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Get Supplier Relationships Right, Then Maintain Them

Analyst Insight: If the wheels on your vehicle are out of alignment, you're in for a rough and inefficient ride. The same holds true for businesses. Alignment, especially in strategic relationships, gets businesses beyond the initial "yes" that sets a deal in motion—it aligns the participants throughout the life of the deal, turning it into a smooth and powerful relationship. – Kate Vitasek, Faculty, University of Tennessee's Center for Executive Education, and Founder, Supply Chain Visions

Get Supplier Relationships Right, Then Maintain Them

Getting your supplier relationships right is more and more a question of attaining and then nurturing relationship alignment. When an otherwise promising business relationship sputters or fails, the problem is often traced to a lack of alignment between the parties after the initial handshake. Effective alignment doesn’t just happen, much groundwork is needed: the business partners need to trust each other, share a common vision and goals for the enterprise, and be committed to the idea of creating, sharing and expanding value.

It’s not enough to expect alignment from a Statement of Work. It is not designed to embrace those ideas—it speaks to tasks and not to broader objectives and goals. In fact the SOW can often be the culprit behind damaging misalignment. In what is known as the Outsourcing Paradox, a company attempts to develop the “perfect” SOW, trying to specify with great detail the expected results. The result might be a comprehensive document containing all the possible details on how the work is to be done. But this “perfect system” is often the first reason that the company’s outsource relationship will fail. That’s because it is the company’s perfect system, not one designed by the supplier or service provider.

A SOW that’s written too tightly and non-inclusively makes the supplier responsible for the work without giving it the authority to exercise initiative to actually accomplish the work. Ultimately it comes down to a lack of trust and acknowledgment that the supplier is the expert, and the reason for the outsourcing decision in the first place. The result? Misalignment and failed collaboration.

The Vested business model is based on trust, transparency and compatibility as elements that foster collaboration and maintain alignment. Trust and alignment are so important to the concept of Vested they are embedded throughout its Five Rules.  The idea is to instill a “what’s-in-it-for-we” mindset between the company and the supplier. They manage the business together rather than focusing on self-interest and transactions. This mutuality—or tugging together on the same rope—requires a high degree of compatibility and trust that the parties will succeed—or fail—together.

Trust is the glue that maintains alignment. In the current economic and business climate combining critical resources across business platforms is a necessity.

That means creating and sharing a vision with your partner or partners, and aligning with them in real and collaborative ways to create and share value. A cooperative and collaborative mindset opens a conversation between the parties: The result is that they share what is needed, admit to gaps in capability, and aim to focus on the benefits that the other party can bring to enhance any gaps in capability. That vision and alignment forms the basis of a truly working relationship.

In other words, a Vested business model and relationship.

                                                     The Outlook

Supplier relationships are not only vital to the financial health of a company – but can also be a key driver to overall brand health. It’s vital to be on the same page—aligned—from the get-go, and to nurture that alignment through trust and collaboration.

 For more on this, read Getting to We: Negotiating Agreements for Highly Collaborative Relationships. It underscores the crucial importance of trust as the foundation for successfully aligned and collaborative business partnerships.

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