I have previously advised procurement teams trying to find new sources of value from their supply base to go for a drink with their suppliers.
My comment usually leaves a few open-mouthed, while those in authority spout company policy on such matters.
However, this suggestion is not made lightly. It is an essential component for securing collaborative working – not with all suppliers – but for a small handful.
Increasingly, the value we need from the supply base is more than lower cost. It is reduced risk, greater assurance of supply, more integrated supply chains and more value in all its forms. As more companies begin to realise the potential contribution the supply base can bring to brand equity and shareholder value, these same companies are recognising that traditional purchasing approaches don’t quite cut it for some suppliers.
First, we need to be clear about which suppliers we should work with most closely. Typically, only a handful are sufficiently important. These may be the ones we spend significant money with, but could equally be those that we are highly dependent upon, that present significant risk if things go wrong, or that have some sort of capability, strength, technology, innovation, geographical presence or alignment with our future needs. Then we must find a way to get close to them. Joint collaborative working with suppliers does not happen by itself. It needs to be nurtured and built over time until a powerful relationship blooms. Why?
Because companies don’t have relationships with companies; individuals have relationships with individuals in other companies. No matter what lengths organisations go to to depersonalise such arrangements, in the end it comes down to people and social interaction.
As a rule, this is limited to exchanging pleasantries at the start of a meeting. So if we want to truly connect supply base possibilities with end customer needs and desires, we need a new approach.
Apple didn’t create the iPhone 6 by having a bunch of clever engineers and designers locked up in a lab for months. It was developed with a handful of key suppliers around the world.
To really collaborate with a key supplier, the individuals who need to work together should socialise on a regular basis. They should also share the cost or take turns so there is no sense of obligation. When individuals get to know each other, the business bits tend to take care of themselves and great things happen.
☛ Jonathan O’Brien is CEO of Positive Purchasing the author of the book Supplier Relationship Management: Unlocking the hidden value in your supply base (Kogan Page, £44.99). A longer version of this article is available for Supply Business subscribers here.