By Russell Saunders Thursday, 14 February 2013

Horsemeat and engagement: arms-length supplier relationships are in the grinder

Are you guilty of conducting purely 'transactional' relationships with your suppliers, without checking if their company values mirror your own? If so, you could soon find yourself embroiled in your own brand of 'horsemeat' scandal.

In just four short weeks, we’ve learned an awful lot about the food we’re buying in supermarkets. Some of us will never look at a burger – or a portion of lasagne – in quite the same way again.

The horsemeat crisis has swept across Europe, reaching stores in the UK in the west, Sweden in the north and Poland in the East. As industry giants scrambled to identify the source, the political and media narrative has become one of conspiracy, fraud and deception. Retailers are already reporting a decline in burger sales.

Supply chain issues and their potential consequences are nothing new. But in this age of the global company, with complicated supply chains, is there enough emphasis on effective communication and engagement between customers and their suppliers?

Core supply chain management processes – measurement and tracking, managing change, pricing, contract management and so on – remain critical. Of course they do. But perhaps the common definition of ‘supplier alignment’ is no longer broad enough.

The horsemeat scandal has brought this idea into sharper focus. If nothing else, it has offered a vivid reminder of the blurring of lines between client and supplier.

In the face of such integration it seems almost absurd to consider an organisation and its potentially thousands of suppliers as separate organisations. And yet, so often, businesses build purely transactional relationships. Surely the more complex the supply chain is, the more important it is to nurture relationships and make sure there’s clarity across all concerned?

Alongside traditional management, organisations should be looking to engage their suppliers. They should bring them onto the inside, sharing more than just KPIs. Greater understanding and empathy (and, hopefully, truly shared objectives) would help suppliers make better decisions – and prevent them from going off-piste.

Of course, with sprawling networks of global suppliers and intermediaries this might not be so easy in practice. But it starts with asking some strategic questions about key relationships.

What do you expect from your suppliers? What values do you expect them to hold? How do you expect them to behave? And – most crucially – have you explained this to them?

What understanding do they have of your business, ambitions and culture? Could you do more to bring them into the loop?

How do you recognise supplier performance, and what behaviours do the rewards you offer encourage?

Russell Saunders is an associate director at PR agency Fishburn hedges

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