Win-Win Sourcing and Booty Calls ...

This morning, I'd like to welcome back a regular guest columnist to Spend Matters. Brian Sommer is a Senior Fellow at Azul Partners, founder of Tech Ventive, and is author of the blog Services Safari.

Booz Allen Hamilton knocks out a great quarterly magazine called Strategy+Business. The latest issue has a piece titled Win-Win Sourcing that details a style of procurement that's mostly foreign to U.S. buyers of goods. Even though Jason wrote about it last week already, I thought I'd offer a different -- and more risque -- interpretation of it for Spend Matters readers.

In the article, the authors contrast the relationships that Japanese automobile producers have with their suppliers versus the adversarial ones U.S. automobile producers have with theirs. While the actions of both supplier ecosystems are well known and documented, the authors lay out several strategies for changing one’s relationships with suppliers so that everyone in the ecosystem benefits.

Clearly, buyer-supplier relationships in many industries need professional help. As I'm typing this I have a Chicago Tribune article in front me that describes how Collins & Aikman forced Ford Motor Co’s Hermosillo plant to shut down for a shift because of a supplier spat they were experiencing (see "Ford Seethes Over Supplier's Stoppage", Chicago Tribune, 10/19/2006). Too many suppliers and buyers have adversarial relationships and too few actually achieve the win-win stature one party may desire.

Recently, I conducted a Negotiations training course for a Fortune 500 firm. During this week-long effort, I observed that:

- This huge firm treats most (i.e., almost all) of its suppliers in a win-lose fashion. Suppliers are pitted one against the other so that the lowest cost supplier wins most deals.
- Many suppliers viewed this F500 firm to be very strategic to their firm and long-term success. However, the F500 firm sees these suppliers as transactional or tactical.

Whenever one party in a relationship sees the nature of the relationship differently than the other, problems explode. Think about your dating past! What happened when you fell madly for another only to have him/her ask "Can't we just be friends?" ... UGH -- The pain of that assessment. In my view, unrequited love isn’t just the stuff of Shakespeare; it's also a mainstay of supplier relationships, too.

To wit, if you want a Win-Win supplier/buyer relationship, both parties have to be willing to work together in a very long-term partnership. Neither party can be thinking:

- about dating around with other suppliers
- about saying “I do” with one strategic supplier and keeping a little side action going with a lower cost supplier (i.e., "Is there someone else or is it just me?")
- about this as a short-term win while saying it's a long term relationship (i.e., "Why won’t you ever commit?")
- dark thoughts re: the future of the relationship (i.e., "What about us?") and subconsciously undermining the relationship

Before suppliers rush out and hire a Dr. Phil type to solve their supplier/buyer relationships, they need to recognize that:

- Only a very small percentage of supplier/buyer relationship can be strategic to both sides. You may want it to be strategic but if the other party isn’t amenable to this, you're screwed.
- The moment you sense one side does not see this relationship as strategic, then circle the wagons and get the strongest tactical deal you can get. Don’t waste energy trying to work out a strategic relationship when the other party’s not interested. I saw this drama unfold in high school and college all the time when one person wanted love, romance and a relationship and the other person wanted a booty call. Sex is not the same as love just as tactical relationships are not the same as strategic ones.

Take a closer look at all those negotiating books people sell these days. Many coach you on achieving a win-win outcome. From my experience, win-win is an admirable goal sometimes; however, sometimes all we want is a transactional relationship. When I bought my Accord, I got a welcome letter indicating that I'd been made a member of the Honda family. Funny, that's a family that doesn't share any holiday meals, have any reunions, etc. Worse, my Honda family hasn’t offered to pay one cent of my daughter’s college education, bought me a birthday gift or anything else a 'family' member does. When win-lose deals are camouflaging themselves as win-win, someone's feelings are going to get hurt.

Making win-win relationships work is hard. But, the real skill is deciding which ones are really worth making win-win. The Booz Allen Hamilton article makes us think about having more win-win supplier/buyer relationships. Before you unilaterally decide to do this, make sure your prospective supply chain has read the same article and also wants a better relationship. Otherwise, you'll be left standing at the Vegas Supplier Chapel of Love empty handed.

Brian Sommer authors the blog: Services Safari