Key Ingredients for Healthy Tier 1 & 2 Relationships
Building strong buyer-supplier relationships is key for any successful business. No relationship can function if both sides aren’t satisfied. That’s why companies like ConnXus and Onyx make it part of our mission to help businesses form strong buyer-supplier relationships that last, and ensure success in your industry for years to come.
There is an African proverb that says “If you want to go fast, go alone. If you want to go far, go together.” This is a great metaphor for the importance of healthy Tier 1 & Tier 2 supplier relationships. In an earlier blog we talked about the important role that Tier 2 suppliers fill in a supply chain. Unfortunately, we hear from a lot of these suppliers that they don’t feel important, they feel disrespected. Data shows that all business-to-business relationships are unhealthy if they don’t have 3 primary ingredients:
- Aligned Interests
- Clear Expectations
- Proper Governance
We will address Proper Governance in a future post. Here we will focus on ingredients 1 & 2.
Whether two businesses find each other or are asked to work together by a shared customer, they must take the time and find their aligned interests. A successful outcome (whether a product, a timeline, development of an idea, etc.) has a much higher probability with the right upfront work to dissect the opportunity with a critical view. What does the customer really need (which may be different than what they actually say) and how can we confirm? What’s the upside and downside of this scope of work? What are the risks we can see clearly, and the ones we inherently are concerned about and how can we jointly manage or mitigate those risks? What formal or informal agreements (e.g, who signs off on change orders) are needed to serve as “shock absorbers” as we jointly serve the end customer?
Businesses operate today at high speed, and a consequence of speed is often incorrect assumptions. “I assumed you knew the timeline was changed!” “Didn’t you read the 5th paragraph of my email where I highlighted this new customer requirement?” It’s bad, and it gets worse by the day. Healthy Tier 1/Tier 2 relationships are intentional about setting expectations – upfront through things like bid clarification meetings, and ongoing through things like quarterly business reviews. They establish a forum and an agenda to clarify the supply chain needs, discuss what is driving those needs, and engage in healthy dialogue about alternatives to insure they will exceed the expectations of their end customer.
Simon Sinek is best known for his bestselling book: Start with Why. In his latest book: Together is Better, he draws out some additional ‘truths’ that can help multi-tier supply chain participants deliver greater value if they remain top of mind:
- A team is not a group of people that work together. A team is a group of people that trust each other. (Aligned Interests)
· Fight against something and we focus on the thing we hate. Fight for something and we focus on the thing we love. (Clear Expectations)
· Working hard for something we don’t care about is called stress. Working hard for something we love is called passion. (Clear Expectations)
In other words…go farther together.
Toi Clarke Jones is an expert in strategic sourcing for Onyx Sourcing Solutions. She has over 25 years of experience in the fields of corporate finance, global purchasing and consulting.