Relationships are difficult. Whether it’s a marriage, the relationship between a star athlete and coach or a supplier relationship, opinions and objectives will differ and conflict will likely exist. Despite this overarching challenge, there are a number of things that all truly successful relationships share. Ensuring these three elements are present in your supplier relationships will encourage the openness and collaboration that you are looking to achieve. Neglecting them should be done at your peril.
Here are the three most critical factors for supplier collaboration, which lead to success in supplier relationships:
At the centre of any relationship is trust. At its most basic level, commerce would cease to exist without a certain level of trust. The very exchange of currency for goods and services relies upon it. Trust is a prerequisite for any productive collaboration.
Trust allows partners to share ideas openly without the threat of being compromised. Trust exists in a supplier relationship when partners have the confidence in one another that aspirational goals can be achieved despite the fact both parties face challenges that are out of their control.
Trust also stems from a belief or understanding that one party will not take advantage of the other and that any decisions made will be made to the betterment of both parties.
Trust is something that is earned over time. Not only will it take time for you to develop a level of trust with your suppliers, they too will be analysing your behavior to determine whether or not you are worthy of their trust. For this reason procurement teams should engage with suppliers around what their intentions are and then follow these intentions up with clearly visible actions.
Organisations need to realise that developing an environment of trust may require a departure from previous supplier engagement practices. Negotiations are not challenges to be won by one side or the other, they are a discussion of how both sides can benefit from the relationship.
In order to work collaboratively and build the requisite level of trust between commercial partners, transparency and openness is key. Transparency involves the open flow of ideas and information between the concerned parties to ensure that the best decisions are being made for the relationship, not just one firm. Only by opening some aspects of your business to suppliers do you allow them the opportunity to assist in solving some of your problems.
In this endeavour, technology is your friend. It is now possible to access a suite of software tools that connects and automates the previously complex process of collaboration and transparency. Technology solutions are now exposing weaknesses in governance structures and encouraging participation in collaborative, mutually beneficial supplier projects.
There is an intrinsic link between transparency and trust. As organisations start to share information with one another in an open and transparent manner, a sense of trust between the two begins to develop. Conversely as trust between partners begins to grow, so too does the level and nature of information that is shared between both parties.
Even with all the transparency in the world some relationships are destined to fail. That’s because the two partners simply are not compatible. While perhaps not as critical as trust and transparency, compatibility is a vital cog in any collaborative relationship.
When looking to assess compatibility we are essentially trying to understand cultural fit. Is there enough common ground between the two partners to harness a culture of trust and transparency? Is there a belief or practice of one firm that would act as a deal breaker to the other partner? To address this stage, firms should be looking at corporate objectives, ethics, mission statements and governance models to get a sense of each other’s driving motivations.
Check out our recent post ‘Which Suppliers Should you Collaborate With‘ if you still have some questions on compatibility.
These three factors require a shift in mindset for both buyers and suppliers. It’s true that cultural change can be challenging, but developments in technology mean it is now possible for this entire process to be supported by processes and tools that guide both organisations through the journey. Getting greater success in supplier relationships should be a goal we are all striving to achieve.
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