The Carrot and the Stick: What You Need to Know for Successful Supplier Engagement

It's the age-old cliché of the ‘big bad buyer’ beating up the supplier.

And although I'd be foolish to think that the practices that drive this cliché are a thing of the past - the optimist in me likes to think that most Retailers and Brand Owners have begun the journey towards a more collaborative and mutually beneficial relationship with their Suppliers.

Ultimately, the carrot and the stick are both ways of motivating Suppliers. However, the carrot and the stick should be used wisely. Else you end up with bruised suppliers, or fat ones. Neither of these traits produce an engaged or efficient Supply Base.

In this blog I will share my thoughts on the pros and cons of the carrot and the stick, how you can use them to the greatest effect and the benefits you can experience.

Incentive and Consequence

It may make what I’m about to cover a little more tangible if we translate the phrase ‘the carrot and the stick’ for the context of a Retail Business. The most concise summary I can provide is:

  • Carrot: The incentive for the Supplier of doing something
  • Stick: The consequences to the Supplier of not doing something

The ‘something’ is anything and everything that you need your Suppliers to do: complete that form; answer that questions, complete that specification, send that sample…

In my experience, the stick is the most typical – cycles of warnings, escalations and in the very few cases punishments based on contractual agreements (think financial compensation or ending partnerships). All of which are very much directed at the Supplier organisation rather than the individuals within it. . I believe that the drawback of this is that it’s the engagement of individuals whom you rely on to complete that something for you and not the ‘organisation’.

Supplier Performance Management Motivation

So this leaves us with the carrot…

The carrot is most commonly associated with providing a physical incentive. In a Suppliers case, this may be continued business or additional product lines. Again, aimed at the ‘business’ and not the people you work with in that business. However, I also believe that the most powerful ‘carrot’ is internal. No, not one which has been eaten - I’m talking about intrinsic motivation of the people that actually need to ‘get the job done’.

I’d like to summarise this potentially complex area of psychology by focusing on two core intrinsic motivators that we all use to push ourselves, whatever the area, discipline or task:

  • Purpose
  • Progression

These are only two of many intrinsic motivators (the others being Social Interaction, Mastery and Autonomy) however I feel that Purpose and Progression are the most immediately actionable within our context.

The above intrinsic motivators influence individuals differently – those of us who want to make a difference in the world are pushed more by Purpose, whereas the ambitious amongst us are fuelled more by Progression. This makes it important that you consider both when trying to get the most out of the diverse people within your Supply Chain.

Over the next few weeks, I will delve into each intrinsic motivator and show you how you can use them to drive product quality, reduce supplier-related resource costs and achieve ROI quicker through successful Supplier Engagement.

Next week, Purpose: How Telling Stories Can Significantly Boost Supplier Performance.

Tags: Supplier development, Supplier engagement

David Taylor

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