Improving Supplier Relationships in a Weak

Top Management Commitment Environment

Kimball Bullington, Ph.D., Associate Professor

Middle Tennessee State University
615/904-8420; kimballb@mtsu.edu

Stanley Bullington, Ph.D., Professor

Mississippi State University
662/325-7621; Bullington@ie.msstate.edu

92nd Annual International Supply Management Conference, May 2007

Abstract. Lack of top management commitment is often cited as the reason for supplier
partnership failure. This workshop assumes that the supply management professional will be
faced with this problem at times. We will discuss approaches for gaining commitment and for
making progress in the absence of top management commitment.

Introduction. Lack of top management commitment is one of the most often cited causes of
failure in improvement programs (Brown, Hitchcock, and Willard, 1994). Commitment is also
usually prescribed for supplier relations success. However, the supply management
professional will often be confronted with less commitment than is desired, whether the
missing commitment is on the part of the buyers organization, the suppliers, or both. I have
been discussing this issue with supply management professionals for over 15 years and have
yet to meet someone who believes that top management commitment is unimportant or that
the lack of commitment is a rare occurrence. The fact that commitment is needed, but often
missing is helpful if you are looking for excuses, but if you want to succeed is there anything
that can be done when commitment is lacking?

In this workshop we will review the importance of top management commitment to successful
supplier relations. We will also look at reasons why the commitment may be lacking and
provide suggestions for building commitment. We will briefly discuss the dire situation when
increased commitment does not appear to be forthcoming.

Importance of Top Management Commitment. Successful relationships will usually fail in

the absence of top management commitment. The reasons for this are varied, but many are
obvious. Successful supply chain relationships are boundary spanning relationships
spanning both corporate boundaries and functions. In a customer organization supply chain
management might depend upon purchasing and supply management, manufacturing, design
engineering, process engineering, marketing, accounting, and quality control. These functional
areas often have conflicting goals when related to supply (e.g., inventory / service issues).
Top management can keep them aligned to maintain appropriate supply chain relationships.

Research in supplier development success factors (Krause and Ellram, 1997) indicated
several factors that depend to some extent on top management commitment. These included
supplier development activities such as site visits, supplier recognition, training, and direct
investments in the suppliers firm. With weak commitment of resources all of these are subject
to deterioration or abandonment during business downturns. Buyer-supplier communication is
another key to success. Without a commitment to site visits and visits by the supplier to the
customer, communication suffers.

Without commitment, there can be no trust. Hacker, Couturier, and Hacker (1999) developed
a conceptual model of trust that set for three elements of trust: capability, commitment, and
consistency. Lacking top management commitment the resources may prohibit capability,
there will be no firm intention to cooperate, and certainly the supplier or the supply manager
cannot be counted on to consistently performed. The result is no trust. In a marriage this
would lead to dysfunction and perhaps divorce. Zsidisin and Ellram (2001) also identified the
need to build organizational trust as a key issue for management.

Top management determines the measures of success. In order to be successful and receive
support, the measures of supply chain performance must support organizational performance
measures.

Reasons for Weak Commitment. One reason for weak commitment is a lack of
understanding of the importance of supply. A number of years ago I was invited into a
company to help with a problem related to labor. I was very skeptical that labor was the real
issue and asked the plant manager what percentage of his cost labor represented. He replied
to my astonishment that it was over 65%. Looking at the abundance of costly materials in his
product I told him that I was shocked. He checked with his CFO to confirm the number and
material supply represented almost 65% with labor contributing 6%. It may seem unlikely that
managers today still do not understand the importance of supply, but the problem still exists.

A more likely understanding issue comes when top management does not understand what
commitment to a supplier relationship entails and therefore they cannot commit. Some
element of this type of lack of understanding is common in many organizations.

Some top managers have a distrust of suppliers and therefore see all supply chain
relationships as suspicious. Others see supply management as a tactical / order placing /
order expediting function and therefore cannot see the need for investing in supply chain
relationships.

There is no obvious connection between some measures of supply chain success and
organizational performance measures. Similarly, there may be a disconnect between supply
chain strategy and organizational strategy.

Building Commitment. I often had buyers complain to me that top management was not
committed to our suppliers. A common response I made was to ask them what they had done
to gain that commitment. Just because research shows that commitment is necessary to
success in supplier relationships does not mean that top management will be committed.
Have you made a business case for commitment? Have you shown performance that earns
commitment? Can you show supplier commitment that deserves commitment in return?
Education and presentation is often the key to building commitment.

Pilot projects are often excellent tools for building commitments. They have several desirable
characteristics including speed of implementation and use of minimal resources. Both of these
characteristics are essential in weak commitment environments.
Understanding why top management is not committed is important. Perhaps the link between
supply chain strategy and corporate strategy is not clear. Perhaps the vocabulary of the
supply management personnel sounds foreign. The manager may have some negative history
that must be offset by newer positive examples. Once you understand the reasons for weak
commitment you can plan to build commitment.

Working with Weak Commitment. There will probably be some situations where you must
still press forward while commitment is weak. What can be done?

There is still hope in these environments, though the way is hard. Besides working to achieve
commitment you can temporarily try to achieve the effects of having top management
commitment before you actually have it. You must achieve boundary spanning and integrative
activity without having the organizational authority to demand it. This requires strong people
skills and negotiations, which happen to be skills valued in supply management.
Interdepartmental coalitions can be formed to serve the interests of the coalitions. Focus on
activities that tend to integrate. Define goals and keep them in sight.

Focus activities to make resources available. Supply base consolidation seems an obvious
method of freeing up time for other activities. Another is ABC analysis of the supply chain.
Start small and focus through pilot projects.

Build trust on a personal level, not be talking down management, but by focusing on the
positives of the relationship and accomplishing what can be done. As much as possible
provide stability in personal relationships with suppliers.

Introduce measures of supply chain performance and make them visible. When possible,
promote the value of the measures to other departments.

Conclusion. Building successful relationships in weak top management commitment

environments is not ideal, but it is a reality. In this scenario it is most desirable to try to build
commitment, primarily through better communication. At times it may be necessary to operate
without the commitment. The best path in those environments is to try to achieve the same
effects of having top management commitment.

REFERENCES

Brown, Mark G.; Hitchcock, Darcy E.; and Willard, Marsha L. Why TQM Fails: And What to Do
About It. Business One Irwin, 1994.
Hacker, Stephen K.; Couturier, Laurent; and Hacker, M.E. The Trust Requirement in Advanced
Manaufacturing Systems, 1999, Proceedings of the 3rd International Conference on
Engineering Design and Automation, Vancouver, British Columbia, Canada.
Krause, Daniel R. and Ellram, Lisa M., Success Factors in Supplier Development.
International Journal of Physical Distribution & Logistics, 1997, pp. 39-50.
Zsidisin, George A. and Ellram, Lisa M., Activities Related to Purchasing and Supply
Management Involvement in Supplier Alliances, International Journal of Physical Distribution
& Logistics Management, 2001, pg. 617-635.