There is no magic recipe to building trust with suppliers, but it basically involves setting a tone that keeps suppliers informed about what you want to accomplish and how you plan to deliver on that, says Washington.

If you have given a supplier a reason not to trust you in the past, you need to be open about acknowledging that behavior and explain what you will do going forward to rebuild collaboration and trust, he says. "And accept that this will take time."

Washington notes that Diebold, which makes ATMs and security systems, has some supplier relationships that go back 40 or 50 years. "There are times when both parties have done things to damage the relationship during that period, and we have had to spend time rebuilding and really demonstrating that we are going to behave differently," he says.

Relationships also need mutually agreed upon ground rules, says Washington. "Our suppliers understand that we will benchmark and cost compare throughout our relationship. We want them to have our business, but this is one of our ground rules and most suppliers understand and are very willing to accept that."

Building trust with suppliers helps drive the business forward, he says. "It enables you to start having conversations about margin growth rather than just taking cost-outs."

It also helps resolve difficult issues that can come up around intellectual property. "One of the biggest risks you take when you collaborate with suppliers is around this issue of intellectual property," Washington says. In some joint development agreements, he notes, suppliers and customers both bring ideas and solutions the table for discussion. "You have to develop a model where you can jointly share the IP," he says. "This may mean that you restrict its use to certain markets or to specific products." But sometimes the supplier may have another customer that could be helped by the IP, Washington notes. If you have built a good relationship, you may be able to work out a licensing agreement and share in a new stream of revenue, he says.

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