Perception Matters

This is an excerpt of the original article. It was written for the May-June 2021 edition of Supply Chain Management Review. The full article is available to current subscribers.

May-June 2021

Indulge me for a minute, while I lead a cheer for our profession. I wrote my column for the January 2021 issue of SCMR one Sunday morning after watching the first trucks full of vaccine roll out of a Pfizer plant in Michigan, headed for a UPS sortation depot. I felt an incredible sense of optimism for the country, and pride in the role that we, as supply chain managers, were going to play to combat a pandemic. Supply chain as in the spotlight, and on that morning, it was for all the right reasons. Fast forward to late April 2021.

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The role of suppliers has changed. The traditional focus for most procurement professionals was on cost efficiency, often through negotiated cost reductions. Today, as supply chains become more disintegrated, procurement increasingly turns to its supplier base for a substantial share of the value creation process that used to be done inhouse, including the suppliers’ roles in new product development and innovation—especially getting access to innovation before competitors. Suppliers are involved in operations at increasingly higher levels than in the past, including technologies, modules and even entire systems. Recent statistics show that suppliers in manufacturing and technology industries account for 60% to 80% of the gross value added.

This has two consequences. The first is that successful supplier relationships are more important than ever in today’s agile marketplaces. In particular, purchasing managers need to ensure that suppliers possess the right attributes to contribute to productive relationships. As suppliers become more integrated into their customers’ operations, they need attributes that go beyond competitive prices and the ability to deliver on time.

That leads to the second consequence: How procurement, and individual buyers, perceive the suppliers with which they do business. After all, perception is often reality. Traditionally, supplier selection and evaluation methods relied on objective, technical attributes and capabilities that could be measured prior to the relationship. However, many relevant supplier attributes will only be unveiled in the course of the relationship with a buyer firm; they can’t be objectively assessed based on checklists and supplier selection sheets.

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