When Supplier Partnerships Aren’t

Ask an executive to describe how his or her company interacts with its suppliers, and it usually doesn’t take long before such words as “relationship,” “partnership” or even “marriage” come up. Indeed, most executives liken their supply chain interactions to a personal relationship, with each partner bringing complementary strengths to create a bond that is mutually fulfilling over time.

If there is one truism about any relationship, however, it is that open, honest communication is required ofboth parties. Yet in some of the most “strategic” supplier-buyer relationships, good communication is absent. A review of the popular literature on supply chain management is telling. There is plenty of discussion of measuring supplier performance; of the need for “soft” supplier metrics such as service and innovation in addition to “hard” metrics such as cost and quality; and of the need for sophisticated models to evaluate supplier performance. But where is the discussion of holding thebuyer accountable for its end of the bargain? In most cases, there are no supply chain metrics for buyers. Why should the buyer be accountable for anything, goes the reasoning — aren’t they spending the money, after all?

Some progressive executives today are employing a different approach. They recognize that buyers have as much influence as suppliers on the success — or failure — of a supply chain relationship. These executives are translating this notion into measurable reality with mechanisms that emphasizedual accountability by creating tools that contain metrics for which both parties are accountable. Dual accountability requires a fundamental shift in the psychology of buyer-supplier relationships. Not only is tangible accountability demanded from both partners, but suppliers and buyers must also show greater communication and openness, as well as a willingness to trust in the presence of professional vulnerability — much like a marriage.

This article presents dual accountability, realized through a Two-Way Scorecard and other methods, as a central mechanism to improve strategic supply chain partnerships. The article explores the genesis of the dual accountability concept, outlines the benefits — which range from decreased risk to improved reputation to lower total cost — and illustrates how dual accountability can be profitably applied by suppliers and buyers working together. (See “About the Research.”)