Developing vendor relationships that transcend the supply chain takes trust, collaboration and communication.

Debbie Bennett, Vice President of Mar­­keting and Sales at Nantucket, Massachusetts-based LightWedge LLC, a company that manufactures and sells reading accessories, says she has seen “the good, the bad and the ugly” when it comes to suppliers. The most important lesson she has learned in the five-year-old company’s short existence is that finding trusted suppliers to complement LightWedge’s core competencies and building strong relationships with them are crucial to success in today’s business environment.

“Since we have a lean staff and are growing and expanding product offerings so quickly, it’s critical to have trusted suppliers,” says Ned Insley, Vice President of Operations at LightWedge. “We need to be comfortable that when a project is turned over to a supplier, it will be completed on time and will meet our expectations. We don’t have time for anything else.”

Making the trust issue even more important for LightWedge is the fact that it owns intellectual property rights and uses contract manufacturers. “With so much of our product being made in China, finding the right partners is key,” Insley adds.

LightWedge’s experience in this area transcends boundaries of industry and size. When two re­searchers at Cornell University set out to find what purchasing agents in the food-service industry consider most important in their suppliers, their focus quickly narrowed down to a single topic: the role of trust and communication in developing strong partnerships between purchasers and suppliers.

As is the case in other industries, food-service companies have come to view partnerships with suppliers as a competitive advantage in the struggle for long-term success, says Judi Brownell, Ph.D., Professor of Organizational Communi­cation at Cornell’s School of Hotel Administration and
co-author of Strengthening the Purchaser-Supplier Partnership: Factors that Make a Difference.

Purchasing agents in that study agreed that trust was the most essential characteristic for establishing a strong relationship.

“Trusted suppliers were described as communicating effectively, listening well and demonstrating a willingness to work collaboratively to anticipate and solve problems,” Brownell says.

Technology is playing a growing role in companies’ relationships with suppliers, and the last few years have seen the emergence of supplier relationship management (SRM) software programs. The supply-side equivalent of the customer relationship management (CRM) programs that have become nearly ubiquitous in many industries, SRM relies on collaborative software to allow companies to work with their supplier base to achieve mutual success.

Bill Warren, President and cofounder of Clear Flow Corp., a Shaker Heights, Ohio-based manufacturer of water filters, knows firsthand the importance of finding trusted suppliers in today’s competitive global marketplace—especially for companies targeting big retail chains.

“The strength, reliability and trustworthiness of my supplier network is critical,” he says. “When you are selling to retailers, they demand terrific service—and you have to provide it on very thin margins. Unless you can afford to tie up lots of money in inventory, you need excellent supply chain reliability to keep inventory down and service high. In today’s environment, you must be able to rely on your suppliers to help you achieve those goals.”

Clear Flow, which contract-manufactures, faced a particular challenge finding suppliers abroad because its product was new. Along with teaching its contract manufacturers overseas how to make the product, the company needed to secure a reliable supplier for a carbon block component that was critical to its competitive advantage of a long-life, low-cost product.

“We found the right supplier for the carbon block stateside, so we knew we would have to carefully manage that aspect of our supply chain,” Warren recounts. Clear Flow was able to work with its supplier, invest in some carbon block and stockpile inventory in Asia so it would be more accessible to its manufacturing plants.

Finding trusted suppliers and managing those relationships effectively are important not just for
purchasing agents but for managers and executives up and down the corporate food chain. A recent UPS Consulting survey of some 260 financial and other executives at companies of different sizes and in different industries found that 89% of senior executives view efficient supply chains as critical or very important to their business.

At the same time, 93% of those polled see the reduction of operating costs as a key goal of their
supply chain efforts, underscoring the growing
importance of establishing collaborative relationships with trusted suppliers. Such suppliers are encouraged to learn about their customers’ company, industry, processes, products and goals. The result is often greater buyer satisfaction with the services provided by the supplier.

The best way for a company to find trusted suppliers and secure relationships with them can depend on many variables, including the industry involved, each participant’s size, geographic location, etc. However, a good generic template for trusted supplier relationships has been developed by the Carnegie Mellon Software Engineering Institute, a federally funded research and development center. The template (available at www.sei.cmu.edu/cbs/epic/VendorSupplierRelationshipPlanGuidelines.html) includes the following guidelines:

• Understand the supplier’s long-term approach and plans for maintenance and support.
• Develop a strategy to create and manage supplier relationships, and record the rationale for selecting candidate vendors.
• Engage in meetings with the supplier and related groups.
• Establish liaisons with other customers or potential customers of the supplier.
• Be willing to invest in the relationship by expending the resources needed to establish and maintain it.
• Keep supplier relationships in perspective to avoid getting locked into a product or technology that may not necessarily be the best solution over time.
• Assign responsibility for managing supplier relationships to employees with strong communication and people skills.
• Develop contingency plans for key supplier relationships.