Trust matters: The vital imperative for business partners

Imagine walking into a car dealership with the intention of buying a new car.

You’ve done extensive research and know exactly what you want. However, as you interact with the dealer you become keenly aware of a lack of transparency as they try to push you into a higher priced model and provide misleading information about the vehicle’s history. Their self-interest becomes evident when they go back to “talk to the manager.” Frustrated and disappointed, you take your business elsewhere.

In this all-to-relatable scenario, the dealer's inability to foster trust eroded your goodwill, driving you to seek a dealership that values honesty and transparency. And while this case might seem small-scale, it underscores the profound impact that establishing trust can have in all types of business interactions.

Unpacking trading partner trust

In procurement, trust between buyers and suppliers has become table stakes. In fact, a new study from the Haslam College of Business at the University of Tennessee contends that relationships based on trust can have a favorable effect on the resilience of a company’s supply chain.

This notion holds even greater significance in the face of global economic disruptions that have upended sourcing dynamics and shifted the balance of power in favor of suppliers, leaving buyers in a scramble to secure necessary supplies from vulnerable supply chains.

In such an environment, we need to ask: how can organizations cultivate trust with their trading partners? And, importantly for buying organizations, how do they become the customer of choice for suppliers in high demand?

I believe success lies in trading partners taking three key steps.

1. Join forces to create a productive ecosystem

The University of Tennessee report referenced earlier asserts that “increasing trust is a strategic choice.” Meaning, building trust in trading partner relationships starts when all parties make the conscious decision that they want to make it happen.

With supply chains in a seemingly constant state of disruption, all involved organizations need to prioritize strengthening relationships to tackle challenges we sometimes can’t control. Usually, organizations make business outcomes the priority. However, maybe we need to flip the script and prioritize relationships over outcomes. That is, the intended outcome is a relationship built on trust. Such a relationship would enable organizations to work more effectively as strategic partners to drive innovation and gain a competitive advantage.

2. Lead with technology

Although many businesses today are leveraging the value offered by tech solutions, they haven’t unlocked true transformation. This is largely attributed to varying maturity levels across organizations. There is an opportunity for businesses to optimize their digital infrastructure to drive a sustainable relationship with their suppliers.

Technology can be a critical component in driving trust in a buyer-supplier relationship by creating transparency and fueling collaboration. Digital solutions such as business networks and digital procurement solutions help to align trading partners with accurate and consistent information sharing across the supply chain. This enables organizations to use data more seamlessly to mitigate risks, encourage collaboration, and save costs.

Of course, establishing trust among partners starts with a basic tenet: keep your promises. All buyers make the same promise to their suppliers – that they will pay their bills. Spend management technology plays a key role in facilitating the timely flow of invoices and payments.

Additionally, business networks connect buyers to working capital management solutions that enable them to pay suppliers on time, or make early payments to help cash-strapped suppliers. Yet another way to become the customer of choice.

3. Update your business practices

In game theory, both parties win when they choose to collaborate with each other. Unfortunately, some traditional business practices haven’t caught on to this concept. In fact, most contractual business models disregard the value that can be gained by treating one’s suppliers as strategic partners. To foster trust, contracts should be structured to enable both parties to work together amicably toward common, pre-decided goals. By doing so, each can benefit from the innovation and creative perspectives of their partners.

In an increasingly volatile economic landscape, trust has become the cornerstone of successful business relationships. While there is no magic formula, I can safely say that the path to success lies in forging productive ecosystems, leveraging technology and evolving business practices. By taking these steps, businesses can build a foundation of trust and pave the way for an improved bottom line in the years ahead.