by Keith Carruthers MBA, SCMP

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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.

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