Supplier cooperation is a win-win strategy!

Suppliers are an essential part of the supply chain. It doesn’t matter what business you’re in, what products you manufacture, distribute and sell, or what part of the world you’re in. And it doesn’t matter where in the supply chain you are. Nothing can be achieved without cooperation with your suppliers.

However, like many of you, I saw that suppliers were treated in many different ways. Regardless of the circumstances, treating suppliers badly is never appropriate. Given that customers fundamentally need their suppliers to be successful, why are they treated badly? And how do we ensure that there is a healthy and productive relationship between suppliers and customers?

Cooperation with your suppliers is always a recipe for success!

collaboration with suppliers

Earlier in my career, I was responsible for leading the manufacturing and supply chain operations for a specific area of ​​operations. The division was struggling financially (as well as operationally). The management team brainstormed actions we could take to improve our financial performance.

When it came to discussing the cost of materials, the conversation started with someone suggesting we just beat up our suppliers to get them to lower their costs. Someone else suggested that there might be a facilitator that we could work with who would be responsible for getting customers and suppliers to work together. This collaboration was about finding ways to constructively reduce costs (or improve service or whatever the goal). We opted for the latter approach.

That sounded like a more sensible approach, so we hired the facilitator. We then planned a one-day supplier collaboration event that featured our top 25 suppliers.

We started the event by updating everyone on the current status of the business, explaining our goals and defining the problem and challenge. In particular, we told them how much improvement we need. We have spent a lot of time here. It wasn’t just a one-way communication. We have stimulated dialogue. When people understand your problems and goals, you arm them with the information they need to figure out how to help you.

We later had the suppliers brainstorm based on what we had discussed. Then we had them articulate in front of the whole group what their ideas were. The intention was to encourage unconventional thinking in everyone else. There was some obvious embarrassment as there were suppliers in the room competing with each other. It was easy to see that some were cautious. That was fine because the real work would start after that.

At the end of the day, we had a list of a few dozen ideas on how suppliers could help us achieve our goals. In some cases, suppliers could make these changes unilaterally.

In some cases we would have to relax our specifications or expectations. And in even more cases, we would need to work with suppliers to make the necessary changes together.

All of this would require continuous work over the coming days, weeks and months.

The supplier perspective

From a supplier perspective, the feedback was consistent. They had never before been asked to contribute to us in this way. The typical interaction before that took place over a negotiating table.

Depending on who was negotiating on our side, it could be a friendly, professional conversation or, at the other extreme, someone hammering cost reductions on the table.

This new approach was more comprehensive and constructive. First of all, the communication and information sharing was unprecedented. We made suppliers feel like part of our team and not just a third party selling us goods at arm’s length. With no ulterior motive, we continued to share our circumstances with all suppliers. As a result, they took this information and immediately committed to helping us.

By openly sharing our challenges, we invited them to our problems as equal players, not just third parties. As a result, they wanted to help us. The bargaining table approach was just to create a divide (the table) between us. This new collaborative approach got them thinking too.

Working together also allowed us to overcome the historically transactional nature of our supplier relationships. Before we tell the suppliers what we expected in terms of cost reductions and other conditions. We may have passed these expectations on to their competitors as well. They would all answer. And on that basis we would place orders.

In the cooperation model, we have made it clear that we continue to expect suppliers to be competitive and we will demonstrate this. We couldn’t afford that they weren’t competitive. But by inviting them into our inner circle through the collaboration effort, we have created the opportunity to deliver outcomes far beyond what could ever be achieved around a negotiating table.

In the very invitation to participate, not to mention the entire collaboration project, there was a message that we shake hands with our suppliers. We really wanted to build a level of relationship and trust that would enable our mutual success.

Conclusion

Within a few weeks, we began to see improvements in costs from our suppliers. Again, some of this came from improvements made solely by the supplier, perhaps by relaxing some of our expectations or specifications. In other cases, we worked hand-in-hand with our suppliers as we needed to test the changes to the products we were making. Once approved and qualified, we were able to incorporate new parts that were much more effective in form, fit, function and cost.

While we could easily track the tangible improvements we made together with our suppliers, it was very rewarding to see a shift in the nature of our supplier relationships. The collaborative effort had become a pivotal moment for us, beyond which our supplier relationships led to incremental improvements.

We have awarded and recognized our suppliers for their contributions. And relationships continued to be built and strengthened in the years to come. None of this would have been achieved with a traditional negotiation approach.

Collaboration is a winning strategy for you and your suppliers.

Originally published June 6, 2017.

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