Target Cracking Down on Suppliers: An All Stick Approach to Supplier Relationship Management

Last week, Reuters reported that Target “is cracking down on suppliers as part of a multi-billion dollar overhaul to speed up its supply chain and better compete with rivals.” Specifically, the retailer “plans to tighten deadlines for deliveries to its warehouses, hike fines for late deliveries, and could institute penalties of up to $10,000 for inaccuracies in product information, according to a letter sent to suppliers and obtained by Reuters and an interview with Target’s chief operating officer John Mulligan.”

According to the article, Walmart is also tightening delivery windows and redefining on-time delivery:

At an annual vendor conference in February, Wal-Mart informed suppliers that it was raising its standard for on-time delivery to 95 percent from 90 percent, according to a Wal-Mart presentation slide posted on a Facebook group and confirmed by several suppliers. Wal-Mart is also cutting the window for deliveries to within 1 to 2 days of a target date, depending on the product category, from 1 to 4 days previously, the Wal-Mart slide showed.

It’s the same old same old approach to supplier relationship management. In the past you might have called it a “carrot and stick” approach, except today the carrot keeps shrinking or is missing altogether and the stick keeps getting bigger and harder.

There is no innovation here. None.

What if, however, retailers and other 800-pound gorillas took a positive discipline approach to supplier relationship management? Or better yet, a Vested approach?

Positive Discipline is an approach to parenting and teaching popularized by the best selling Positive Discipline books by Dr. Jane Nelsen. Watch the short video below where Dr. Nelson talks about the Five Criteria for Positive Discipline, and as you watch, replace “parents” with “retailers” and “children” with “suppliers” and I believe much of the advice applies.

For example, one of the criterions is that you need tools that work in the long term, not just the short term. As Dr. Nelsen states in the video (with my word substitutions):

Positive discipline, non-punitive [supplier relationship management tools] work long term, not just short term. I’m not saying that punishment doesn’t work if all you’re interested in is stopping the [unwanted] behavior right now; punishment will do that. But we need to be aware of what [suppliers] are thinking, feeling, and deciding that affects them long term.

You’ll find a similar theme in the Vested approach to building successful business relationships, which Kate Vitasek and colleagues have outlined in several books. This quote from her book “Vested: How P&G, McDonald’s, and Microsoft are Redefining Winning in Business Relationships” sums it up nicely:

In today’s rapidly evolving world, business relationships based on an outdated ‘win-lose’ mentality won’t withstand a market that demands constant change and adaptation. Only by focusing on ‘win-win’ relationships can companies drive innovation and increase their competitive edge.

Simply put, if you continue using the same old same old approach to supplier relationship management, you will continue to get the same old same old results.

There’s nothing bold and different about carrot and stick. Nothing at all. And wielding a bigger stick and dangling a smaller carrot is even worse.

Nothing else to do but sigh and shake my head.

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