Yes, trust. Collaboration, flexibility, innovation, reliability and even communication work most effectively in a volatile environment when trust is firmly established in a relationship. What happens when trust among the parties becomes second nature is that the relationship becomes a partnership.
University of Tennessee research has found that the best outsourcing relationships create a partnership where the parties are vested in each other’s success, and in the importance of trusting each other. The Vested Outsourcing, or Vested, approach takes SRM to an entirely different level beyond simply managing the supplier. Our research shows that best relationships focus not just on managing supplier – but on managing the business with their suppliers. A Vested approach puts aside the traditional transaction-based and cost-cutting focus which often ends up in frustration by shooting for the short-term gain at the expense of long-term stability. Instead, a Vested approach creates a long-term relationship based on achieving outcomes – not just performing activities.
So how is this different from SRM? Under SRM parties do try to create processes for managing their suppliers. SRM does establish a common frame of reference, some unified business practices and common terminology for buyers and suppliers to use. That’s fine as far it goes. More is needed however, because too often SRM simply devolves into a one-sided “what’s in it for me” strategy of managing the service provider rather everyone jointly managing the relationship. Managing the relationship means shelving the conventional I-win-you-lose adversarial mindset in favor of a win-win, “what’s in it for we” partnership framework that creates, shares and expands value across the board. Viewing outsourcing governance from the Vested perspective means that the parties’ processes will encourage closer alignment and shared accountability for achieving agreed-upon outcomes. Once parties acknowledge that they want and need a better relationship structure, based on trust and collaboration, they’ll find and perpetuate the long-term win-win.
The Vested Outsourcing Manual provides a comprehensive discussion of the Vested approach to for managing 3PL relationships.
SRM will continue to gain traction in 2013, as companies increasingly realize that it’s logical and necessary in a volatile and complex supply chain world. However, the most progressive companies will shift their focus from SRM to a Vested approach for managing the business with their suppliers. To learn how the best of the best do it – look at the chapter on McDonald’s in Vested: How P&G, McDonald’s and Microsoft are Redefining Business Relationships.
Keywords: sourcing solutions, supply chain management, Vested Outsourcing, SCM