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Sharing Information in Customer-Supplier
Relationships
 During World War II, a
common poster warned military personnel that loose
lips might sink ships. The saying stemmed from the
government’s concern that newly recruited
soldiers with limited military experience might share
seemingly inconsequential information that could
become disastrous in the hands of enemy spies.
That same attitude has permeated the relationship
between customers and suppliers. For instance,
retailers frequently are involved with the same
suppliers used by their competitors. In a world where
both organizations are trying to get the best of
every deal, there’s a reluctance to divulge
information that might get into competitors’
hands—even if that transfer occurs
inadvertently.
Times have changed, however, and today’s
world requires optimization of the supply chain.
Limiting information flow is an almost certain way to
undermine the effectiveness and efficiency of
customer-supplier interactions. Information exchange
is a vital aspect of customer-supplier team success
if the right information is shared with the right
people for the right reasons. But how do we define
these three rights?
The Right People
It’s first important to identify who needs
to receive specific types of information. All
suppliers do not need all types of information; in
fact, there may be situations when a supplier finds
certain information to be burdensome. This may occur
when a small customer attempts to build a partnership
with a large supplier. Although the concept is sound,
the supplier may be distracted with the needs of
higher-volume customers. In these cases, information
provided by the customer may never be used and may
not be controlled as tightly as desired.
The truth is that information sharing is
worthwhile only when both the customer and supplier
can see the benefit of its use. This means that some
types of information may be appropriate for some
suppliers and not for others. Similarly, some
information may fit the needs of some of the
suppliers’ staff members but not the whole
supplier team. In both cases, consciously exploring
which people in the supplier’s organization
will use the information and how it will be used is
essential to determining what information should be
shared.
Indeed, a supplier’s ability to use a
customer’s data to mutual advantage may be
worth investigating during the qualification phase.
That small customer mentioned previously might find a
smaller supplier better able to meet its needs. In
some cases, a supplier’s inability to leverage
customer-provided data might lead to the customer
selecting an alternative vendor.
The Right Information
Similarly, the key to determining what information
should be shared centers on the issue of usability.
In this case, however, specific consideration must be
given to the level of detail, the format of the
information to be exchanged, and the frequency of
sharing.
There are always many options regarding how in
depth the information should be. In some cases,
annual summaries suffice; in others, daily updates
are appropriate. Within the same supplier, similar
information may be used in substantially different
ways and, therefore, may need to be provided in
differing levels of detail.
This is also true for the format of information
and its frequency of distribution. Format includes
not only the presentation layout of the information
but also the channel used to convey it. With the
growing use of the Internet and electronic data
exchange, it’s possible to trade voluminous
quantities of data rapidly. Once again, the question
becomes, “Will these data be useful if sent in
this format over this channel at this
frequency?”
The Right Reasons
There are many reasons for customers and suppliers
to exchange information. In some cases, the potential
benefits outweigh the potential risks so
significantly that it’s wise to exchange
proprietary secrets and confidential information. In
others, far less sensitive information is sufficient
to meet both organizations’ needs.
One area where customer-supplier teams can add
great value is in identifying the reasons that
information should be shared and then clarifying what
information will be provided to whom. Communicating
the specific rationales associated with each
information exchange and establishing processes for
the exchanges can greatly reduce the potential for
leaks.
An Example
Consider the example of a restaurant chain that
received weekly deliveries from a soft drink
supplier. Over time, the customer found itself
experiencing periodic out-of-stock occurrences. When
details of the customer’s sales were given to
the supplier, its projection process was improved
greatly. The supplier was able to shift to bi-weekly
deliveries, and the customer reduced inventory and
stock shortages. Because both organizations benefited
from the information exchange, it enhanced their
relationship, as well as improved their quality and
costs.
Trust, Confidentiality, and Sensible Security
Clearly, it takes time to build trust between
customers and suppliers, so traditional security
measures, such as confidentiality agreements, are
useful tools for conveying the importance of shared
information and protecting the customer. Even when
the customer-supplier relationship is strong and
there is a long history of successful information
exchanges, it is wise to conduct periodic procedural
audits to ensure the agreed upon processes are used
consistently. Otherwise, new personnel and other
similar changes at the supplier may increase the
customer’s risk.
On the other hand, true customer-supplier
partnerships are enhanced by an environment that
projects trust and confidence in the supplier’s
desire and ability to manage sensitive information
appropriately.
A Two-Way Street
Information flow is not a one-way street from the
customer to supplier—even though that’s
the direction that tends to generate the most
concern. It’s just as likely that a customer
will leak a supplier’s secrets to another
supplier, which creates the same competitive
disadvantage—in reverse. That’s why most
suppliers expect their suppliers to sign
confidentiality agreements and to implement
reasonable security measures too.
BRIAN HUME is president and founder of Martec
International, a leading retail consulting practice.
He is known and respected in Europe, North America,
and the Asia-Pacific region as an authority on
retailing and retail technology, including supply
chain management and partnering between retailers and
vendors. For more information on Martec
International, visit the company’s Web site at
www.martec-international.com
or telephone 770-392-9664.
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