Many supply chain professionals are focused on maintaining their “relationship” with the soft drink supplier contacts. While relationships are important for some reasons, they should not be relied upon at the supply chain level during critical negotiations with soft drink companies.
To your soft drink supplier, a relationship with you is the primary tool to get you to pay more.
Think about their behavior while in the negotiation. You will notice they do a lot of “relationship building”. They offer tickets to highly sought events. They schedule dinners and outings. They will try to reach every level of the organization to build relationships and develop champions or coaches. The relationship is a tool for them. If you allow them to use it, you will pay more.
Whenever a supply chain professional tells us they have a great relationship with the soft drink representative, we always find a below average soft drink contract that leaves millions on the table. The soft drink representatives will try to make you believe you have a great relationship. They will use that “relationship” to help them spend less and get you to pay more. A relationship is their primary tool.
The most effective supply chain executive I ever met was Ed McCranie of Ryan’s Family Steak Houses. Ed was a master of the “arm’s-length until you prove-yourself” style of supplier management. He was a thorn in the side of suppliers who were underperforming or not yet proven. His style was gruff and inflexible until a supplier proved their worth. (He is really one of the nicest people I ever met. He was just a very good actor and enjoyed playing his role with great skill.)
Ed was not concerned with the relationship. He understood that the relationship could be held at the CEO level or some other function within the company. When it came to managing and negotiating supply contracts, Ed knew that a relationship was a tool that worked in the supplier’s favor, not his.
We were young Coca-Cola National Account Executives at the time we dealt with Ed. We were trying to convert Ryan’s from Pepsi to Coke. Ed was a formidable gatekeeper. We had to earn our way in. It took us over a year of effort and testing to get Ed to even talk with us about a possible switch. But during that year, Ed got every ounce of effort out of us and out of the entire support team at Coke. The result was an ultra-competitive contract with very few land mines and a lot of money for his company. The great results Ed got were directly related to how demanding he was and how well he kept us from using a relationship to influence the negotiation.
The point: The supply chain executive should make soft drink suppliers sweat. If you don’t smell any sweat, the supply chain people aren’t doing their job. If your supply chain people are concerned about soft drink supplier relationships, it is likely you have the wrong people in those seats. Either that, or your management of the supply chain people could be improved and could lead to much better results.
If you are a supply-chain professional, during a negotiation, ditch the relationship façade and go full arms-length to get the results you need to be competitive. Leave the relationships to the other functions. Leverage is what is important in a negotiation, not relationships. If you stick to the arms-length approach, whatever relationship you think is important will be just fine, while your results will be superior.
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