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Excerpts from the Research Report:
Sales and Purchasing Communication Processes and Their Impact on Corporate Performance and Profitability
When representatives from supplier and customer organizations think of buyer-seller relations,
they usually think in terms of their respective companies: one producing or distributing products,
and the other purchasing those products. Both think in terms of meeting specs, production
capabilities, delivery, service levels and unit price. What they do not think about is the complexity
of the communication processes in play when individuals from these companies meet. Rarely
considered are: how the specific actions they take when communicating impact the process; the
quality of the many individual decisions they make during each meeting; how those interactions
impact the performance of other functional areas within their organizations; or the overall
Enterprise-to-Enterprise relationship. And, although they think about achieving their personal
performance objectives such as making forecast or reducing unit cost, they are not necessarily
thinking of the overall performance of their respective companies or the effectiveness of the entire
supply chain system.
The subjects of Lean Manufacturing and Continuous Improvement programs seem to enter every
aspect of business discussions today, except for the communication processes at the pointof-
contact meetings between the customer and supplier representatives. At this critical pointof-
contact, the general consensus seems to be “everyone can–and does–do it their own way.”
Simply ignoring the fact that the current communications system is adding costs and fostering
inefficiencies throughout the supply chain will not improve performance. Only appropriate and
direct action will . . .
One of the most important discoveries made during the study was the fact that the processes
used by the customer and supplier representatives during their meetings, particularly at the front
end of the relationship, could accurately predict how successful the relationship would be. . .
… As stated by the customers time
after time to us,” I know who my best
suppliers are.” Not unexpectedly, they
always turned out to be one of the
top 2% implementing the Exceptional
Practices. . .
. . .The current purchasing practices are often seen by suppliers as being adversarial versus
cooperative. Suppliers respond by becoming cautious and begin to spend time and energy
ensuring they are not taken advantage of in the business relationship. This, in turn, draws
attention away from the tasks of understanding needs and improving customer performance. . .
. . . Current sales practices are often seen as manipulative by Purchasing and the User Groups
and addressing general needs with generic presentations of facts, features and benefits. This
makes it very difficult for purchasing to distinguish one supplier from another. Purchasing
responds by focusing on a limited number of easily comparable factors such as ability to meet
product/service specifications, delivery capabilities and, of course, unit price. Total cost, although
often discussed, is rarely the primary factor...
. . . It came as no surprise to discover that top executives from the various groups had differing
perceptions from those at the implementation level. Many of the Purchasing and User Group
executives described their company’s system for selecting and working with suppliers as
functioning well. They were quick to elaborate on all the improvements and measures they had
implemented within their groups. It should be noted that these improvements and measures
had little or nothing to do with improving the communications system at the customer/supplier
meetings. This was reinforced by the comments at the implementation level such as: from the
User Group, “. . . The amount of downtime and lost resource time just trying to make the system
work is not truly understood by the upper levels – it is wreaking havoc with employee morale and
throughput. Supplier relationships have been decimated. . .”; and, from the Purchasing Group,
“We spend enormous amounts of time, effort, and money correcting, redesigning, repairing, and
replacing items because the specs were wrong or purchased only with ‘price’ in mind.”
Supplier executives also have differing perceptions from those at the implementation level. We
often heard how well their company understood the needs of the customer and how product
quality and innovation differentiate their firm from the competition. At the implementation level
we heard comments such as “At our company the sales force tends to focus on what we have in
our bag and telling the customer all of the things we can do for them or sell them. But in the end,
the customer only cares about price.”
. . . Another critical factor impacting performance is the alignment
of objectives between the various User Groups and Purchasing
(Figure 3.3). The customer User and Purchasing Groups as well
as the Supplier Group were all in agreement in this dimension.
The agreement unfortunately is that the objectives of the User
and Purchasing Groups are far out of alignment. This is having
a significantly negative effect on performance. In many cases
the various internal groups and purchasing personnel, were
actually working at cross-purposes. The result of this lack
of alignment is wasted energy, poor use of resources and a
significant increase in the cost of doing business. . .
. . . Both customers and suppliers must begin to move toward a more collaborative model. This
will not happen by continuing the never-ending discussions on the need for greater collaboration.
It will happen only with the implementation of the specific processes that enable both customers
and suppliers, to gain a more complete understanding of issues and needs at the beginning. . .
. . . The survey responses to the dimension “Effectiveness of
RFP Process,” indicates the Request for Proposal process has
a number of flaws as commonly practiced (Figure 3.6) The RFP
is typically weighted heavily toward the product specifications
and unit pricing. This, in itself, is not the problem. The problem
arises with the manner in which the specifications are developed
and how they are presented to the suppliers. Input from the User
Group certainly covers the basic product specifications, but not
enough emphasis on other factors such as the processes that
could be affected by various designs, prototype development,
material handling, or the needs of other functional areas are
considered to the degree necessary. . .
. . . The survey dimension that scored the highest among all
three groups was the “Effectiveness of Buy Teams”. . . Both the
User and Purchasing Groups were in agreement that when Buy
Teams are in place and functioning at high performance levels,
better decisions are made regarding supplier selection. . .
. . . Simply forming a Buy Team, however, does not accomplish a better result. . .
. . . Buy Teams in the Unexceptional and Common Practices were functioning merely as a group
of people providing basic information on general issues. . .
. . . Based on the survey responses, the average seller has attended four of these sales
training programs. During our interviews, sellers who had attended more than two programs
stated they had difficulty distinguishing one program from another. We experienced that same
problem. Another interesting response during our interviews came from sellers with more than
one-year of experience. Those individuals who were preparing to attend another sales training
course generally stated, “I hope to get a couple of tips” from the program. It’s important to
note these programs were typically between two and five days in duration, which is a long
time to spend away from customers for “a few tips.” Add to that the fact these programs cost
between $1,250 and $3,500 per person, so a few tips, becomes a very questionable return on
investment. . .
. . . One of the major benefits promoted by the sales training companies is that they create a
common language base for the sales force. In theory this allows the sales force to communicate
more effectively with each other and share ideas. On the surface this appears to be a solid
concept. In practice, however, it falls short of its promise. The first flaw is that the common
language base is so general that identifying exceptional practices remains in the realm of good
intentions. Rarely, if ever, is the “common language” defined specifically enough in terms of
a process component to enable an individual to reproduce the tactic within their process with
any degree of effectiveness. The second and more problematic effect is that the managers
cannot differentiate the feedback on a call given by an exceptional seller from that of a sub-par
seller, as they will both describe their sales call in the same general terms. . .