Not that long ago, in Local Suppliers, Your Opportunity is Now!, I echoed Tim Cummins’ sentiments when he stated that the current market should offer the perfect storm for local suppliers to make their case that, when everything is factored in, they are often the best choice for your business as they are often able to offer lead time reduction, quality, compliance, and innovation advantages that their offshore peers cannot. In other words, I noted that you, as a buyer, should be looking hard at local suppliers, who just might be the right choice for your business.
However, what I did not point out was that not all local suppliers are equal. Not all are able to offer all of the advantages listed, and each of the advantages offered by a specific supplier will differ in degree, if not in kind, with respect to the particular advantage offered. Thus, even though I believe many of your needs can be met locally, I don’t necessarily believe that any old local supplier will do — it has to be the right supplier for you.
This seems rather straight-forward, but it doesn’t provide an answer as to why some suppliers are more cost effective, why other suppliers are more innovative, and why yet other suppliers strive to straddle the middle. I’m not sure anyone has a good answer for this, but I have to say I do believe that it has to do with the relationship between the buyer and the supplier, the goals of the relationship, and, differentially, the trust between the buyer and supplier, or lack there of.
Why? In a recent post on Commitment Matters, Tim Cummins tackles the question of why buyers and suppliers must work together. In his post, he notes that a relationship can span the spectrum between a focus on cost and a focus on innovation. In the beginning, a buyer tends to focus narrowly on cost, at the expense of commitment and innovation, because that’s the issue that led to a shift in supply. However, the lack of innovation starts to hurt the buyer as competitors introduce better products into the marketplace, so the buyer switches to a long-term relationship based on trust in order to collaborate and inspire innovation. But after a while, the partnership becomes too comfortable, the buyer finds itself at a competitive disadvantage, and it reacts by switching back to a cost-focus in an effort to “right the ship”. In other-words, the relative trust determines the relative level of collaboration and the merits of the relationship in question.
Thus, depending on the current levels of trust between a supplier and its buyers, it is likely that it will either be tightly focused on cost, tightly focused on innovation, or somewhere in a comfortable middle.
So how can you tell where a supplier’s focus is? Tim gives us more insight when he tells us that buyers not in a position of power tend to seek out collaboration but those in a position of power tend to seek out cost reduction, because they don’t feel the need to collaborate. Thus, if you know the buyers that constitute the majority of a supplier’s business, and you know where their focus is, you can likely determine where a supplier’s focus is. And I hypothesize that this could go a long way to helping you find the right local supplier for you — the one with the right relative focus on cost, innovation, and quality to take your sourcing initiatives to the next level.