relationship, helping them and joint working;
• making long-term investments in assets or facilities that support joint working;
• providing long-term contractual commitment to minimum volumes or spend levels;
• visibly promoting the joint relationship including, for example, co-branding or publishing marketing collateral about the relationship.
If we show commitment but reciprocation is lacking then it could indicate a lack of willingness on their part, in which case we might need to rethink our aims for the relationship here. However, it could also mean a willing supplier is holding back or individuals haven't figured out how to enable things such as communication and transparency in practice. It could also mean the individuals leading the relationship are not the right people. The reality here is that strategic collaborative relationships are hard to create in practice and often there is little experience of doing this so efforts can fail just because parties don't know what to do. If we are certain there is willingness then such issues can usually be overcome by working together to secure the necessary commitment.
It could be argued that cooperation and collaboration are one and the same, and to a degree this is true, but both are needed; cooperation involves agreeing to accommodate the other and work together with them and collaboration is then the process of actually doing this to secure results. Both are summarized by the concept of joint working, which I shall explore more fully shortly.
Go drink beer with them, but go Dutch!
When I've trained and worked with senior purchasing teams, I often suggested something like 'If you want to build a strategic collaborative relationship with your supplier you need to go out and drink beer with them.' My suggestion is typically not received well, people become visibly uncomfortable and those in charge feel compelled to issue some sort of countering or balancing remark. However, whilst I am being deliberately provocative, I am also attempting to get companies to think differently about how they approach such relationships. As we touched on earlier, as buyers we are brought up to follow the 'keep suppliers at arm's length' philosophy, and, in most Western cultures, we also tend to follow strict ethical principles that are not set up to permit anything that gets too close to a supplier. For a strategic collaborative relationship we need to behave differently, and even change the policy, if we want it to really work well, and the secret to this is social interaction.
In the vast majority of interactions with suppliers the degree of social interaction is limited to casual conversations at the start of meetings about sport, vacations and family. These moments of sharing 'personal puff, often initiated by the seller, are there to build rapport and culturally it is often expected, especially by the Italians. However, this is in fact pseudo social interaction.
If we really want supplier relationships to work then we need the individuals to be compelled to work to build the relationship, and this has to happen at an individual level, in the same way it has to within any team. This usually only comes after a good degree of social interaction; the point when people get to know each other and who they are not the title they hold. Therefore we need to create the opportunity for individuals to do just this. Suppliers have long since understood the power of social interaction in building a relationship, which is why they love to invite customers to sporting events or functions they host. However, this sort of corporate hospitality is increasingly unacceptable from the perspective of accepting gifts from suppliers, but crucially it is not appropriate because it is social interaction on their terms and creates obligation through the gift. Instead we need a form of social interaction that does not create obligation but remains entirely neutral and transparent. This is as simple as going out for dinner, going out to a bar or even an event where key individuals can get to know each other, discuss work topics as well as personal topics but where both 'go Dutch', ie they share the cost and pay their way equally, and both are investing in the process of doing so.