Fears of a recession in 2023 are not going away. It ranges from rising transportation costs and inflation, persistent labor shortages, fluctuating demand, to the scarcity of critical goods, to name just a few. Should that trend continue or even accelerate, the global supply chain is more stressed than it has ever been.
To greatly weather and mitigate further effects of such impossible-to-predict recession, buyer-supplier’s old ways of operating should be abandoned and replaced by a more collaborative, trust-based relationship.
From the get-go, the buyer-seller foundation is far from a balanced one. They each behaved in their own best interests.
On the buyer’s side, the whole relationship process is simply rationalizing that strong supplier relationship will win them cost reductions and service improvements. They do not usually see suppliers as partners to help drive innovation, competitive advantage and business growth.
Yet for most sellers, this relationship is just one aspect of their sales strategy, and they are less invested in the relationship than we think they are. They will leverage relationships for as long as they can if that is what the buyer wants.
And just as so, the pandemic-related disruptions of supply chains around the world have cruelly brought to light flawed supplier relationships.
If the buyer-supplier relationship was once considered a single event transaction, now they have made it abundantly clear that trust between companies and their suppliers is integral to building a resilient supply chain (3 Ways to Build Trust with Your Suppliers, the Haslam School of Business at the University of Tennessee.
The pyramid of trust between trading partners
Recognizing that trust is a two-way street, the Compatibility and Trust assessment (CaT) is developed to provide a multi-faceted view that organizations can use to not only assess the trust of a partner but their own ability to be trusted, along with tools to monitor insights on an ongoing basis to ensure that relationships are healthy and act to strengthen them.
In particular, the CaT measures 5 key relational components that contribute to a healthy and trusting relationship. When these dimensions are cultivated, relationships flourish as a result of increased cooperation and improved performance.
Beside CaT, technology can play a role as well when it comes to buyer-supplier relations.
Business networks and digital procurement tools can provide a clear and transparent way to collaborate that removes friction, by aligning trading partners with consistent and accurate information across orders, inventory, capacity, logistics and asset management, to make sure the right product gets to the right customer at the right time. And they also fuel seamless collaboration for greater supply chain visibility to ensure their mutual needs are met.
All of this builds trust. And trust pays dividends. There can be extremely strong, strategic opportunities if trust is well-formed and nurtured.
- The costs of procurement can be reduced by 40% when compared with power-based agreements.
- With increased collaboration and innovation, new markets and business growth is created for buyers and suppliers alike.
Evidence has shown that the industry is moving towards greater collaboration. Organizations that recognize and embrace it can become partners of choice and succeed even in the most uncertain of times.
Reported by SUVI @WEDO 2023-02-13
