Why Trust is Key to Successful Collaborative Procurement

“I believe that your social capital, or your ability to build a network of authentic personal and professional relationships, not your financial capital, is the most important asset in your portfolio.”Porter Gale, ‘Your Network is Your Net Worth’.

Both Porter Gale and fellow author and speaker, Tim Sanders, have highlighted the importance of networks for individuals and businesses. However, both agreed that the key to success lies not in the size of the network or the number of connections, but in the quality of the interactions that your network provides. 

When it comes to Procurement and Supply Chain the idea that your business is only as strong as its network of suppliers and stakeholders is not a new one, and has been thrown into sharp relief in recent years. At the height of the pandemic, procurement professionals leaned heavily on supplier relationships just to keep things ticking over. However, with ongoing concerns over the financial stability of organisations, shrinking markets and accessing new technology and advancements, it’s clear that the need for strong supplier relationships is just as high as it ever has been.

All of this points to why Procurement and Supply Chain need to cultivate stronger relationships with their networks, in order to ensure that challenges can be faced and new opportunities created for both parties to thrive. Yet this is where many organisations struggle, not knowing how to strengthen existing relationships, or even if, by managing supplier relationships ‘strategically’ they are achieving more than if they kept their relationships more transactional. 

Relationships – ‘Good’ versus ‘Typical’ versus ‘Bad’

Before we can understand how organisations can maintain and improve supplier relationships, and therefore move to a more collaborative footing, we first need to understand the most common types of relationships. These relationships are defined by how they are described by those working most closely with them, and are detailed below:

• Good – relationships that are viewed as largely positive by the majority of the people who deal with the supplier. These relationships are usually defined with positive adjectives such as ‘Aligned’, ‘Collaborative’ and ‘Trustworthy’.

• Typical – frequently the most transactional type of relationship, though they can also be strategic relationships that people attach high levels of frustration to. They can be described positively, but often have more negative descriptions, such as ‘Frustrating’, ‘Restrictive’ and ‘ Distant’.

• Bad – those relationships that are turning, or have already turned, sour and there is little value in them for either party. The descriptions are far more negative and can include terms like ‘Difficult’, ‘Strained’ and ‘Dysfunctional’.

Every organisation will have a mix of all relationship types, and relationship management strategies will be built around those that could and should be improved, or looking at cutting away anything beyond repair. It’s also worth remembering that even the best of ‘Good’ relationships can end up ‘Bad’.

The Importance of Trust

What makes a ‘Good’ relationship good? A key factor in this is trust. Procurement and Supply Chain professionals understand how important trust is in commercial relationships, especially for their strategic business relationships. Trust can take a long time to build, but far less time to undermine and ultimately destroy. 

But how much does trust really matter in these relationships? And are organisations spending too much time focusing on building ‘high-trust’ relationships, only to find they’re not actually that much better than ‘Typical’ relationships?

Consider it this way. If you counted up all the suppliers, contractors, consultants and external stakeholders who provide goods, services or support to your organisation, your number would probably run into at least the hundreds. For larger, multinational organisations, this number could easily reach thousands. 

If you are segmenting based on standard SRM principles, there will be key relationships and strategic partners, transactional relationships, and those that are easily replaceable or divestible. Even if the majority are ‘Good’ relationships, then there is a sizable percentage seen as potentially ‘frustrating’ or ‘dysfunctional’.

What may play a part is a lack of trust or honesty, which can lead to negative feelings or friction between the parties. This, in turn means that these relationships will take up more time and resources to manage, and may produce less beneficial outcomes. So if trust is what it takes to make a ‘Good’ relationship, is it not worth the investment?

From Trust to Collaboration

Only once this trust is in place can organisations build together towards closer collaboration. Not only will this collaboration help nurture better relationships, but it can also have a positive impact on an organisation’s bottom line. The key is enabling this collaboration with the relevant suppliers and using the tools and technology available to make this process as seamless as possible.

So how do organisations do this? And where do you start if this isn’t something your organisation has done in the past? This is where our new webcast comes in.

Presented in partnership with SAP Business Network, Procurious introduces ‘Collaborative Procurement – How to Build Stronger Supplier Relationships’. Join Procurious founder Tania Seary as she discusses trust and collaboration with suppliers, featuring insights on how you can achieve this from renowned experts in the field: Kate Vitasek, an international authority on highly-collaborative relationships; Lorraine Yao, Director of Product Marketing at SAP; and Julian Oakes, Strategic Partner Alliance Manager E-Procurement – EMEA at RS Group.

Join us for the free webcast on 17th July at 10am PDT to discover how you can build stronger supplier relationships. Click here to register.