Bring back the handshake

30 November 2009

1 December 2009 | Paul Snell in Boston, USA

Buyers should be more concerned with building trust with suppliers than relying on provisions in their contracts.

John Campi, founder and managing partner at consultancy Genesis Management, said at the Aberdeen summit that as the importance of supply chain collaboration increases, informal trust between supply chain partners will be crucial.

Drawing on the work of academics Elinor Ostrom and Oliver Williamson, the 2009 Nobel laureates for economics, Campi said: “A contractual agreement can never be complete, there are always contingencies. How many of you believe your contracts are boilerplate – absolutely locked so nobody can get out of it?

“If you believe that, you haven’t cut a contract in China, or Eastern Europe, and I would argue that this country and our profession put more weight on the contractual agreement than we should. I don’t care how good your lawyers are, you will never get the language so good you won’t have issues.”

Campi, a former CPO of Chrysler and retailer The Home Depot, said the behavioural change required would be “difficult to swallow” for many purchasers, but they should think of it as going “back to the future”.

“How did people make agreements to buy and sell stuff 100 years ago? – the handshake,” he told delegates. “When there is integrity and trust it doesn’t matter what the contract says. What matters is the concern for the success of the supply chain – your customer, your supplier are part of that concern.”

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