Building trust in the supply chain

The frictional approach to procurement is beginning to change

businessmen handshake on the factory background

In the supply chain relationship, buyers traditionally have the upper hand. Given that they hold the purse strings, buyers often call the tune for suppliers, and there’s usually a strict set of parameters suppliers must adhere to in order to make the sale. On the other hand, suppliers of a certain size, or those offering exclusive products, can also throw their weight around disproportionately in the supply chain. Unfortunately, these types of relationships can sometimes create a lot of friction between the two parties.

The good news is that this frictional approach to procurement is beginning to change. Manufacturers like GM, for example, are altering their supply chain models to be more inclusive and holistic in their relationships with suppliers. They’ve found that by treating suppliers as partners, they’ve been able gain access to the new technologies and innovations that give all parties concerned a competitive edge in the marketplace.

The results are increased trust and reduced friction between buyers and suppliers, outcomes that are borne out in statistical research. In her findings from a recent study by Penn State, researcher Veronica Villena says that “In the supply chain, we typically talk about the hard skills—the size and power of a firm—and we tend to overlook the soft side, which is trust, reciprocity, interpersonal relationships.” She concludes that “both are important, but the one with the higher impact is these softer skills.

Although the relative size of buyers versus their supplier counterparts can also impact the level of trust between them, Villena maintains that the very concept of trust itself plays an increasingly vital role in the supply chain decision-making process. Supplier networks, like those provided by Tungsten Network, not only provide the technological infrastructure to remove friction from processes, but can help expedite the establishment of trust between buyers and suppliers, making for a more equitable and efficient supply chain for all.

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