by Keith Carruthers MBA, SCMP

Welcome to Strategic Sourcing International's blog on Supply Chain Management. It is our intention to provide information on the topic of Supply Chain Management that we hope you enjoy, find useful, or at least find somewhat entertaining. Feel free to provide us with any feedback you may have. For more information on our organization, please visit our website through the link listed on this page. Enjoy!

Tuesday, August 19, 2008

It's all about Relationships

Ah..............the good old days. The suppliers would come and visit, almost begging for our business. We, as purchasing professionals, would make them compete with each other, like it was the "procurement olympics", or some such significant event. Then, once we got the best price, despite the cries of misery from the successful candidate, we would proudly announce that it still wasn't good enough, and ask for a kidney, or maybe their first born, just to make them understand that we were in fact doing them a huge favour by even letting them compete, let alone awarding them the business......and we were proud of our accomplishment! We would shout from the roof tops, "I AM A NEGOTIATOR...........go ahead, make my day!"

As society has evolved, so too has our procurement profession, evolving into what we today call Supply Chain Management. We have finally come to realize, that suppliers can do much more for us than shave a couple of points off the purchase price. It is not that we can afford to have a source of supply today that is not competitive, but we are now focused on the big picture...... What can our suppliers do for us to help us be more and more competitive? How can we use their expertise in their specific industry or process, to help us improve our bottom line? What is the true "total cost of ownership", and not just the sticker price? How can they help us gain a competitive advantage and gain marketshare? What is the effect of their product on our operation? What is the effect of their "system" on our distribution network?

As this evolution has taken place, it has become increasingly evident that business is all about relationships. As the Lean gurus at Toyota would say, respect for our customers, respect for our suppliers, respect for our employees..... We want our suppliers to be our partners in business, to help us grow our top and bottom lines. As a result, we need to involve them in our process, to share information with them, and to not treat them like the enemy.

Now I will be the first to admit, that several years ago when I would have sales people come to visit me, and tell me that they wanted to be my "partner"(the buzzword of the day), I wasn't overly enthused about the prospect. In fact, most suppliers at the time were only paying lip service, and what they really meant to say was "I would like to be your partner in business, when it is to my advantage, but would rather not have anything to do with you, when it is not to my advantage". No win-win thinking there..... (Now it is always possible that I may have been a little too sensitive to their comments, and that most of this was in my imagination, but it's my story, so we'll go with my perception of the world, if that's all right with you).

OK, that's enough of the dirty laundry. We as purchasers were not perfect, and neither were the sales people on the other side of the desk. Enough said.

Gladly, we have now evolved to a point where we are actively working at establishing relationships. Not the definition of relationships from twenty years ago, wine and dine to get a PO, but true "let's see what we can accomplish if we work together" kind of stuff. Situations like "I'll take on a little more work which will increase my costs, but it will allow you to save many times my cost, and we can share in the gains". And not only share in the gains between the supplier and the customer, but also share it with others in the supply chain, and reduce the price to the end consumer as well. What a concept!

And it's working. Just look at the price today we pay for many of the things we buy each and every day. There are numerous items that we buy today that have the same and often superior quality, at a fraction of what we once paid, not to mention the value of money then compared to now.

So what does all this mean?

It means that although it is good to challenge your supply chain partners, and to expect superior results and continuous improvement year after year, we need to view these relationships as long term commitments (assuming of course you have done the due diligence upfront and have chosen the right partners), and to do everything we can do as supply chain partners to compete in the marketplace.

Remember, competition today is often competition between supply chains, so choose your partners carefully, but once you have them, involve them, and work as a high performance unit to bring the utmost value to the end consumer, and you'll come out ahead every time.

Thursday, August 7, 2008

How Critical is Culture?

Over the past number of years, the global nature of business, and in particular, doing business with China, has been a hot topic that has gained considerable coverage by the press. If one was to look at any large news source with a reasonable amount of business coverage, we would be hard pressed to search the business section and not find some coverage of China. It has indeed become a fact of life in the North American business world.

Equally popular over the past decade has been the prevalence of articles discussing the critical nature of "understanding specific cultural aspects" when doing business internationally, and that lack of this critical knowledge would make doing business in these countries all but impossible. But is this really the case?

Although most reports of our ineptitude in understanding and recognizing cultural difference as North Americans is not unfounded, I believe that culture is not nearly as substantial a roadblock as the media make it out to be. Although there is no doubt that recognizing these cultural differences and modifying our business practices to show respect to the diversity that exists in the business community makes us feel good, is the right thing to do, and is indeed a positive step towards developing solid business relationships, the explosion in the global nature of business today has led to an enhanced familiarity in the ways in which different countries do business. This familiarity has in turn helped cultivate a strong sense of acceptance with behaviours outside of our normal cultural business practices. In other words, we are more understanding of each others cultural practices, and as a result, are not as sensitive to violation of these practices, as maybe we once were.

In my experience doing business internationally, I have run in to many practices that I was once unaware of. Despite the fact that I do my best to follow the majority of these practices as a means of showing respect and attempting to establish strong and meaningful new business relationships, I inevitably find myself "falling from grace" from time to time, albeit unintentionally. Despite these occurences, I have never felt disadvantaged in my business dealings as a result of these occasional "faux pas'".

In the end, maybe the truth lies somewhere in between the two extremes. Maybe the concept of how critical cultural practices are, was once very much the case, but has simply become less and less critical as we have continued to evolve as global business citizens. Familiarity often leads us to becoming desensitized to our surroundings, so it is possible that our individual and unique cultural practices is yet simply another area that has become desensitized over time.