The relationship between purchaser and supplier is generally one based on domination. Yet the cost of such aggressive relationships is high. In France, legal fees caused by disputes between suppliers and buyers cost companies 40 billion euros per year. Debt between companies hovers at around 600 billion euros and the average delay for billing is 73 days. To break away from this vicious circle, mindfulness offers companies a path to reset their relationships with purchasers and suppliers.
"Clients put a lot of pressure on their suppliers, and this tension reverberates down the entire value chain. It's a vicious circles that decreases the quality of products and services." says Hugues Poissonnier, a professor of strategy, management control and purchasing at Grenoble Ecole de Management.
The cost of such negative relationships is high. Small- and medium-sized French companies lose approximately 15 billion euros a year. Approximately 25% of bankruptcy filings can be attributed to cash flow problems, which are often exacerbated by late payments.
The buyer holds the key to change
Hugues, who is also the director of the IRIMA (Institute for Research and Innovation in Purchasing Management) and a member of the Mindfulness Chair, underlines the crucial role played by purchasers. Purchasers have the ability to change their perspective and strategy to work with suppliers who are the best in terms of quality. By doing so, they have the opportunity to create value through innovation instead of solely searching to slash prices.
Mindfulness to relieve tension
"Mindfulness offers a path to improve individual capacities, in particular in terms of emotions. By developing self-awareness, purchasers can be better prepared to face demands from within their company. Mindful meditation helps us focus on our emotions and identify where they originate." explains Hugues. As a result, purchasers improve their efficiency.
"Mindfulness helps purchasers make wise decisions in terms of their company's needs. Sales staff, engineers, production managers and other departments rarely manage to fully express their needs at the same time in a given bill of specifications. Purchasers are often capable of accurately fulfilling expressed needs. But they can't fulfill needs they don't know about." says Hugues.
Negotiating through cooperation
The second step available to purchasers is to rethink their approach to a negotiation. Instead of limiting a purchase based on restrictive technical specifications, a purchaser can chose to give a supplier a larger part of the order. "The key is to work as a team to ensure a flow of information and feedback. Thanks to a little bit of creativity, such an approach can provide economies of scale." explains Hugues.
"By adjusting internal needs, a company can also become a supplier's favorite client." adds Hugues. Such a change is of no small importance as it opens the door to working with the best suppliers.
Thinking in terms of cost margins
The final step is to think in terms of value. "Instead of choosing a supplier based solely on his or her price, the idea is to think about the overall cost. Simply choosing the cheapest supplier is an easy process. But you can increase overall margins when you think about the added value offered by a supplier. If a product costs more but also offers greater added value, then it will contribute to a company being able to sell its own goods or services at a higher price. It allows companies to defend a strategy based on excellence." says Hugues.
Strategic innovation to capitalize on purchasing
By putting purchasing into the heart of their strategy, companies are able to position themselves at the top-end of the market. ARaymond in Grenoble for example, has implemented a strategy that relies on added value and excellence. For the past couple years, the group has relied on an ethics chart to guide its purchasing.
In Lyon, Outillacier is a company that supplies materials and tools for the construction industry. The company made purchasing a central part of its strategy by refocusing on French suppliers and favoring a policy of paying higher prices for high quality goods.
Givaudan, a Swiss fragrance group, has developed privileged relationships with its international suppliers by launching local campaigns to support schools and organic farming. The company Les jus de fruits d'Alsace has invested heavily in the production of oranges in Brazil. As sugar cane plantations earn more, many farmers have been foregoing their orange farming. By investing in orange farming, the company not only supports its farmers, but also ensures access to one of its key resources.