We are sometimes so busy looking for cost effective procurement purchases that we miss out on finding suppliers with whom we can build truly collaborative relationships.
We create our own prescriptive requirements and look for suppliers who will work and deliver within this rigid framework. By doing this we squander the opportunity of finding partners who will challenge and work with us. We don’t take the time to evaluate capability and develop value with our suppliers – we certainly don’t tend to set up a supplier relationship based on these less definable qualities.
Instead we concentrate on the bottom line. But the value of a good partner is that they should be able to challenge your way of thinking, to be able to share their expertise and open up new possibilities. However, it is often easier for businesses to retain suppliers with moderate capabilities because it enables you to retain more control.
The emerging trend in the supply market is to build and manage networks of specialist suppliers, where the value in the network comes from the primary orchestrator. The orchestrator defines challenging performance targets, supports the supply base, removes barriers to improvement, provides the space to develop and detail the solution.
All of this combines to leverage the overall value in the partnerships. The starting point is to define and cascade the orchestrator’s business requirements and to review the partner’s main areas of expertise and their underlying capabilities – their fit with the business and their willingness to co-operate.
When you are looking to set up a supplier relationship you often see this happening within a static environment and largely miss the point that what you are doing is planting a seed and what you should be looking for is a collaboration that will develop into an enduring and sustainable partnership.
The new basis for trust in these relationships comes through clear aggressive targets and network collaboration to achieve a common set of objectives, whilst mutually developing the capabilities amongst the partners. Failure to assess a suppliers overall offering and core capabilities, but instead to focus simply on who is cheaper or appears to be ‘best value for money’ on paper often produces unsuccessful outcomes and increased overall costs.
So what you should be asking yourself and your business is: what core internal capabilities should be developed and invested in in-house? What activity should be divested to a specialist? But also, what do we type of relationship do we want with a supplier? And how do we find what we’re looking for?