Friday Rant: Turning a Climate of Supplier Mistrust Into Something Better

Earlier this week, I spoke at a local IACCM networking and roundtable event in Chicago. Attended by about 30 people, the event really got me thinking about trust and buyer/supplier relationships. I'd say about 50% of the audience came from the buy-side with the remaining 50% split between sales, legal and professional services. After my presentation on economic and related factors impacting the procurement and sourcing landscape, the panel discussion commenced with the concept of "trust" taking center stage almost immediately.

Many of the participants agreed that the current climate was eroding trust. One of the panelists, a sell-side contract / account executive for a major pharma/diagnostics provider, spoke about the challenge they have with one very large customer whose credit rating is declining but whose DPOs to their organization are increasing. Another sell-side member of the audience asked if other companies in attendance were seeing an increase in arbitrary contract cancellations or renegotiations -- as this organization had observed recently. On the buy side, procurement organizations in attendance worried not only about supplier viability, but the ability of suppliers to continue providing the same levels of quality and service in the current climate -- not to mention greater flexibility to help their customers survive given economic uncertainty and overall demand volatility.

In short, buyers and suppliers were talking about the same things -- general levels of eroding trust on both sides of the equation brought on by the current economic malaise. The situation reminded me of how financial hardships and challenges cause similar problems in marriages -- and can often lead to or at least contribute to break-ups (I saw this first hand as the child of divorced parents). The problem often arises that when couples -- and companies -- seek professional counseling to repair the relationship, it's frequently too late to make a difference.

Is there any good news in this apparent conundrum? I would argue yes. Based on what the audience at IACCM had to say and my own experience, I'd say that the pre-emptive antidote to the situation seems almost too easy to be true: constant and early communication between both parties. Not so ironically, when relationships are based upon clear and open communication, crises involving trust are largely precluded.

Establishing trust at the point that one or both parties believes it is lacking becomes the challenge. While few of us are expert in human psychology, I suspect that we can agree that is impossible to force behavioral changes upon other individuals and organizations. What we can do going forward is to table the issues at certain points in time as we see them and acknowledge where and under which circumstances we have been complicit in creating the problems that need resolve while teaching by example in future dialogue and negotiation. When both parties can meet the issues surrounding "trust" half way, resolution is always possible.

- Jason Busch