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Supplier Partnering

Supplier Partnering—Keep Your Profits Up & Costs Down (1401 Words)

Supplier Partnering Means Better Profits for All

Supplier partnering challenges American business conventional wisdom. Throughout most of the twentieth century, American business had functioned based on the paradigm of adversary transactions. Squeezing the lifeblood out of all, that fall unknowingly victim. When I entered the American workforce as a salesman, in the 1970s, I learned that many small manufacturers called this the Sears Syndrome.

Decades ago, this syndrome was prevalent in situations where small companies supplied large national companies. While today, it might not be fair to degrade the name of a respected American retailer, decades ago this was conventional wisdom in the supply sectors. Fortunately today, we are seeing a major business philosophical shift happening before our eyes! The cost of doing business is steadily increasing yet only in a few industries are profits increasing to keep pace. A new belief or model—a new paradigm, has become absolutely necessary. This paradigm is collaboration.

Collaboration is Supplier Partnering

Partnering, especially supplier partnering, is a current buzzword for collaboration. Partnering is the process of two or more entities coming together for the purpose of developing synergistic solutions to their challenges. Supplier partnering is more a journey than a destination. No matter how well you think you’re currently engaging in partnering—you can always do it better! Partnering is both a mind-set and it’s an activity—a place where management, marketing, and philosophy meet.

Supplier Partnering Benefits

Many benefits from supplier partnering are obvious and some are not. Listed below are a few of the important reasons for you to embrace partnering:

  • For technological contributions or a competitive edge.
  • Competition from non-traditional sources has created a need to become more competitive.
  • Develop a market advantage and to increase distribution capabilities.
  • Risk sharing and financial stability.
  • Inventory control and automatic fulfillment for product sales and manufacturing materials.
  • Greater consistency in service and product quality and availability.
  • Better productivity and quicker response times.

Supplier Partnering Challenges

Along with the benefits of partnering, also come the pitfalls or land mines. Identifying these early will greatly increase your prospects of achieving effective partnering alliance relationships. Some of the more common partnering pitfalls:

  • Not making an organizationally complete partnering commitment, especially from executive suites.
  • Alliance partners having incongruent core values.
  • Alliance partners having unexpected inefficiencies or poor management, causing reduced partnering capabilities.
  • Resistance from employees on new methods of operation.
  • After entering into a partnering relationship, one partner unexpectedly pulls out leaving the remaining partner or partners in need.
  • Culture clashes among partners.
  • Complacent attitude or expecting others to complete the difficult or unpleasant activities.
  • Hidden agendas or unrealistic expectations.

In understanding the possibility for these calamities to arise, you can plan and organize your partnering agreements to hopefully eliminate these potentially dreadful occurrences. One of the best ways to guarantee failure is not to know your partner’s strengths and weaknesses. Knowledge of your partner is imperative for successful long-term relationships. In today’s unstable economic environment, you want the least amount of surprises possible. Depending on where you fit into the supply chain, as a manufacturer, wholesale distributor, or dealer/retailer, your needs and possibilities will differ.

Steps for Effective Supplier Partnering

Five steps for developing your buy/sale partnering relationships:

  1. Monitor. Study your business, observe, and identify areas for improvement. Also take inventory of core strengths that might be valuable to a potential alliance partner.
  2. Educate. Learn about those companies you might consider for partnering arrangements, arrangements that create a win-win result for all who participate. Ask yourself and your management team about their strengths and weaknesses? What effect would they have on our business? This is the time to study value based purchasing and to understand the difference between cost of an item and total cost of procuring the item.
  3. Select. This is the critical step because all your future efforts are built on this foundation. Select with knowledge, understanding and commitment. Surely there is little security built upon a flimsy foundation. Search for the strongest materials for your partnering foundation.
  4. Organize. Now you’re to the point of identifying, understanding, and putting together the possibilities for an alliance. This will be your not only your partnering structure but also your road map, plan it well. This is where you must determine if you are rewarding the correct behaviors in your organization. Are you making the mistake of rewarding your purchasing agents for obtaining the lowest item cost and not for the lowest total procurement cost?
  5. Charter. This is the agreement, whether it is a handshake (which I advise against) or contractually. I strongly urge all buy/sell-partnering alliances to put their agreements on paper—it’s so much more clear six months or two years later. Each party’s commitment to the other, on paper, will smooth a path through the potholed road of partnering. Also your charter should explain conflict resolution, as Murphy’s Law is sure to emerge. Be ready for it and the conflict will be resolved timely and amiably.

