New Business Landscape Requires a Rethink of Supplier Relationships
January 18, 2016
Alex Short
2 minutes

Despite prevailing corporate practices, the mode for success in todays business landscape favours collaboration over combat. We need look no further than businesses like AirBnB and UBER for crystal clear examples of how changing tact and taking a more collaborative approach to problem solving can create huge business opportunities.

What’s in it for Procurement?

The UBER example along with a series of buzzwords like ‘disruptive’ or ‘the internet of things’ seem to be rolled into every newspaper article and conference we attend, but what does collaboration mean for procurement? I believe that organisations that are able to dive further into their supply chains, collaborating with suppliers to create new and innovative solutions, will hold a distinct advantage over competitors that ignore this practice. To me, this is the future for many more businesses.

The process will not be easy however. For these sorts of changes to occur, aspiring organisations must rethink the way they design and manage relationships. They need to determine and map out new ways of collaborating and communicating, both internally among their different functions and externally with partners. Looking at new approaches like Return On Relationships that is designed to drive real value from supplier relationships.

For these ‘new’ relationships to exist and flourish, they must build on a culture of openness and trust, something that is sadly missing from most supplier relationships today.

Supplier relationships must move beyond mere operational efficiency and cost reduction towards agility, responsiveness, innovation, social and environmental responsibility.

There are clear implications in adopting a relationship-based approach. Taking a narrow cost-efficiency perspective on relationship management, for example, focusing on only one area of intra- and inter-firm relationships can result in the waste of time, effort, and resources, producing a silo mentality and stifling collaboration.

It rewards managers for ignoring or destroying valuable information and punishes them for pursuing efforts that will provide benefit in the medium and long term. This leads to the neglect of the strategic potential of supplier relationships and hamstrings what both businesses are capable of.

For companies and their supply chains to remain competitive in a constantly changing global competitive landscape, a new way of looking at business relationships and specifically supplier relationships is needed.

This means:

  • Understanding the contribution that suppliers can make to buyers’ success and failure
  • Shifting perspective from functional efficiency to company and supply chain effectiveness
  • Recognising the business value of relationships, beyond price and cost reduction
  • Moving away from power-based relationships with hierarchical dependence towards a network model, based on mutual development within a partnership
  • Greater receptivity to change and willingness to face new challenges
  • Awareness of the competitive benefits that can be derived from the impact of strategic procurement and information technology on buyer-supplier relationships

Essentially, companies should recognise the return from long-term, collaborative relationships with supply chain partners, as a means to innovation and sharing of risks and rewards.

Buyers and suppliers need to view each other as vital extensions of their organisations and regard colleagues from other areas and companies as resources, rather than competitors, helping to develop a spirit of partnership with an emphasis on knowledge creation and exchange.

Vizibl has developed an actionable framework that supports the sort of commercial relationships that will move an organisation away from unidirectional supplier relationships that are focussed on past performance towards the sort of engagement and collaboration required to make businesses successful in today’s corporate environment. to find out more download our Return On Relationships whitepaper.

Return On Relationships

Alex Short is Founder of Old St Labs he is passionate about building the next generation of business software. He is recognised as one of procurements thought leaders.
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