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A shared investment

The best business relationships are those in which risks and rewards are shared equally

By Dr. K. Subramanian -- Industrial Distribution, 4/1/2002

It is Friday November 16th at about 9:00 a.m.

Sitting in a lounge chair at London Heathrow Airport, I am facing a moderately sized turnstile with an advertisement for an e-commerce company. It is a three-sided turnstile slowly turning at a constant speed, perhaps a gentle reminder of the gradual passage of time.

The billboard is bright, colorful and well lit. It is nearly impossible to miss it, along with the bold advertising it displays for a global, e-sourcing software and services company.

One of the three sides of the turnstile reads, "If you are looking for the right supplier, start with the 155,000 we've already found." That makes good sense. Why would you go about the arduous task of searching and finding a supplier, when all of that is already done and available at the click of a button? Whoopee! All the power and strength of e-commerce at my fingertips!

The billboard slowly turns and the next side is facing me. It reads, "We run our global sourcing market like the stock market. After all, the whole idea is to buy low."

Just wait a minute! Doesn't your financial adviser tell you not to try and time the market? It is a tempting thought to buy low and sell high. But most investors lose in the stock market by such market timing. A prudent investor gets into the stock market for the long haul.

Time cost averaging and staying with the market for the long haul are prudent strategies suggested by most financial advisers. Wouldn't the same be true for supplier/purchaser relationships? Choose a group of companies you want to work with and develop long-term relationships with them where risks and rewards are shared mutually.

This is similar to "time-cost averaging" on the stock market. As a result, both companies build on their core competencies in a mutually synergistic fashion. Instead of equating the distributor/supplier relationship with buying low in the stock market, shouldn't we look at it as a stable, interdependent relationship with mutual reliance for long-term success?

Information technology offers exciting possibilities for suppliers, distributors and end users to work together to bring about unprecedented opportunities for efficiency in the supply chain. Combine this potential with each party's core competence in technology and you have the recipe for long-term success in the global economy.

The billboard keeps turning. Now, the third and final side displays a message, the same as the first: "If you are looking for the right supplier..." . The gears in my mind are turning. But a single thought keeps resonating: Treat the supplier and the distribution chain as part of your carefully selected portfolio to achieve long-term goals, with a clear strategy in mind — just like a successful investor in the stock market.


Author Information
Dr. K. (Subbu) Subramanian is the director of grinding technology and director of the Higgins Grinding Technology Center at Saint-Gobain Abrasives Co. He is also author of the recently published book The System Approach — A Strategy to Survive and Succeed in the Global Economy.

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