Supplier relationships can make or break the supply chain

The current supply chain crisis has further underlined the importance of good relationships with suppliers – on a personal level as well as a professional level. “The stronger the relationships are, the more resilient the supply chain will be,” said supply chain expert Heidi Larsen during Supply Chain Media’s recent Webinar Wednesday. In the webinar moderated by Martijn Lofvers, the founder of consultancy firm Plus 7 explained why curiosity is an indispensable trait in order to build good relationships with Chinese suppliers.

By Marcel te Lindert

Last year, when deliveries from China gradually resumed after the initial lockdown, Heidi Larsen (pictured) noticed something striking. The first customers to be helped were not the large, capital-intensive companies, but rather those with the best personal relationships in China. “They were small and medium-sized companies that had taken the time to call their contacts and ask how they and their families were doing. In other words, they were companies that showed an interest in the people rather than just in the status of their shipments.”

Larsen is a consultant who advises companies that are setting up supply chains in China. She has written two books on the topic. Her first book, called ‘(easily?) Made in China!’ is aimed at companies looking for suppliers in China, while her second book, called ‘(easily?) Made for China!’ is for companies looking to sell their products in China. Larsen is convinced that building good relationships with Chinese supply chain partners makes all the difference, especially during a crisis. “The stronger the relationships are, the more resilient the supply chain will be.”

Asking questions

When asked about the secret to good relationships with Chinese suppliers, Larsen didn’t have to think long: “That’s curiosity. Make sure you understand what’s going on with your supplier. Why do they ask the questions they do? If they don’t ask any questions at all, you should be concerned. And you certainly shouldn’t assume that the supplier will contact you themselves if they have any questions. If you do, you have no right to get angry when something suddenly goes wrong. Instead, make absolutely sure that the supplier has understood everything and that things are on track.”

Being curious means asking questions. What is the company’s history and what are its ambitions? Why do they operate the way they do? Do they have any problems sourcing raw materials or recruiting the right people? By asking questions, you automatically stimulate the exchange of information between yourself and the supplier. “And perhaps most importantly, ask how you can leverage your network to support that supplier’s success. Don’t pretend you have all the answers and try to tell him how to do his job. That definitely won’t work.”

Results-oriented vs relationship-oriented culture

For her first book, Larsen – who is from Denmark – interviewed a Chinese businesswoman about her experiences with Scandinavian companies. She likened it to a football match. “She said that in Scandinavia everyone is focused on the ball, whereas in China everyone is focused on the players. And she was right,” stated Larsen. “In Scandinavia we’ve learned to focus on the goal or the outcome of a collaborative partnership. But that collaboration involves two parties. So how can you know what the goal or the outcome should be if you don’t know the other party very well?”

Most businesses throughout Europe are results-oriented, just as in Scandinavia, whereas Chinese companies tend to be relationship-oriented. “They want to know what your dreams are. Because how can they help you climb Mount Everest if they don’t understand why you want to reach the summit, and how you want to get there? Are you looking for the fastest route or the most reliable route? Many European companies forget that, because all those details are time-consuming.”

Cultivating mutual understanding

When explaining how companies can achieve successful collaboration with Chinese suppliers, Larsen uses an innovation model from design thinking methodology. The model consists of five steps: establish empathic understanding, define the problem, create ideas, develop a prototype, and test. “European companies often tell me that it’s impossible to innovate with Chinese suppliers, but that’s because they miss out the first step. That’s the stage where you cultivate mutual understanding, it’s where the magic happens. If you skip that step, the partnership will never be successful.”

The common thinking in Europe is that innovations are most successful when Supply Chain is involved in product development from an early stage. “Yet companies hardly ever invite the experts from their Chinese suppliers to visit their R&D department. They don’t take the time to sit down with them and cultivate mutual understanding. Why is it important for the product to have a shiny, scratch-free surface? Why was the packaging designed to look that way? The better the supplier understands these kinds of decisions, the more successful the partnership will be.”

Intellectual property

Companies that want to manufacture goods in China can’t simply Google a supplier, send them an order with some specifications and then expect everything to work out, cautioned Larsen: “Supply chain experts have a valuable role to play. But by no means all companies have the necessary experts in-house.” According to her, businesses should not worry about giving away too much information. “Europeans are sometimes afraid that Chinese suppliers will run off with their intellectual property. But out of the 400 European companies I have helped, there have been only two cases of that happening, and even that wasn’t really because of the Chinese companies but rather because the European companies didn’t deliver on their promises.”