Supplier Management Lessons From Steely Dan
The first lesson (like the rest) is basic -- make everyone want to work with you. By nature of their standards, musical prowess and the artistic license they've granted what was probably the best back-up band I've ever heard, Becker and Fagen were able to source world-class talent to play with them (even in fairly small venues where the upside is not that significant). Like a Honda or Toyota who engender respect from their suppliers (even though they can be extremely demanding), Steely Dan does the same, which makes suppliers (i.e., their back-up band) seek them out.
The second lesson is simple: it pays to have your best suppliers stick with you for good times and bad (and to know when to rely on them). To be truthful, Walter Becker was a bit washed up on guitar. But they had a new guitarist (also the musical director) to play his classic licks for him -- smart decision all around. As in procurement, sometimes it makes sense to outsource aspects that require superior performance to a third party.
The third lesson is something that only experience can teach: stick to the oldies but goodies. Sometimes, the best way to win over your suppliers, customers and internal stakeholders is to go with the tried and true. In Steely Dan's case, this meant spending about a third of their set playing their old standards, albeit jazzed up for a live, more experienced musical audience (we've all grown up since the seventies). But in procurement's case, this can mean using standard tactics such as supplier rationalization where everyone appears to win -- suppliers are happy because they get more business, internal stakeholders are happy because they don't need to risk working with a new supplier and finance is happy because there's straightforward savings associated with the procurement. Sure, advanced sourcing techniques such as optimization or downstream procure-to-pay initiatives like EIPP can pay huge dividends, but sometimes it pays to stick with the classics.
The fourth lesson is to figuratively know when to sing the song "Hey Nineteen" to your suppliers. For those who don't know this classic, it's one of my favorites. The song is essentially about trying to talk to a 19 year-old girl in a bar who completely lacks the cultural literacy of recent decades. The lyrics say it best: "Hey nineteen, that's Aretha Franklin. She don’t remember the queen of soul. It's hard times befallen Sole Survivors. She thinks I'm crazy, but I'm just growing old -- Hey Nineteen". In the procurement world, sometimes you need to remind your suppliers (and your stakeholders) about the past. For example, if a supplier is threatening to stop shipping goods if they can't pass along a price increase (even one that's not allowed per contract), remind them how five years ago, the same tactics resulted in another supplier getting blacklisted from future business -- even if they got the short-term increase at the time. Teach your suppliers some history -- and let them draw the conclusions.
The last lesson from the night is to diversify your customers and supply base. The audience in attendance at the show represented just about every generation (even some past the Baby Boomer era). The fact that Steely Dan has been able to recruit such a diverse following is testament to the timelessness of their music. For procurement organizations, this can also offer a valuable lesson. By pursuing diverse supply bases and new customers and geographies, you can create natural risk hedges should an incumbent supplier or strategy not pan out.
- Jason Busch
Risk Management - The Fez
LCCS - Third World Man
Verticalnet, Frictionless, Mindflow, etc - Everything Must Go
But in all seriousness, I have some agreements and contentions with Jason Busch’s post. I’ll start with the agreements.
Diversifying the supplier base is a must. I saw SD two years ago at the Tweeter Center in Camden, NJ. The crowd included less than “Hey 19”-aged youth as well as AARP card-carrying members wearing the “Brite Nitegown” (“Morph the Cat” for you newbie’s). This dovetails into another point Jason made about others wanting to work with you. When you have a good product and/or process, the masses come to you. Everyone wants to be on a winning team. That explains why SD can get old talent like bassist Peter Washington and new talent like drummer Keith Carlock. This goes both ways however. Being a Major Dude at sourcing can leave a line behind you, but having the best and brightest on your team can keep you a youthful enterprise. Never get too arrogant and think you’re “The King of the World” and the only one having influence in the supply chain, as some of the “Kid Charlemagne”s can move you in a more aggressive direction.
There are points of contention however with Mr. Busch’s analysis. His second lesson, having suppliers stick with you through good and bad, doesn’t fit the SD model, nor the smart supply chain model, and was somewhat contradictory in his explanation. Becker and Fagen were cold-blooded when it came to studio musicians. They knew when they couldn’t produce the musical output they envisioned and they employed as many musicians as needed to get the desired result. Your supply chain should be no different. Why stick with your old school? Comfortability can breed complacency. Plus, if suppliers know you’re willing to shake things up, it keeps them on their toes and you on their cutting edge of pricing and service. When musicians like Bernard Purdie, Mark Knopfler, and Larry Carlton got into the studio knowing their performance would be scrutinized, they elevated their game and produced remarkable tracks. Make your suppliers do the same and know they are being watched.
Another point of contention is Mr. Busch’s fourth lesson of reminding your suppliers about the past. I personally think you should be thinking “I.G.Y.” and be future-oriented. Start thinking “graphite and glitter” and come up with the best way to New York from Paris in 90 minutes and you won’t have to whoop out a history lesson to any suppliers. Don’t be “Reelin’ in the Years” and have to “Do it Again”, because “Only a Fool Would Say That”. Have a “Change of the Guard” and visit the “New Frontier”. Supply chain innovation is always moving forward.
By the way, I’d probably get fired from my job if I spent this much time writing a comment to a blog without mentioning our blog. If you’d like another source for strategic sourcing blogging, please visit http://www.strategicsourceror.com/ In the meantime, I’ll try to keep “Peg”, “Josie”, and “Rose Darling” from ruining my business “Lunch with Gina”.
Of course, you guys didn't mention the etymology of the band's name, but, like the object in question, a Procurement organization should be 'fit for purpose', and it's less about the size of the spend than how you use it... which is to deliver lasting value. And even if you have to rotate many of the players, you make sure that you always have the right core members and surround yourself with the best talent (you forgot Steve Gadd!). I saw Steve recently with James Taylor. Great show on the lawn with the wine and cheese - as usual. Yeah, I'm reelin in the years a bit and they served Geritol right next to the Harpoon IPA, but like with your truly strategic suppliers, you stick with what works.
I love the articles Jason!