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For too many outsourcing partnerships, trust issues lurk

The Foundation for Strategic Sourcing’s recently held an event, F4SS Connect, in San Diego...

Pw 88322 Lisa Shambro 0 1

At this executive session, we usually enjoy hearing the latest developments in the industry — how we continue to progress, new examples of value creation, etc. The event included a ceremony honoring winners of an award program called the F4SS Outsourcing Excellence Award winners. This provided examples of how customers and suppliers work together and, in so doing, create value and raise the bar for the industry.

On the surface, everything seemed to be “normal” in the sense of the usual meeting attitude. However, once we dug a little deeper, we learned there are some underlying issues which we find to be disturbing.

Specifically, many customers and suppliers in the industry cite regression in the area of trust in customer/supplier relationships. This is of concern because it is the foundation required to build long term, strategic relationships that can lead to value creation. Without trust as a foundation, our industry may be relegated to the transactional interaction which has been our historical approach.

In one of our sessions, I had the opportunity to ask a large group to answer whether they believed we were regressing in the area of trust. (The question was posed in true-or-false form.) While there were customers and suppliers who took both sides, by and large, suppliers believed it to be true and customers false.

Could it be that suppliers have the more accurate view since they see a wider range of customers upon which to base their opinion? I believe so. Meanwhile, customers know only the dynamics of their internal organizations. Further, customers tend to be less objective since their internal organizations provide a myopic perspective, in general.

Factors that can affect trust

Those customers who report concern with the regression cite numerous factors that contribute to the situation. The two most common are:

• Increasing pressure to deliver cost reduction

• Organizational change and staff reductions leading to “doing more with less” pressure and challenges maintaining continuity in strategic relationships.

It seemed like we were making such great progress in the last few years, so to hear of these developments is very concerning. As I think about the problem, there is no obvious solution that comes to mind. We must strive to demonstrate new levels of leadership to create mutual value in relationships. This led me back to the awards themselves — demonstrations of how customers and suppliers, due to long term, trusting relationships, were able to work together to create mutual value. Please see the F4SS website for more information. The award winners were:

• Gold – Kellogg’s and Roskam Baking for collaborating on supply chain network redesign

• Silver – Procter & Gamble and Coregistics for rapid, collaborative response to peak season supply chain interruption

• Bronze – General Mills and Hearthside Foods for collaboration and co-innovation on new product development and commercialization

Also receiving Honorable Mention were Peacock Engineering, KleenTest Product and Butterfly Health

In each of these examples, products achieved market success as the direct result of customers and suppliers collaborating at levels we rarely saw as recently as three years ago. In these examples, both sides are committed to insuring success, each side trusted the other to work together to the best interest of the partnership. If trust didn’t exist, these results wouldn’t either.

This leads me to conclude that maybe, as an industry, we are having trouble seeing the forest for the trees. I can’t imagine there isn’t any customer who wouldn’t jump at the chance to experience the market success the companies above are enjoying as outlined in the examples. Thus, we need to find a way to tie these results to trusting, collaborative behaviors so the industry can establish this as our “new normal” vs. the “we vs. they” of a more primitive state.

Lisa Shambro is executive director of the Foundation for Strategic Sourcing/F4SS. Contact her at [email protected]

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