Wednesday, July 23, 2008

Supplier Collaboration - Tales of Two Different Approaches

Supply Management magazine recently ran a couple of stories that related to supplier collaboration. Each was based around a CPO's approach to supplier collaboration.

And these two CPO's seemed to have polar opposite approaches to supplier collaboration.

First, my attention was drawn to a headline on the cover of the July 3, 2008 edition that read "BT's message to suppliers." I thought that this could feature some fun-to-quote tough talk.

And I wasn't disappointed.

The article - which was entitled "BT to halt supplier 'gravy train'" (Membership required. Man, I love that title!) - begins by saying "BT will not renew contracts with long-standing suppliers that are not prepared to collaborate as the company overhauls its purchasing processes." Then, it quotes BT CPO Neil Rogers as saying:

"Some people in the past have got into BT and ridden the gravy train because we've not been joined up and have not been strong enough. I can see where those deals are and over time I'll break them. Some suppliers see their quarterly sales targets as being the way to behave, and it isn't, so we'll change that over time...They think we can't shift them - well, we will."

The article says that Rogers wants to dispose of "old-fashioned" procurement relationships and build partnerships with suppliers. But then, while discussing how he personally gauges supplier interest in partnering, Rogers says "You have to see it in the way that people respond to your pushes, challenges, and demands."

Let's contrast that with an article that was in the June 19, 2008 edition. This article, entitled "Changing Up A Gear," talked about how Chrysler was making changes to embrace greater supplier collaboration. Some quotes from Chrysler CPO John Campi seem to illuminate a different paradigm of supplier collaboration. He says:

"The first thing Chrysler needs to do is regain trust and engagement with the supply base. Over a number of years, we have lost the kind of relationship with key suppliers, the kind of partnership activity absolutely necessary to enable real growth for both organisations."

Will Campi want to see how his suppliers respond to "pushes" and "demands" the way that Rogers does? These words of his may shed some light:

"Any company that abuses a supplier is destined for failure, because it's only with those key suppliers that you're able to really make progress. It is extremely expensive to change a supplier; there's a tremendous amount of risk involved. I would much rather work with suppliers that we have a history with, and have a positive relationship with, than anyone else. It not only makes my job easier, but it makes our products better because our supply base understands what we are trying to do. Now if you destroy the trust in the supply base, which I believe has been done, then you have a contentious relationship and you can get to the point where each party is trying desperately to take advantage of their opponent, rather than looking at them as their partner."

He goes on to say that a savings sharing strategy (much like the one taught in the online class "Savings Strategy Development") is the basis for his philosophy and, in contrast to putting pressure on suppliers to reduce price, is "certainly a more appropriate demonstration of our desire to be collaborative."

My personal opinion is that a "win-win" disposition is at the heart of successful supplier collaboration. That requires a recognition of each party's interests and working together to help each other satisfy their interests.

If "quarterly sales targets" are of interest to a supplier, a CPO should ask the question "How can we help you achieve your quarterly sales targets while helping us achieve savings/better delivery/better quality/etc.?" I don't think that you can have true collaboration without acknowledging the importance of the other party's interests.

That's not to say that there isn't room for tough talk with suppliers - there is - just that maybe it shouldn't be called collaboration.

So what are your thoughts? Are these CPO's definitions of collaboration two sides of the same coin? Or is only one a true representation of collaboration?

To Your Career,
Charles Dominick, SPSM
President & Chief Procurement Officer
Next Level Purchasing, Inc.
Struggling To Have A Rewarding Purchasing Career?
Earn Your SPSM® Certification Online At
http://www.NextLevelPurchasing.com

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