Differentiating Behavior

In our survey of executives responsible for making purchasing decisions, we discovered that beyond the basics (meeting the specifications, delivering on time, etc.) and adding value, buyers choose the suppliers they prefer to work with based on the suppliers’ behavior. Indeed, behavior can be one of the most powerful differentiators because most suppliers today can deliver on the basics and can add some degree of value. However, suppliers differ considerably on their behavior, so this is a rich source of potential competitive advantage.

The intangibles often outweigh the tangibles, particularly when competing suppliers offer essentially the same tangible benefits. Frank Muschetto, senior vice president, worldwide supply chain management, for McDonalds, told us, “There are many things we look at when selecting suppliers: product innovation, for example, suppliers who challenge our thinking in order to achieve better business results. More importantly, we want suppliers with a passion for the business, with a demonstrated commitment to their customers and a demonstrated focus on the ultimate consumers. We want thought partners, not vendors.”²⁴ Moreover, it’s important for both buyers and suppliers to be vested in each other’s growth and well-being. The director of raw materials for another large industrial company said, “We look for suppliers who are not only interested in their own growth but in ours as well.”²⁵

We heard that theme of partnership over and over. Francois Gauthier, vice president of materials, supply chain management, for Coherent, told us that the old saw about finding a “win-win” really is meaningful in today’s buyer-supplier relationships: “If we are looking to do business with a subcontractor who will do some level of assembly for our product, we’re looking for a partner, rather than a vendor. In terms of a partnership, I am looking for somebody I’m comfortable doing business with, somebody I can count on when we represent a small amount of their volume but need their full attention. In partnerships, I’m looking for advantage to go both ways. They should be benefited by working with us, and vice versa.”²⁶ Partnership is a two-way street, but many suppliers don’t behave like partners, as Gauthier indicates: “If the supplier is selling a commodity and is acting like a used car salesman (‘What would it take to put you in the driver’s seat today?’), I am likely to use another supplier. Behavior matters to me. I don’t need to feel pressured.”²⁷

A number of the executives we surveyed said that they want suppliers to designate people to serve them who understand them and their needs. These account managers or account team members should devote the time necessary to get to know the customer, and they should remain with the customer for as long as possible. Furthermore, it mattered whether and to what extent suppliers’ senior executives engaged with customers. Jim Kozlowski at Pepsico said, “We look at all the companies within an industry and ask, How can we partner with them to take costs out of the supply chain where they can achieve a reasonable profit but also drive down costs? We look for the most cost-effective operations, the highest quality and service, and their willingness to invest.”²⁸

A number of purchasing executives also cited “ease of doing business” as a critical behavioral factor in selecting preferred suppliers. They said they wanted suppliers who were flexible and willing to work with customers the way customers wanted to be worked with. They also looked for alignment, in culture and values, between their organization and the suppliers’ organizations. Lance Kaye, a buyer/planner for Waste Management summarized: “Behaviorally, we look for a willingness to bend to our rules. We have certain processes we want suppliers to follow and implement. They have to be willing to adapt to our way of working. We also want designated people who understand our needs. It gets down to a pretty personal level. They are partners in our business, and we are partners in theirs.”²⁹

It goes without saying that buyers want integrity and trust in their suppliers. However, as we will see later, they sometimes don’t get it. Greg Schwartz of Safeway said, “There are many things we go through to find suppliers. First, we look for integrity and trust. That’s fundamental. If you are going to go into a strategic partnership, you have to believe in the supplier’s integrity. You have to trust them. You have to know that they will protect your proprietary processes and protect what they learn about how you do business.”³⁰ Integrity should not be a behavioral differentiator; it should be present in all commercial relationships, but it would be naïve to assume that’s always true. On the other hand, suppliers are sometimes so open and so candid and so transparent that they do differentiate themselves from their competitors. So while integrity is a fundamental, you can enhance the impact of it by being more open, candid, and transparent than your competitors, and you can diminish it by being more guarded, more protective, and less open with information.

Naturally, an absolute negative behavioral differentiator occurs when suppliers are deceitful or dishonest. Lance Kaye told us that in his previous employment he dealt with suppliers who would blatantly lie to him about their deliveries. Furthermore, some suppliers were dishonest on their invoices. Sometimes, the impression of dishonesty was created when suppliers included items on an invoice that had not been discussed. “They may have a good reason for adding something,” Kaye said, “but they don’t communicate it ahead of time.” Finally, suppliers sometimes make promises during their sales presentations that they don’t keep and probably never intended to keep. “When it’s time to renegotiate, that kind of behavior is really held against them,” Kaye said.³¹