Here, Jonathan O’Brien, CEO of Positive Purchasing, looks at how positive social interaction with suppliers can be beneficial to small business growth.
Previously, when I have suggested that procurement teams should have a beer with their suppliers, there have been a few snorts of surprise and much shaking of heads from those in senior positions.
Although it may be right for only a select handful of suppliers, this is a good move if you want to find a new source of value from the supply base as it’s a very important component for securing collaborative working.
These days, value from suppliers doesn’t just equate to lower costs. Increasingly, procurement teams are looking for reduced risk, greater assurance of supply, more integrated supply chains and more value in all its forms.
More and more companies now recognise the potential contribution that the supply base can bring to brand equity and shareholder value. It’s these same companies who understand that the traditional purchasing approaches don’t quite cut it for some suppliers.
Believe me, innovation is out there.
If you can connect what your customers need now – and in the future – with the supply chain potential, then the possibilities are boundless.
Remember, it’s the supplier’s job to keep striving for the next thing that will make them successful and secure their position on the future stage, so they will already be directing huge energy towards this.
If you can then connect to and collaborate with your suppliers, you can unlock this potential for your own benefit as opposed to that of your competitors.
But is it really that simple? Can you just go and start collaborating with your suppliers?
Well, perhaps not straight away. A key starting point is to identify the suppliers with whom you should be working jointly. Whilst most suppliers may want to get close to you, there are, in reality, usually only a few who are of sufficient importance and could potentially make a dramatic difference to your business.
But just who are these suppliers? They could be:
- The ones with whom you spend significant amounts of money (the traditional basis for determining who is important)
- Those upon whom you are highly dependent, who present significant risk if things go wrong
- Those who have some sort of capability, strength, technology, innovation, know-how, geographical presence or alignment with your future needs that could really help you
You also need to understand that the supplier who is most important to your future could actually be a tiny concern. It could be someone with whom you spend very little, but who has some unique innovation or capability.
Put simply, if you base your judgement on spend alone you run the risk of excluding future possibilities.
Once you have identified who the critical suppliers are, you then need to find a way to work with them closely. Of course, this also requires the supplier to be equally as willing.
When I work with teams on this I frequently hear people say, “we need to collaborate more with suppliers”, as if it can happen at the flick of a switch or by waving a magic wand.
The reality is that joint collaborative working with suppliers does not happen by itself. It needs to be nurtured and tended to over time to allow a powerful relationship to grow.
Why is social interaction so important?
The answer is quite simple really. Companies don’t have relationships with companies but, instead, it’s the people in the different companies who form the relationships. No matter what measures or processes organisations put in place to depersonalise such arrangements, it ultimately comes down to people, and relationships between people need social interaction to cultivate them properly.
The traditional rules for supplier engagements seek to prevent too much social interaction. As buyers, we are taught to be alert to suppliers trying to build a relationship with us. We are told to never accept much or any hospitality or, indeed, anything that might create a sense of obligation to them.
Social interaction is typically limited to exchanging pleasantries at the start of a meeting. Clearly there is a need to be mindful of any corporate policies on what can and cannot be accepted from a supplier, but this can still be done.
If you truly want to connect supply base possibilities with end customer needs and requirements to unlock the full potential for the critical few suppliers, then you need to adopt a new approach.
A great of example of this is Apple. Apple didn’t create the iPhone by having a bunch of clever engineers and designers locked up in a lab for months.
Instead, the next generation phone was developed collaboratively with a handful of key suppliers around the world who each brought unique capability and new ideas, and more importantly benefit, by putting everything into sharing this.
For parties in companies to create value, they need to work together and get to know each other and be part of a single team. Teams get built because those in the team like and trust each other, and that demands social interaction beyond a verbal handshake at the start of a meeting.
So, it doesn’t matter how much corporate provision is made to get closer to a key supplier. Unless the environment is created for those from each party to build a greater knowledge and understanding of each other through some sort of social interaction, then true partnership will not happen.
To properly collaborate with a key supplier, the individuals who need to work together should go and have a beer on a regular basis, maybe even stretch it to a curry or two.
They should also either share the cost or take it in turns to pay so there could never be any sense of obligation to the other. When individuals get to know each other, the business elements tend to take care of themselves and great things happen. At the end of the day, isn’t that what all companies want?
Negotiating with suppliers: How to secure the best deal
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