This is the second part of a trilogy of posts on the life cycle of a buyer/seller relationship. To read the first article please click here.
So, the deal has been done. The contract has been signed, savings captured, margins reduced, press releases issued and bold internal statements made by Procurement and Senior Executives extolling the virtues of the ‘partnership’ that has been ratified.
The beginning of a beautiful friendship
Both parties are euphoric. The supplier can now make a steady contribution to fixed costs, springboard into other accounts and – based on the forecasts and the buyer’s promises – upsell existing and potentially additional products and solutions.
The buyer, meanwhile, is counting the money and feels victorious: they have replaced the previous supplier who, despite repeated threats, remained in the ‘exploitable’ quadrant of the Seller’s Perception Matrix. That supplier believed that their ‘close’ relationship with stakeholders meant that the buyer was handcuffed because the category was in the ‘strategic’ portfolio quadrant of the Kraljic matrix.
Oh, the power of effective Category Management!
The Honeymoon period
Early signs are promising. The Seller is delivering in accordance with the Contract in a timely manner and to a high standard. Users were visited and listened to, so their expectations have been managed. SLAs have been introduced and measurement has begun.
Both sides anticipated resistance in certain areas. Early adopters are complying, but laggards are resisting and creating localised issues. Performance levels for the first quarter have dipped below those of the previous account, but corrective measures are now in place and the love remains mutual, with both sides devoting the time and resource to making it work. Senior Executives remain involved and resolution is quick.
A year quickly passes into a second…
All appears well. The laggards have now checked out, either voluntarily or by being pushed, and leakage from the agreement is negligible. The problem is, though, that nobody sat down at the beginning and planned the journey from start to finish. So, having now managed the change, captured the savings and seen steady improvements in performance through the KPI regime, the buyer has taken a back seat and become a passenger. The honeymoon is over and it’s business as usual.
Although trust has been reciprocated, it remains superficial as underlying beliefs, values and strategic direction are not fully shared and, whilst not voiced, there is a general feeling of inequality. Not all of the promises that the buyer made at the outset have been kept and business development remains difficult and somewhat tactical – a contradiction of the overall ethos and mutual intentions which were to develop business together.
The spark has disappeared
The supplier has done everything they were supposed to and continues to deliver, to meet expectations and to hold regular review sessions. But there’s something lacking – the zeal and flair has gone. The buyer hasn’t noticed as they’re on to the next big initiative. The supplier knows it, though, and because of the broken promises has actively started to modify behaviours either to deliver less value within the account or to ensure that any additional ‘value’ is charged for rather than being a gesture of goodwill.
The account is now moving from a ‘opportunity’ phase to ‘core’ phase (Seller’s Perception Matrix), with profitability now rising. Yields are increasing in human capital and resources, finances are being efficiently managed and slight tweaks ensure that the ship remains on course.
However, so much more could be done to make the operation leaner. The supplier knows that the buyer won’t devote the time to it and the frustration is tangible. If only the journey had been planned, there would have been a culture of continuous improvement and innovation.
Fatigue sets in.
The signs may be subtle, but they are still manifested in the supplier’s attitude:
- general apathy to suggestions, with counters and reasons not to do something
- lack of enthusiasm to create new ideas, challenge processes and ways of working
- very polite rejections to meetings, with other dates proposed some way into the future
- shorter and more precise phone calls, the probe and challenge gone
- simple perfunctory execution of tasks
- more distant words and tone, with less friendliness
- collective nodding and agreement to performance statistics, the measurements suggesting that the relationship has indeed worked well, but they portray only a scorecard and not the underlying health of the relationship.
And so another year passes…
It seems that, whilst happy, the buyer now takes cursory notice of the account beyond scheduled meetings. The work is likely to be re-tendered within the next 6 months or so. It’s time for the supplier to ensure that the buyer sees the account in the “strategic” portfolio quadrant, then perhaps an automatic extension will be granted.
So, some subversive tactics are required. Budget holders are influenced by the exceptional performance as evidenced by the KPI reports. Small pockets of value become reintroduced, such as process/product reviews, access to technologies, recommendations for different ways of working.
It’s just as well, really, that there hadn’t been a plan at the outset, otherwise these areas of value would have been eroded months ago. Emphasis is placed upon how rates have remained firm despite inflationary cycles and the number of times that critical situations have been avoided due to pre-emptive action, foresight and, in worst-case scenarios, working through the night.
It’s fortunate, too, that the initial intent to have a transparent costing model with full visibility down the supply chain never came to fruition. This is something for the supplier to recommend again come the tender round as more value that can be delivered.
Love don’t live here anymore
The supplier’s love just hasn’t been reciprocated, but, will this last ditch effort to create dependency be in vain, or enough to convince the buyer that indeed this relationship was made in heaven? The strange thing is, though, that the buyer has become silent and relatively unresponsive. What is going on?
Find out in the final part of this mini-series, where indeed there can be only one course of action to take…
Is the buyer-supplier relationship above a typical one in your experience? How have you avoided this pattern? Let us know what you think.