Building Collaborative Relationships with Suppliers

How do we build collaborative relationships if all suppliers are working remotely?

Collaboration is a fundamental component of supplier relationships. It helps to secure supply, seek out competitive advantage, build brand value and foster innovation. As such, strategic supplier collaboration contributes in no small way to ensuring the future success of an organization.

And yet, while recent global developments have shone a spotlight on the importance of supplier relationships, wide-ranging changes to the ways in which suppliers operate threaten to shake these processes to their very core.

In today’s post-pandemic world, when ensuring assurance of supply is now the key driver of procurement decision making, changes to working practices have made supplier relationship management more challenging than ever.

Strategic supplier collaboration

Recognizing strategic suppliers and building highly effective relationships with them is essential for any firm wishing to survive and compete in an ever-changing, fast- moving and volatile global environment.

For those suppliers mapped as critical by an organization, collaboration is the ultimate goal. After all, these hold the potential to deliver dramatic benefits.

As in personal relationships, powerful bonds are borne out of social interaction. These cannot be achieved overnight but need to be courted, pursued, built and reinforced with consistency and persistence.

It is important to remember that companies do not nurture relationships but, rather, individuals do. Crucially, this means that strategic collaborative relationships are founded upon relationships between individuals, albeit supported by the companies they represent.

The challenges

Given that all relationships require social interaction, it’s fair to say the coronavirus pandemic has severely tested SRM practices.

In 2020, when Covid-19 brought about a completely new era for the workplace, suppliers made wide- ranging changes to the way they operated. As companies around the globe sent their teams home, giant corporate buildings were left empty for months and, while widespread panic initially followed, employees soon realized that most business operations could carry on, almost as normal.

We learnt quickly that many of the things we used to do in the workplace could be done remotely, and that, incredibly, the technology already existed to keep in contact effectively. We simply had not been using it to its full potential.

Employees enjoyed a new balance of work and family and, ultimately, a better quality of life through homeworking. A new hybrid working model soon emerged, where physical workplaces became locations for manufacturing and service delivery while individuals working attended only when necessary to meet.

This new technology-enabled hybrid model has allowed organizations to shrink their property portfolios and reduce costs and emissions. Meanwhile, firms have also reported increased productivity and commitment.

As recruitment adopted the ‘work from anywhere’ model, the same concept was applied by suppliers and across the supply base. As a result, suppliers should no longer be viewed as entities within specific operating locations. New global network-based suppliers instead comprise the best available talent in the world in multiple physical locations, connected by, and operating through, technology.

These widespread changes in how suppliers are organized and operate mean we need new ways to understand them, manage risk and, crucially, maximize key relationships.

Relationship building in the new world

It is fair to say the seismic global developments following the Covid-19 pandemic have changed the supplier landscape beyond all recognition.

The changes it has driven fundamentally altered how procurement functions need to operate,  - in particular, how they manage their key supplier relationships.

Successful procurement teams will be those that are agile enough to adapt to new ways of engaging with the future supply base.

First, this requires a new mindset that considers suppliers as networks rather than purely physical locations. This affects all aspects of supplier relationships, from contractual elements, such as auditing, to the softer skills of relationship building. After all, personal relationships are built on social interaction and this is less likely to happen in person in the post-Covid world.

On a positive note, this shift in how suppliers are organized is likely to deliver enhanced innovation, as connected talent networks are given the remit to work free from the constraints of a physical entity.

Making strategic relationships work

Clearly, we don’t want or need collaborative relationships with every supplier, just those that present either great strategic opportunities or very high levels of risk. We should also evaluate whether the supplier is interested – unrequited relationships do little more than soak up resources.

Once we are clear on which suppliers are suitable, there are some key steps that are critical to making strategic relationships work:

1. Have a clear, shared goal – Relationships won’t achieve much if the parties have differing objectives. There needs to be a single, mutually beneficial goal that both sign up to.
2. Choose the right people – As in personal relationships, trust and effort are crucial to success. Empower the people that will deliver both.
3. Agree on how the relationship will work – Partner companies that do this well sign a ‘relationship charter’ where they agree on how the relationship will work, the agreed goals, who is involved, roles and responsibilities and review points.
4. Create the right conditions – Collaborative relationships might require individuals or teams to physically come together, perhaps even working at each other’s facilities.
5. Work at making it a success – As in any relationship, unless you work at it, it will not bear fruit. The same applies between companies. Share resources, make it a priority, give it your best effort and celebrate successes.

As the world has changed beyond recognition, procurement professionals must adapt in order to survive and thrive. This challenge brings with it a unique opportunity to redefine post-pandemic supplier relationships in order to realize obtain a competitive advantage.