It staggers me to think that despite it being 2015, suppliers and customers still find it difficult to have a mature conversation about how to improve their relationship and their supply chains.
Traditionally companies segment their suppliers by volume and value of spend, focusing their supplier development resources. Despite this, there is still wariness from packaging companies about entering into supplier development discussions with their customers.
A naivety about the suppliers’ willingness to respond positively to supplier development activity remains. The result is many initiatives fail to deliver declared improvements because suppliers do not want to open the discussion with customers about more price reductions – they would rather view it as margin recovery.
Looking at packaging companies for example, they’d rather focus review meetings on the value-add in relationships. Talking about growth initiatives like innovation neatly side-steps gritty conversations about operational supply chain improvements and cost reduction. This is massively frustrating for their customers.
Ultimately, the root cause of supplier development failure is an inability to understand the maturity of the relationship between the two parties involved. Two factors must be considered:
• The need of both parties for the relationship to work. This is dependent on factors such as the uniqueness of the product supplied and the relative sizes of the customer and supplier
• The support of both parties for this kind of activity – as a minimum they should both have a philosophical commitment to it and having allocated resources makes a big difference
Plotting the relationship dynamics on a matrix such as the one below is a powerful thing. Not only does it illustrate the maturity of the relationship and the consequent ability to have those difficult conversations, but it indicates the size of the task ahead if you want to be able to have that kind of dialogue:
To put it in human terms, initiating a supplier development programme when your relationship is in the bottom left of the matrix is rather like asking a complete stranger to open a joint bank account with you. For the initiative to work, the relationship must first be understood and then built upon to have any chance of reaching the maturity needed to manage those mutual operational supply chain costs.
There is still a place for robust supplier collaboration frameworks in the world, they just need to be built on the right criteria. By assessing relationship maturity at the earliest stage both the customer and supplier can be confident that their relationship is strong enough to realise mutual benefits and not be weakened through frustrations, which arise from having different agendas.
☛ Natalie Henfrey is principal consultant at Crimson & Co