Procurement Council Blog: Do Relationships Really Matter?

Everyone talks about the importance of relationships to the point that most just respond with an agreeable nod and little else.   

In a recent poll (see below), the majority of procurement professionals reported that they do not consider relationship management to be a critical part of their overall responsibilities. But why?

Transactional convenience

In discussing “the why” regarding the seeming lack of importance procurement professionals place on relationships, a colleague shared an interesting metaphor.

He said when he goes into a convenience store to buy a carton of milk, he is not looking to build a relationship with the clerk behind the counter. As long as the person greets him with a smile – ideally, his only interest is whether the milk is fresh and available at a good price. In short, it is a transactional interaction.

However, if I am looking to choose a doctor to perform open-heart surgery, you can be sure that I will do more than a cursory once over. I will research the procedure, choose a physician whose qualifications are the best, and consult with them so that I can feel comfortable putting my life in their hands. Unlike purchasing a carton of milk, the relationship is very important.

The apathy we perceive isn’t the result of disregarding the importance of relationships. Instead, it is about where and with whom procurement applies a relational strategy. 

Not why, but where and who

In my previous Procurement Foundry article, I talked about the importance of procurement being a “trusted advisor” in several key areas, such as identifying emerging market trends and their impact on stakeholders within the enterprise.

However, knowing where and for whom your insights will provide the greatest benefits requires you to build strong ties internally. What this means is that you need to develop and foster ongoing relationships with key stakeholders such as sales, marketing, and engineering. 

It is through knowing the where and the who that you will ultimately understand the why regarding the value you bring to these relationships. 

Looking outside of the organization, the depth and strength of your relationships with external partners – which are even more important now because of the COVID-19 crisis – should be a priority. 

Partnering is no longer optional

Before this global crisis, the practice of building strong relationships with suppliers was often limited to the most strategic areas of the procurement practice. For example, if your company develops new products that require a high degree of technical expertise, close relationships with suppliers are essential in both the development and production phases.

Generally speaking, and beyond complex acquisitions, good partnering practices with suppliers were more situational than they were common.

All that is now changing

Experiencing the pains of an over-reliance on practices such as low-cost country sourcing, in which all our collective eggs were put in one basket, i.e. China, organizations are now scrambling to find new sources of supply. Even governments are beginning to call for the establishment of sovereign supply chains in which cost is a secondary consideration to ensuring availability through a local or national supply base.

Of course, for those organizations whose supply chains are somewhat resilient, negotiating more favorable contract terms including the extension of DSOs necessitates having a strong and open rapport with suppliers. Many of these companies now realize the consequences of having a transactional mindset, even with their sources of commoditized goods.

Given the above, I can’t help but wonder if the results of the same poll to which I referred at the beginning of this article would be different today. One can only think (and hope) that they would be.