With production capacity of automobile makers heading back to pre-recession levels, car makers and suppliers are at a crossroad. Will they take the opportunity to create win-win supplier-customer relationships?
3 Actions to Ensure a Win-Win Outcome
The first foundation for success involves information flow, the communications between the two firms. Best-practice customers tell their strategic suppliers what they need to know in order to be successful. They share their forecasts, their plans, their headaches, etc. They don’t keep suppliers guessing and, as a result, suppliers have a chance to be successful. At the same time, best practice suppliers are proactive in bringing information to their customers, avoiding unpleasant surprises and suggesting ways in which the relationship can be taken to a higher level. It is always remarkable how many relationships are assumed to be like mushrooms, best kept in the dark.
A second key principle is that there must be an openness to the relationship, with quite a few people involved. In many of the auto industry relationships that I’ve observed, everything goes through purchasing and sales. There are gatekeepers involved on both sides of the relationship. They will justify that on the basis of competitive fair play or company secrets or some other rationale. But the end result is that there’s a choke point in the relationship, and the right people and departments never connect with one another. Any relationship that hopes to yield innovation and breakout ideas must allow interactions between the experts who have the potential to collaborate towards such outcomes.
A third lesson from best practice success stories is that the two firms need to take a “systems perspective” when thinking about strategy and about their relationship. They need to be open to changes in the roles and boundaries between the two firms. It’s a simple principle of optimization that when you focus on the whole system instead of its components in isolation, you have more options for improvement. This applies when suppliers and customers are confronting problems – and despite improvements in demand, the industry has many that still must be addressed. Sometimes the solution requires a new way of doing things, shifting responsibilities from one firm to the other or making changes in processes in one firm that open the route to savings in the other.
The automotive industry is certainly the most visible example of one that is experiencing a big change that can be transformed into a second chance, but it’s not the only one. Hopefully, in a few years, we will be able to look back and see a dramatic change in the nature of supplier-customer relationships, one that will generate new ideas that will solve the challenges facing such industries, delight their customers, and generate an ongoing stream of rewards for their shareholders
George F. Brown, Jr. is the CEO and cofounder of Blue Canyon Partners, Inc., a consulting firm working with leading companies on growth strategy. See www.bluecanyonpartners.comand @GeorgeFBrownJr on Twitter. Along with Atlee Valentine Pope, he is the author of CoDestiny: Overcome Your Growth Challenges by Helping Your Customers Overcome Theirs, published by Greenleaf Book Group Press of Austin, TX. He has published frequently on topics relating to growth strategy in business markets, including articles in IndustryWeek, Industrial Distribution, Chief Executive, Business Excellence, iP Frontline, Industrial Engineer, Industry Today, and many others.
