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In procurement, relationships trump technology

Rochester Business Journal
January 17, 2014

The promised scenario sounded so efficient: Ever-improving technology would allow a continuous exchange of data between buyer and seller. Customers would post their requirements for goods and services to the cloud, and suppliers would respond with their offerings. The marvel of electronic procurement would dramatically boost productivity as reliance on human involvement declined.

For retail commodity purchases, e-commerce has indeed revolutionized the landscape, with U.S. e-retail sales growing about 10 percent a year and expected to reach $279 billion by 2015, Forrester Research estimates.

But such gaudy statistics obscure the reality that, in many industries, the vision of technology rendering humans redundant has fallen short. No matter how sophisticated the tools, certain transactions still depend on person-to-person interaction. Particularly in industrial procurement, customers continue to value and benefit from solid relationships with their suppliers—with technology merely providing assistance.

Consider that personal relationships offer four crucial attributes—flexibility, responsiveness, trust and creativity—that technology does not.

Flexibility: In industrial procurement, the exception is often the norm. Typically, the purchasing agent is seeking either non-standard components or standard products with unique specifications. Or when standard components might be satisfactory, the agent may be seeking a guarantee of stepped-up delivery.

Decades of experience has shown us that while software systems and business algorithms may excel in black-and-white transactions, they don’t do well when negotiation and flexibility are required. In negotiating unique specs and lead times, only humans have the capacity and flexibility to navigate the gray-area challenges.

Responsiveness: Every customer wants responsiveness, and every vendor claims to deliver it. But it’s another area in which technology pales—which is why the recorded prompts for virtually every customer service line include the option to push 0 for an operator. And consider how many times that operator seems too poorly trained or equipped to solve the customer’s problem.

Delivering responsiveness means grasping and anticipating the complexity and nuance of a customer’s requirement, perhaps even when the customer himself isn’t entirely sure what product or service will meet his need. Delivering responsiveness requires a commitment of time, attention and information sharing that many find challenging.

The responsive supplier will listen actively to understand the requirements that define the purchase and to convey the parameters that govern the supply. The responsive vendor also will ask probing questions to ensure that each party clearly and completely understands the other’s position. Responsiveness also involves sharing information and acquired knowledge that may help avert an oversight or miscalculation. Finally, true responsiveness requires mutual empathy and mutual acceptance of the shared benefit of a successful transaction.

Trust: The keystone of every successful transaction, trust nourishes confidence and security, promoting and encouraging ongoing business opportunities.

Charles Green, co-author of “The Trusted Advisor,” contends that “actions, not words, are the only language of trust.” In business, he writes, trust is earned when “you are perceived as working to achieve your goals through helping others achieve theirs (and when) you are seen as focusing on the longer-term relationship rather than the immediate transaction.”

Developing and earning mutual trust and professional respect can be a painstaking process. And while technology may assist humans in their journey toward trusting relationships, it certainly doesn’t supplant those humans.

Creativity: Many product innovations and refinements introduced by leading manufacturers originated with their suppliers, whose engineers and designers marshaled the expertise and motivation to deliver a better product. As a supplier, generating the ideas that enhance your customer’s products enhances your value.

Again, trust is crucial for creating an environment in which such creative exchanges of ideas and experiments will thrive.

In industrial procurement, cultivating an enduring business relationship—a series of interactions distinguished by consistently high levels of flexibility, responsiveness, trust and creativity—takes time and continuous energy. It also requires the supplier to clear high bars: to tell the truth, to truly listen, to offer one’s best advice regardless of who benefits, to share one’s knowledge, to practice civility and to consider compromise to promote a mutually beneficial outcome.

Author Harvey Mackay put it well: “The quality of your life is determined by the quality of your relationships. The quality of your business is no different.”

James M. Terhune is owner, president and CEO of T&T Materials Inc., a Rochester Top 100 firm that delivers customized procurement solutions to the U.S. government, prime corporate contractors and private industry.


1/17/14 (c) 2014 Rochester Business Journal. To obtain permission to reprint this article, call 585-546-8303 or email service@rbj.net.


What You're Saying 

Vin Nolan at 11:04:56 AM on 1/21/2014
Couldn't agree more. This article serves as a reminder to all of us in the industrial supply chain of the need to perform at ever-higher levels for our stakeholders, which is very rewarding and very challenging.

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