How to be a preferred supplier.

The narrow margins of global competition mandate the tightest possible supplier relationship. But agreement on standards can be difficult, and open communication between manufacturers and suppliers is a very new phenomenon. CE gathered U.S. and Japanese CEOs to help understand why forging a tightly-linked supply chain calls for top-level commitment.

Global business is creating a revolutionary change in the supplier-vendor relationship. The old way, which one CEO calls "secretive and exploitive" makes no sense in a world where cement travels from a Mexican-owned plant in the U.S. to Thailand, and American factories sited by multi-nationals allow Japanese consumer electronics to compete with French televisions.

The new way calls for an open relationship, designed to bolster efficiencies at all levels. Shared planning, product development, technology, and service can speed up the supply chain, and lower costs. But the open relationship also means letting the supplier in on what once were called trade secrets. Price, bargained across a number of suppliers for the lowest possible bid, is no longer efficient since advantage now derives from higher-quality components and service, all following from the imposition of strict production standards and tighter supplier supervision. Suppliers benefit by knowing in advance exactly what will be needed. The way to be a preferred supplier is to communicate at all management levels and add value at every stage of the production process. Ford's Escort plant in Wayne, MI, for example, has reduced the number of suppliers of windshield mounts from 12 to four and ultimately to one. BMW CEO Eberhard von Kuenheim told CE recently that his company has reduced the number of suppliers from 800 to 300 (although the number of sub-suppliers hasn't changed that much).

CEOs gathered by Chief Executive to report on preferred supplier progress--at the Turnberry Isle Yacht and Country Club--were continuing to wrestle with the basics of the new supplier relationship that leads to certified status. Within the U.S., outsourcing gains are being made, and U.S. CEOs were nearly unanimous in the shared belief that price is much less of an obstacle than learning how both sides can talk to one another, and go on to produce with extremely tight specifications. Intertwined fates are now understood to be a fact of life of global competition.

But as the supply chain moves offshore the conflict increases. Suppliers attempting to enter new markets are running head on into overseas trade barriers. U.S. suppliers--even those with operating relationships in Japan--insist that cracking the domestic Japanese market is a mission impossible goal made even more difficult by quality standards bordering on perfection. But NTT America's Taketo Suzuki answers by pointing to the steep climb in the trend of the Japanese phone company's U.S. procurement.

Matsushita Electric Company of America's Akiya Imura is involved with the same problem in reverse. In MECA's case, following the mandate of its founder Konosuke Matsushita, the aim has been to site Panasonic plants in the U.S. and raise the local procurement content progressively, while lowering reliance on imported Japanese components--shifting from assembly only to made in the U.S.A. products. Here again component and materials quality is the issue, although price is more of an issue for the Japanese. Imura knows that the rebuilding of the Japanese industrial infrastructure in the postwar era has allowed for finer production tolerances, and manufacturing processes that aging U.S. equipment can't carry out. MECA has won some and lost some, as Imura reports. But business now acknowledges that international partnering is the only way to compete.

THE SUPPLIER AS INNOVATOR

Lawrence A. Reed (Dow Corning): Our business is involved with chemical materials with various ingredients and with applications to products that are sold to every industry that there is. We supply products to a very different group of industries across the board. We also buy lots of products--so we're on both sides of the relationship. And to make that successful, as a supplier ourselves, we've been working very closely with our customers and even our own suppliers to improve technology. Developing those relationships is something that all of us need to learn how to do better.

We have sales of around $2 billion, and we compete when it comes to becoming a preferred supplier. I hope I don't make this sound too simplistic, but it's important not to forget the basics. One of the things to start off with is determining what in fact is important to the customer. That might sound kind of simple, but a lot of times you really don't do that. We try to find that out in several ways: First, is the normal sort of thing you do when you call on customers and talk to them. We also use surveys done by outside parties to assist us with our customers. Either way, becoming a preferred supplier is about getting information from the customer's point of view.

Now that we've done that, we've found that you can really categorize the kinds of issues into five generic categories. I'd be willing to hazard that these are the ones that show up in any companies reviewing their supplier status. The generic issues involved in being a supplier are price, service, quality, delivery, and innovation. Some combination of those five things are uniquely related to each individual customer. Because of the variation, we have gone on to try and prioritize these issues. As we thought about them, it became clear that as a supplier you really start out with delivery or availability, not quality. Delivery or availability comes first because if it's not there, regardless of what the quality is, it's a non-starter. The product has to be available when the people want it. If it's not, then forget it, because they'll go someplace else.