Qualities of Supplier Partners

Selecting your trade partners well will serve you and your company for years to come. To aid you in the search, I’ve identified many of the necessary qualities of a person, management team, or corporate culture with which to successfully build your alliance.

  • Wants to win. There is no intelligent reason to partner with a loser. This kind of relationship will only drag you or your company down to an unacceptable performance or production level. You and they must have a desire to win—to want to do better, to be useful in creating synergy with your partner!
  • They understand that they are still ultimately responsible for their own success. They understand the value of synergy and acknowledge that accountability goes both ways. Be careful not to always assume your partner is looking out for your best interest.
  • The leader and or contact must be an active listener. To truly keep in touch with the heartbeat of an alliance, active listening is critical. This helps you to know what you need to do extra and when the other side is falling behind in their commitment to you. Alertness from both sides equals mutual success.
  • Understands and cares about what drives their partner’s’ businesses. Because successful partnering is about synergy, you must consistently give the correct kind of value to the relationship. Regular Relationship Bank deposits are always required before withdrawals are possible. You can only offer value to the relationship by knowing what your partner’s business considers as being synergistically important.
  • Responds well to, and acts on, feedback. The only possibility for forward and beneficial movement occurs when leaders are willing to accept counsel. None of us are smart enough to know it all. Notice I didn’t mention criticism—it was intentional.
  • Flexibility, especially when events or circumstances are not what was expected. If you don’t have the ability to change direction when the road ahead is washed out. You’ll find yourself wishing for rescuers as you uncontrollably float down the stream. Flexibility is absolutely necessary because things will never be exactly as we expect.
  • Trust, integrity and respect for others. I found this to be the common thread weaving through an organization’s consciousness—from the factory floor to the executive suite.
  • Seeks win-win arrangements and solutions. Earlier, I stated that you must look after yourself, but if that is all you do, you’re of little value as a long-term buy/sell partner. You must win for the sake of your business. At the same time your partner must also win. This will develop a desire within them to want to continue in the relationship. The partnering advantage becomes stronger the longer the relationship lasts.
  • Understands that partnering is a relationship of interdependence, not dependence or independence. Visualize your partner and yourself as partially overlapping circles. The overlapping parts of the circles are your areas of mutual value. This overlapping area is also your area of interdependence.

Buyers and Sellers

Buyers and sellers, working together for mutual improvement is the great benefit received from partnering. Be careful of unrealistic expectations on one another. Too often one’s perception of disloyalty from a partner can in really be an unrealistic expectation. Communicate your needs, as both benefits and pitfalls are inherent in partnering. The benefits usually outweigh the challenges. Be careful and methodical in the search for alliance partners. Take care in carefully structuring the arrangement. Do this, and you will succeed for years to come. Remember—partnering is not instant gratification but rather a long-term paradigm for success.

Partnering's 5 Areas

Building Your Pentad for Partnering Success (974 Words)

Partnering's 5 Areas

Five Areas of Partnering

Time for a Pentad. Are you tired of adversarial business relationships draining your energy?

It is time for you to look at a new way of conducting business–one that empowers all to be more productive and profitable.

If the pain of where you are is greater than the perceived pain of the unknown, you might be ready for partnering. Partnering is an idea that is loosely used to describe anything from teamwork to alliances to contractual partnerships. Partnering, as I define it, is the process of two or more entities coming together for the purpose of creating synergistic solutions to their mutual challenges. I recommend you adopt partnering as your overall business strategy. The benefits are numerous yet the partnering path is not without land mines.

