Global sourcing is about trust, not just statistics

“Globalisation has been the key factor in the decline of trust” - Sometimes it might seem like stats and graphs might be the best way of understanding a foreign supply market, but let’s not be mistaken, for procurement trust is hugely important issue and one that requires you to look a little deeper.

The quote above is from IACCM founder Tim Cummins, whose blog focuses very much on the relationship level. He was commenting on a report from the World Economic Forum that described how levels of trust have fallen by 44% in the last 10 years.

He makes some fascinating points to back up his claim and you can see how procurement is at the centre of these relationship disconnects – the way they might structure contracts, the cultural engagement; there are any number of choices that procurement professionals in western companies make that affect the trust between them and businesses on the other side of the world.

I was looking at the FT’s recently launched global risk map and suddenly this seemed extremely relevant. Here is this neat gadget which allows you to zoom in on facts and figures for countries all over the world and gauge what kind of risk you might face doing business there.

As I say, it’s a great gadget, but it’s not a tool and there are a couple of reasons I say that.

Procurement needs to learn how to access the tremendous market insight that comes from talking to people who’ve been there first. It’s apparent, having seen it in action many times when CPOs get together, that part of effective global sourcing is about going beyond the numbers and finding out what you can about a location, or an industry or a supplier.

Which comes to the second point: frequently, the reason to go overseas is that it’s cheap. But that shouldn’t mean that contracts and the general interface with suppliers isn’t given the due attention.

Risk mitigation is a vital topic for CPOs today but I think there’s a danger when we talk about it that we’re precluding the possibility that at the relationship level, taking risk out of global sourcing is also an exercise in supplier relationship management and simply put, it isn’t always done well.

I’d argue that understanding what it takes to build trust with overseas business contacts is at just as valuable as having every scrap of economic and financial data. And clearly, if failing trust is a consequence of globalisation then that’s still a lesson that requires a great deal of attention.

Steve Hall is senior staff writer of Procurement Leaders. To find out more about the magazine, click here.