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Forbes

47% of Supplier Collaborations Fail: Build Trust or Expect Failure

By Jonathan Webb

September 13, 2017

Supplier relationship management is difficult to get right. Our new research in Procurement Leaders finds that roughly half of supplier collaborations fail.

Previous studies have identified difficulties in extracting value from supplier initiatives, but few provide probabilities of success.

To calculate this figure we asked 480 procurement executives from a range of geographies and sectors about their experiences in collaboration.

Supplier collaborations are special relationships between a buyer and supplier where the two look to cooperate to achieve a specified goal or deepen their long-term working patterns. These close relationships can deliver a variety of benefits from new product innovations, to incremental efficiencies, to a richer flow of data.

These are partnerships that exist in a buying organization’s ‘supplier relationship management’ program. That is a company’s policies, procedures and frameworks that guide its staff in managing external relationships.

Only 53% of supplier collaborations are successful. Worrying for those in the supply chain profession, the proportion of successful collaborations falls to 51% when a formal SRM program is in place.

This produces a troubling conclusion that suggests that it is better not to have an SRM framework to conduct collaborations.

However, the real reason for failure is a lot more complex. Failure is more attributable to human failings than an absence of a managerial process.

Within our sample, the most commonly identified reason for failure relates to a lack of commitment or trust.

Previous academic research has shown that collaborations hit the wall because organizations do not integrate the two teams in either company. The buyer and salesperson have a good working relationship, but a true partnership between collaborating companies requires the coordination of many touchpoints.

Unless these complex and disparate relationships are managed on either side of the business, collaborations run the risk of failure. Stakeholders that are not engaged may resist the initiative and work to sabotage it.

Building trust requires time in which goodwill, openness and transparency are demonstrated over a course of many transactions. Trust does not only need to be won with direct counterparts but throughout both organizations.

It is a significant challenge to construct a compelling business case to win over stakeholders and persuade a diffusion of interested parties across two organizations. The requisite skills run far beyond the procurement professional’s traditional remit of raising POs and putting contracts out to tender.

Our research suggests that many buyers are not preparing adequately for supplier collaborations and therefore are not winning the trust of crucial stakeholders throughout both organizations.

Buyers that are unwilling or unable to prepare adequately for collaborations run the risk of failure. According to our research that risk is approximately fifty-fifty.

The lesson here should be apparent: Successful supplier collaborations require a lot of planning and hard work.

 

This article was written by Jonathan Webb from Forbes and was legally licensed through the NewsCred publisher network. Please direct all licensing questions to legal@newscred.com.