The BIG SEVEN in 2023 for Procurement Series: #5 Supplier Relationships

Posted by Mita Gupta on Feb 9, 2023 1:37:45 PM
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By Mita Gupta, Board Advisor at Mintec

Having read the previous four instalments in this 7-part blog series, you have likely noticed an interesting trend emerge.

While each of the seven points we will discuss in the February 23rd webinar are individually significant, there is also a distinct and direct relationship between each one. They are interconnected and, therefore, have a "collective" impact on an organization's procurement function.

For example, in post two, I talked about inflation and shrinkflation and the importance of a procurement team's ability to recognize and adapt to the changing realities of a volatile economy. This ability to adapt also impacts supply chain's risk and resiliency response to these external factors – most of which are out of our control. I wrote about risk and resiliency in post three.

Today's blog on supplier relationships continues this end-to-end "interconnected" theme, further showing the dynamic nature of any procurement function and the extended supply chain.

Testing the Relation$hip

In her recent article - The Inflated Supply Chain: How To Navigate The Complexity Of Doing Business During A Period Of Rising Inflation, SIGs Dawn Tiura shares a notable and newsworthy story regarding the "relationship" between Canada's largest grocery chain (Loblaws) and global brand manufacturer Frito-Lay.

In summary, here is a brief synopsis of what happened.

Facing rising production costs due to inflation, Frito-Lay informed Loblaws’ that they would have to raise their prices. The executives at Loblaws countered that they did not believe the price increase was due to inflationary pressures but an attempt by Frito-Lay to capitalize on the current economic situation to raise prices needlessly. The grocer was having no part of it and reached a loggerhead in their negotiations, resulting in the snack maker pulling their products from the grocer’s shelves. It was a bold move as Frito-Lay is the most popular snack brand in the country.

Reading the entire article will show how this battle between "irresistible force" and "immovable object" played out. Regarding this article, a fundamental question must be asked: "Is the Loblaws - Frito-Lay situation the result of inflation, or is it the result of a lack of trust in their relationship?

A Question of Control and Long Memories

It is often said, "it isn't what happens to you in life, but how you react to what happens that matters most."

Obviously, neither Loblaws nor Frito-Lay had control over the varied and complex circumstances that led to a period of unprecedented escalating inflation. However, they had control over how they reacted individually and collectively. Based on their reactions to the situation, it is clear that their relationship was lacking in transparency and mutual trust, the foundations of which were laid long before the current crisis.

There are many other examples of how our relationship with our suppliers over the years will impact all stakeholders while raising the question: have we "learned" enough from the past so that we don't repeat it? Let's consider a Walmart 2007 case example about the retailer's approach to supplier relationship management. The Vlasic Pickles story is telling, as were the corresponding industry statistics at the time regarding the giant retailer's heavy-handed relationship with its suppliers. Fast forward to 2022, and the article In Excess: How Target and Walmart are struggling with more inventory than they can sell demonstrates how the tables can turn in the buyer-supplier relationship.  Specifically, giant retailers are now turning to their suppliers to help lessen their inventory burdens.

Emerging from the "pressure-tested" challenges of the past three years, how are your supplier relationships holding up? Of greater consideration, how will these relationships enable your organization to meet the challenges of the coming year?

What is the Vlasic Pickles story (can you provide a one sentence summary? Same for the Target/Walmart story, what is the takeaway?

Next Up: Part #6 - Data Modernization

Upcoming Webinar - The Big Seven in 2023 for Procurement



Topics: Commodities, Procurement