Supply Excellence — Sage Advice — From a Marketing Exec No Less

Sage Advice — From a Marketing Exec No Less

October 30th, 2006 · by Tim Minahan · No Comments · best practices

Sorry to interrupt our regularly scheduled programming. But every once in a while you come across advice that transcends disciplines and reminds us of the most sage principles for sustained success in both business and life.

On his self-named blog, new-age marketing guru (and former Yahoo! exec) Seth Godin takes on the Gordon Gekko-era adage, “It’s just business.”

I couldn’t help but pass on Seth’s counter: No, it’s just life.

“Anyone who is willing to lie to you, cheat you or treat you with disrespect because it’s just business is doing more damage to herself than to you,” writes Seth. “As far as I’m concerned, I don’t want to spend time or money with anyone who has this particular attitude disfunction.”

Supply managers should heed this seemingly simplistic counsel when engaging team members, internal stakeholders, and suppliers. A myopic focus on year-over-year price or cost reductions can foster questionable sourcing and supplier relationship management practices. And, while this might provide short-term gain, it will inevitably backfire in the end.

Consider the U.S. auto industry. Hard-handed tactics by General Motors and others have created a level of distrust between buyers and suppliers that rivals the Hatfields and the McCoys. Past decisions by GM to rip up long-term agreements midstream and demand double-digit cost reductions have left battle scars that still ail the industry today. Instead of investing in development and processes that could deliver innovation and sustained competitive advantage, suppliers were forced to spend most of their time guarding their narrow margins.

By comparison, Toyota and Honda have long viewed cost control as a team effort, investing in and training suppliers to improve operating efficiencies and to develop next-generation technologies. The result: better quality products, joint competitive advantage through innovation (such as today’s hot-selling hybrids), and better financial performance for the automakers and their suppliers.

Or consider that the initial backlash against reverse auctions. Contrary to popular belief, supplier resistance wasn’t the result of the heightened competition auctions introduced into negotiations. (In fact, top-performing suppliers liked the idea of competing in a truly transparent market.) Instead, it was the misuse of the technology by some buyers that caused the revolt.

In the early days of online sourcing, there were numerous tales of buyers using reverse auctions merely to force price concessions from incumbent suppliers. There were other stories of buyers secretly negotiating deals offline after the auction event — all without full discloser and no real intention to award the business to the true best-value supplier. These deceitful tactics were the true source of supplier angst. And, now with tightening supply markets, some of these same buyers are reporting difficulty in securing supply for certain commodities at any price.

Supply Excellence has reviewed methods for ensuring integrity in supplier negotiations and relationships in previous posts. But the message is worth repeating. There is ample evidence that technology-enabled supply management best practices can drive dramatic improvements in cost and performance. (In fact, the information transparency enabled by technology actually increases the integrity of buyer-supplier relations.) Sustaining such success requires that these approaches are employed in a proper and upright manner.

Ask yourself the following question: Are you instilling integrity in your sourcing, supplier, and personal relationships? If not, history shows that the short term benefit you’re gaining through deception will backfire on you in the end.

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