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12/22/2008
Partnering – Part 3 A Tale of Two Extremes; Partnering in the Food Sector

In part 1 in this series, John Seddon introduced a model for partnering, but stressed that ATTITUDE was the key. In part 2 he used a case study from the IT services sector to explore aspects of partnering in practice. Now in part three he assesses the state of partnering in the food sector.

John Smith, a chief executive of a food manufacturing organization, waxed lyrical about a partnership he had been involved in. “We were supplying a retailer with a strong brand. They brought in what they called a ‘smart’ team and these guys sat us down and told us everything. They were completely open about their objectives, their concerns and the opportunities as they saw them. They invited us to join them in working out how to work together to optimize both parties’ interests”.

“We got involved in joint planning, and not just the numbers but the means. We worked together on cost – taking an end-to-end look at costs, not just focusing on the suppliers (our) costs. We studied the suppliers’ suppliers, the manufacturing process and the distribution methods. Over seven years we got the price of our products down by 50%. Both parties became more profitable. We became so efficient we were the world leader in the products we made”.

If we compare this example to our ‘four principles of partnering’, it has it all, it scores at the top. Further, as I noted at the end of the last article in this series, mutuality was the cornerstone: not just mutuality of purpose, but mutuality with respect to method.

The four principles of partnering

Mutuality: A common purpose with mutual benefit.

Commitment: Parties are prepared to commit resources to the mutual endeavor.

Clarity: Each party is clear about who is doing what.

Openness: Both parties are prepared to raise issues concerning the quality of the working relationship.

John Smith was talking about a situation that happened some years ago. So I asked him, “What is the state of partnering in the food sector today?” and he replied:

“Where do I start? The retailers are all using the term but few, if any, show any understanding of how to make it work. In truth there is no partnership – the term is no more than a commercial convenience for the stronger ‘partner’, the retailer, to prey upon the weaker partner, the supplier”.

“I think I know how it feels to be raped. I would put it that strongly; it is a mental raping. I find myself licking my wounds from each of their successive actions. For example, I can no longer be confident that the products I supply won’t be put out to bid – they could and do seek alternative suppliers at the drop of a hat, I’m sure they see this as a normal part of their job. I can no longer be confident about what will be going on next. There is no trust in the relationship with retailers. In fact you can hardly call it a relationship, in today’s world relationships count for little. What counts is short term, the bottom line. In short, the accountants rule. “

“Without any warning, one of the retailers invoiced the suppliers of their top 1000 lines. The suppliers were being asked to pay $20,000 per line in order to secure the retailer’s commitment to giving ‘priority treatment’ to the lines.”

This is not the only example of financial coercion in this sector. Another retailer sought a ‘refund’ of monies paid to all suppliers as the retailer’s shareholders were not impressed with the bottom line. It is as though the idea of partnership translates into demands for help from the strong to the weak during hard times, but no more than a slogan for normal times.

The problem comes down to lack of method. My informant gave an example: “One retailer adopted the ‘partnering’ slogan about five years ago. They decided we should all work on an integrated transport system. Clearly this is important; transport is a major cost. But what they did is ask for our views and then they just set up a system and told all suppliers to use it. We all needed to work on how to make it work, but that wasn’t done. The result was not good; their planners had failed to understand the logistics. Very quickly we found that things were not working well and costs were rising. Then they made things worse. Instead of scrapping it, they sub-contracted the work to a hauler, assuming they’d know this business better. They maintained their insistence that suppliers should use this transport and as a consequence suppliers had to pay more than the market norm. To make things worse, the suppliers discovered that the retailer was also taking a payment for the volume of transport provided.”

As suppliers became aware of how they had been duped, there began an attitude of ‘we’ll remember this and we’ll get one over on you next time’, and so the adversarial spiral was set. As my informant said “This is not partnership, it is selfishness” and selfishness breeds mistrust.

Despite his experience, my informant remains philosophical, he can see that it is the systems that are at fault, not the players. He observes that today’s buyers are only doing their job, and that job is all about meeting targets. “The analysts have become too powerful in driving short thinking into our organizations, the buyers and suppliers are merely pawns in the game. But the net effect is we all lose.”

He, like me, sees the irony that by their methods, they fail to achieve what could be done – they could out-achieve their targets by substantial amounts if only they changed their attitude. He puts it this way: “If only they realized that partnering is not about ‘being nice’ instead of being nasty. It is about working hard together to achieve a common objective. It is not a soft option, but it is a smart option.”

But being ‘smart’ means thinking differently. And that’s what I shall explore in the last of this series. In part 4, I shall chart the development of partnering in the Toyota Production System, and explore how attitude developed alongside method. This should be of vital interest to anyone who wants to break the current mold, for what we learn is that action is the key to developing partnerships, and action must begin on method – how we work together.

Articles were written by John Seddon (Managing Director) and Vanguard Consulting Ltd.  He is an occupational psychologist, author and consultant.  John describes his work as a combination of systems thinking – how the work works, with intervention theory – how to change it.  This article has been edited by the people of Bryce Harrison Inc. (USA).  The Bryce Harrison website is www.newsystemsthinking.com.