Management Articles


 

Partnering with Suppliers

By: Gregory P. Smith

Greg Smith's cutting-edge keynotes, consulting, and training programs have helped businesses reduce turnover, increase sales, hire superior people, and deliver better customer service. As President and founder of Chart Your Course International, He has implemented professional development programs for thousands of organizations globally. Greg has authored eight informative books including Here Today, Here Tomorrow: Transforming Your Workforce from High Turnover to High Retention and 401 Proven Ways to Retain Your Best Employees. He lives in Atlanta, Georgia. For more information, visit www.ChartCourse.com or call (770) 860-9464.


Purchasing Magazine has called partnerships with suppliers a major trend in business today and indicated that most companies are seeking these relationships in their key buying categories. They have also proven to be disappointing if not planned and executed well. So what does it take to have a successful partnership?

A partnership is defined as an on-going, mutually beneficial relationship between a buyer and a seller. Both stand to win if the relationship is successful, and both stand to lose if it fails. Most of the time, the understandings are formalized in a contract; but the partners may prefer an informal agreement. Cooperation and commitment are critical to the relationship. Partnering encourages the parties to share information, risks and even profits. This means that a partner accepts some responsibility for the otherís success.

Obviously, this kind of relationship is radically different from the typical adversary buyer-seller ways of the past. It is no longer a buyer searching for the lowest cost and the seller trying to obtain the highest margin. Both parties are now working toward a common objective.

Either party can initiate partnerships. Or they may evolve out of a long-term traditional buyer-seller relationship. In many cases, companies have a strategic plan to eliminate the number of suppliers in order to reduce purchasing department workloads, improve consistency of materials, and upgrade inventory management.

It will not be possible or desirable to build a partnership with every customer. Some are too small or have no desire. An organization also has limited resources to commit to such relationships; therefore, selecting the right partners is a serious decision which should be evaluated carefully.

The driving force for this new type of relationship came from the quality emphasis in this country during the past few years and the need to find innovative ways to gain productivity. There must be an ongoing commitment to quality as the prerequisite for a partnership.

Partners have to address some critical issues to achieve success:
  • Needs/Capabilities Match. There must be a match between what a supplier can (and will) do and what the customer needs and expects. This requires a lot of open-ended questioning and investigation. There must be good dialogue and information sharing. It may be necessary to modify equipment and processes. This courtship should continue until a trusting relationship can be developed; and once the decision is reached, it needs to be a total company commitment.

  • Long-Term Relationships. As the number of suppliers is reduced, partnerships will be built on long-term relationships. The process is difficult and time consuming; and multi-year agreements are necessary to justify the efforts and resources required by both parties. Strategic as well as operational planning becomes part of the agenda.

  • Capable Sales Team. The salesperson becomes the quarterback of the sales team, communicating, coordinating, and taking responsibility for nurturing the partnership. This can result in some role ambiguity and conflict resolution skills may be needed. The customer will look at the salesperson as a non-paid, problem-solving consultant, available and able to do whatever needs to be done. Continuity of personnel has been the most common cause of failed partnerships, and a variety of support people may be involved in the team from time to time. Everyone involved must share the commitment. Partnerships certainly should also be a top management priority with appropriate involvement in the process.

  • Shared values. There must be a supplier and a customer with common goals and shared values. Problems need to be solved with win-win attitudes. Suppliers must consider themselves a part of the customerís system and take responsibility for it. Commitment must be continually demonstrated and the relationship periodically reexamined.
Successful partners in the new millennium will be rewarded with a more stable customer list, preferred supplier positions, and barriers which make it increasingly difficult for competitors to break into the relationship. Partners will grow together and depend on each other for support. Building the trust needed to gain such a position may take quite some time and effort. These partnerships may not be easy to build, but who wouldnít like to have a few good ones?

© Copyright 2000 Gregory P. Smith

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