Good supply chain managers hire employees with the intent of creating cooperative relationships with them, not pitting them against each other. They encourage the employees to work as a team. And they only terminate an employee when every effort to salvage a struggling relationship has failed.

So why treat your suppliers any differently?

In his sourcing career, Scott Wilkerson has seen a significant focus around savings in some companies for which he has worked and among fellow supply chain executives in other companies. "I have also seen situations in the industry where the entire focus can be around savings," recalls Wilkerson, who is director, global indirect products and services, for The Clorox Co. of Oakland, Calif. One problem with this attitude is that it tends to drive a certain type of behavior. This behavior often leads to adversarial relationships with suppliers.

Over the years, Wilkerson did some research and found something interesting. He looked at companies that were very successful as a result of leveraging supplier relationships and emphasizing innovation with the suppliers and bringing creative opportunities to the market.

"They had completely different behaviors with suppliers than those that operated in an adversarial mode," he states. What Wilkerson realized is that it is more valuable to work closely with suppliers in ways that can lead to great capabilities and innovation, and focus less on obsessing over price. At Clorox, Wilkerson and his team studied these examples. "We realized that, if we treated our suppliers as we do our employees, then the goal would be for everyone to work together, be successful together, and win together," he notes.

This meant starting to challenge suppliers and develop them in the same way the company did with its employees. "Under the umbrella of supplier relationship management, we now have clear goals and expectations for supplier, and we have agreements about how that performance will be measured, such as quarterly business reviews," he says.

Another change has been the introduction of what Wilkerson calls "courageous conversations." This involves being open and honest with suppliers, and, just as importantly, involves encouraging suppliers to be open and honest with Clorox and to set stretch goals.

Conversely, it means also being willing to listen to feedback from suppliers related to guidance on how Clorox can be a better customer and learn what opportunities exist to better support the supplier.

At first, he admits, many suppliers were a bit concerned, wondering what was really behind the change in attitude and behavior. "We were thinking 'is this really just a facade around another way to get cost savings?'"

Suppliers often didn't gain complete understanding until they had gone through it for awhile and realized that it was legitimate, he says. They began to accept it when they saw that people really were aligned around supporting each other. "It took a few cycles of reporting for this to become real," he notes.

Once suppliers began to see that it was real, they began trusting more and opening up more, in terms of how they worked with each other. More and more supplier comments were along the lines of, "I don't know if you realize what these requests that you place on me mean operationally for me," and, "From an infrastructure process, you are driving costs up when you ask for these kinds of things." When suppliers saw that there weren't any negative repercussions for them when they didn't give Clorox an "A" as a customer, they became willing to provide even more useful input.

Wilkerson also realized the importance of the need for acknowledgment around great performance by suppliers. "When a supplier delivers exceptional performance, we make sure we have a way to make that visible, in the same way we would do that for our employees," he states.

Certainly, not every supplier relationship works out, just as not every employment relationship works out. There are times when it is necessary to part ways. "We have to realize that, at the end of the day, we are both still running businesses, and we have to do what is best for our respective businesses," he explains. If Wilkerson found a supplier that was simply unable to achieve the goals that had been set, or other factors existed related to looking differently around that piece of business, then the need often existed to part ways.

"What was different, though, is that, while we still needed to switch suppliers, it didn't come as a surprise to the supplier," he points out. "If we had done things well, they saw it coming—that their performance was not meeting expectations, and that everyone had legitimately been trying to make that work." This is the same as it would be with an employee who is not meeting expectations. You have tried as hard as you can to make things work, but if they don't work, it should come as no surprise to the employee that termination is necessary.

What Wilkerson has found over the years of utilizing this approach is that suppliers have become extensions of his employer's business and become part of the team. "By having greater expectations of each other, we have found that performance has been raised in our organization and in the supplier organizations," he states. "In sum, we have found that, if our suppliers are doing well, it is helping us to do well."