RELATIONSHIP MANAGEMENT: AI CAN’T REPLACE US
Sourcing Consultant
Lead Consultant
Artificial Intelligence (AI) can be a wonderful thing. And if we are to believe the companies selling solutions built on it, AI solves all the world's ills. Right? Think again.
There are some things AI cannot replace. While it has made massive strides in operational efficiency and enhanced decision-making, to name a couple, it has not successfully replicated human interactions to the point that we can throw out our “people skills” in supplier-client relationships.
Strong organizations have an appreciation for the importance of fostering healthy supplier relationships. While achieving a “win-win” every time may seem elusive, in most instances, there is room for compromise that can minimize friction points and help build on a mutually satisfying relationship. And that’s something only humans can achieve.
Seprio’s Supplier Governance Operational Model promotes building and maintaining healthy supplier relationships. Here are some well-established edicts when first forming these relationships worth a review:
Build trust through honest, reliable information and feedback.
Trust is something earned through repeated goodwill and honesty. Once either party is “caught” or otherwise thought disingenuous, trust is lost, and it’s difficult to rebuild trust. The problem here is that usually it then becomes a game of brinksmanship in who can do a better job of avoiding necessary facts in the discovery and evaluation process. Further, this does not set up a productive dialogue that will ensure you have the right solution to meet your needs.
We all know a story or two where a supplier or their potential client walked away from a deal because they could no longer trust the information they were given to proceed. Most will disavow that they have ever told a lie to warrant this reaction. But lies are embedded in half-truths or purposefully misleading information. Let that sentence sink in for a minute. Relaying honest information on the product being evaluated (by the supplier) and providing accurate information on needs, expectations, and evaluation criteria (by the client) are essential for a productive exchange AND a successful result.
Provide open dialogue to ensure understanding.
Building rapport sets the stage for continuing productive communication. However, dialogue does not mean you need to give away your company’s secrets. You certainly don’t need to volunteer points that would impede your leveraging ability in the negotiation phase. Suppliers are trained to ask as many questions as possible to gain an edge in negotiation. A good rule of thumb is to ask yourself: “What does my company have to gain by me answering this question.” You have nothing to gain by telling the supplier what competitors they are up against. But there are a great number of questions that are important for you to answer. An open conversation will provide the supplier with critical information necessary to match the solution to your needs and limit potential abrasions in the future. Additionally, having positioned yourself as someone open to constructive dialogue signals that you are approachable. This is an enviable position as you are more likely to be presented with innovative ideas that you may not have conceived of yourself.
Foster transparency by communicating your goals
The phrase “win, win” in a supplier/client relationship makes many seasoned negotiators cringe. Many will argue there is no such thing. I prefer to look at it as two opposing forces moving towards each other and passing each other to the point where the nexus is the area of compromise. This overlapping area of a few-to-several acceptable concessions for both parties is where, depending on where the agreement is settled, one may get more than the other, but both are satisfied with the result. Too often, the purchasing company doesn’t want to move from its original position, and the nexus is never achieved. If both parties communicate what they value most in the deal, you can often arrive at a satisfactory place where one is giving up something it doesn’t care as much about in the interest of compromise.
As an example - perhaps an acceptable price is your line in the sand, but the supplier is willing to give this in exchange for a longer-term contract that assures them a continual revenue stream for a longer period. You’d be surprised the items within your control that your supplier may find appealing to help you build leverage on getting the desired price: an introduction to other members in your organization that a supplier can meet to market other segments in their line, a cash payment that aligns with a critical timeline that helps them meet an internal sales goal, or an endorsement of their product by your organization – to name a few.
And a final, perhaps a less obvious edict, but critical in forming strategic bonds with your suppliers:
Invest the time in providing access to top-level managers and executives
This one is easily missed. This isn’t necessarily critical in all phases of the selection process, but for high-dollar, high-impact supplier solutions, it is important to match someone at the top levels of your company with their influential counterparts at the supplier. In the final selection process, having top-level engagement is critical to ensure you have strategic synergy. We’ll talk about this more in an upcoming article in our Seprio Summer Series as we unpack how a healthy relationship is maintained after the deal is struck.
The value you place and the time you dedicate to initiating and building healthy communication channels with your suppliers are investments that are sure to pay off throughout the duration of your engagement. And there is no effective AI algorithm (to date) that can replace it.
Please join us next week as the 2025 Seprio Summer Series continues the discussion around relationship management and maximizing the value from your suppliers after the money has been exchanged.
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