Partnering is not meant to be a flavor-of-the-month management strategy to be hastily adopted and then as quickly abandoned, rather a long term paradigm for success. Partnering is not instant gratification! To adopt partnering as your overall management strategy, you’ll need to understand the Partnering Pentad. A pentad is simply the name given to a group of five, the Partnering Pentad represents the five key areas of every business, the areas in which to begin developing your partnering belief and activities. Once in place, you’ll have Total Organizational Partnering.

1. Synergistic Alliances

This is the area of your business where you develop alliances with outside entities for activities where you have core weaknesses you desire to shore up and to cut costs. These could include: purchasing, R&D, manufacturing, employee sharing, distribution, marketing, advertising and the list continues. By sharing your core strengths with others and theirs with you, both can create an environment of synergy yielding each more than the some total of their collective contributions. Land mines to watch out for are core values of alliance members being too different, circles of interest overlap being too little, and continual management change of one or more alliance partners.

2. Supplier Partnering

This is an area where much is being talked about.  For companies desiring just-in-time manufacturing (JIT) and electronic data interchange (EDI) ordering and inventory control, partnering is an absolute prerequisite.What I here so often from suppliers about their customers is, “They’re talking marriage but acting one night stand.” Whether you be a retailer, distributor, or manufacturer–to succeed and prosper, you had better start developing long-term relationships with those whom you do your purchasing. The biggest land mine in this area is to talk about quality, delivery, and reliability while only buying based on price. Remember, there is today’s price but there is also the overall cost–the overall cost is usually lower through long-term partnering relationships.

3. Customer Partnering

This is the area of your business where you must be outward driven. Your customers will buy from you as long as they feel they’re receiving good value for the dollars they give you. Value-added is a term which much is being written about. You must be customer/market driven rather than product driven to understand what your customers want and perceive as value being added to your products and services. It costs about 10 times as much to get a new customer as to keep a loyal customer coming back for more. The important land mine to watch out for is short-term thinking on your part when making customer satisfaction decisions.

4. Employee Partnering

To many businesses is a “non-issue,” meaning that they don’t. What motivated the WWII generation is different from what motivates baby boomers and is different from what motivates the youth of today.  Just because something motivates you, it doesn’t necessarily mean it will motivate those of a different generation than yours. If you want your employees to have an ownership in your business–even though they don’t have a legal ownership and to hold sacred the business as you do–you must empower your employees.  Empowering means giving them the authority and encouraging them to accept the responsibility to do the job. Then acknowledge their successes and failures in an environment of safety–one where you encourage and reward risk taking. The major land mine to watch out for is the Ego Trap, yours of course. To give power, you must be a powerful person, one who possesses personal power rather than power simply acquired from your position.

5. Owners/Executives as Optimal Partners

This is the final and in many ways the most important part of the pentad. Not the most important from the perspective that all revolves around you, but that of having a culture of true partnering. The belief must start at the top, you must lead the charge and show by words and actions that the paradigm of partnering is truly your preferred and accepted business strategy. The critical land mine here is when top brass arrogantly believes that they are at the center of the pentad and that all should revolve around them.  The coveted center is reserved for the relationships that bind the partnering pentad and your organization as a viable entity serving society and receiving profits as the result.

For today’s cutting-edge business leaders, partnering is the prevailing answer. The Partnering Pentad will enable businesses of any size to access the benefits generated by pooling the knowledge and experience, crucial to compete in the global marketplace. Partnering is the answer if you are willing to adopt the paradigm of collaboration for mutual success! Challenge yourself to put into action the paradigm of partnering as your management and marketing strategy. Nicholas Copernicus, the father of modern astronomy, in the first decade of the sixteenth century A.D. wrote a paper stating, contrary to conventional wisdom, that the earth was not the center of the universe, but rather that it rotated around the Sun. For this he was rewarded with a 500 year excommunication by the church, what price are you willing to pay for progress?