After delivery comes price, but it's of lesser importance. People think, is it in the ballpark? When it comes to quality, the first thing they ask is: Is it at least comparable to what else is out there? Service, very clearly, means: What if I need help with whatever it is that I'm doing? For our company--we've talked a lot about this-- innovation is really the category in which we've tried to differentiate ourselves. We try hard in all, but thinking about what really is coming along the way, what are the new solutions, or new materials, is the way we best deal with the needs of that customer. Our strategy in this is really kind of simple: We want to be at least as good as everybody else in the world in delivery, in quality and in service. But we want to be better than anybody else in the world on the innovation side. Then we will price in a way that the price is determined to be fair value for what is provided. But the innovation really is the key. It's where we have the main focus on you.

Historically, we had this over-the-fence kind of mentality, where we did our thing, and when we were ready with our product then we sold it to the customer. If they didn't want it, well, we said what's wrong with them? Because we knew that our product really should be the thing that they really want--just because we knew it. In that environment, historically, of course, we maintained a lot of secrecy about our technology and what we were doing. Our customers also maintained a lot of secrecy on markets, and the applications. But that finally led to all sorts of problems. We both were unable to maximize, to excel with the competition. Now we are very much into partnerships where we exchange information.

We obtain information from our customers on their markets, their applications, what they're doing, what are the features of their products that they're looking for, what are the cost problems that they might be having that we might be able to deal with. We exchange information with them on our technology, our chemistries, how we can modify things, how they can help us in the application and changing some of those materials. The development of joint teams to create products is very central. The joint membership teams have joint objectives, they are really acting as if the companies were extensions of each other. And of course, the whole objective is to gain some competitive advantage for our customer so that they will be more successful in their markets and then we will enjoy the benefits to them.

The issues involved in making the choice are, for the supplier, loss of control of technology. Conflict of interest is always a difficult kind of thing because you can be working with customers who are competing in some way with your other customers, and maintaining the integrity of the customers' information is extremely important. That's an issue that has to be dealt with. For the customer, obviously the reliance on fewer suppliers, or perhaps a sole supplier, is a real issue. The ability to negotiate price is involved. It also is a very important step because the customer can't view alternative technologies and innovations the way they used to. The new relationship demands much more dependency. And both sides really want to make sure that they're dealing with the leaders in their fields. That certainly equates with security. Most of all, a commonality of values between the companies is extremely important. In order to have the confidence in the other side, to see the kind of things that you really want to see because you're going to be working together for many years, mutual integrity is needed.

Roy Serpa (Instamelt Systems): When it comes to being innovative--our major product is a revolutionary, new extruder, very different from what's been used in the U.S. for the last 50 years. It was introduced about three years ago, and we're now pursuing overseas relationships. We've found that we can help our customers use our technology along with theirs to give them the competitive advantage. That's how to sustain a strong partnership and a strong preferred supplier relationship.

Alexander D. Jacobson (Inference Corp.): The software and services that we sell are a strategic business resource, as opposed to elective information systems technology which tends to be a tactical resource. As such, we've found that we're drawn naturally into what you might call strategic partnering relationships with many of our clients, some of them involving equity participation, some of them just involving straight forward business relationships. We find the need to relate to our clients as partners very great--primarily because when the partner spends X number of dollars with us, he spends 10 times that internally to take advantage of what we tell him.

Albert C. Bersticker (Ferro Corp.): It's very evident that strategic alliances are becoming very critical. We operate with major manufacturing facilities in 22 countries, and we have laboratories or sales offices in another hundred. We are the oldest U.S. company operating in Japan. We specialize in very narrow niche businesses, powdered paints, base coatings, colorants, pigments, intermediate chemicals, friction modifiers, stabilizers for plastics, plastic compounds, and even aerospace materials. As a major supplier in many areas, since the very beginning of the company, we've followed a general rule: We won't compete with our customers, and we won't compete with our suppliers. That means we don't backward integrate to make resins, and we don't forward integrate to refined products.

Frank Liguori (Ulsten Corp.): We've got 350,000 temporaries, and we have seen an increase in outsourcing. We see it happening all around us. Labor is probably the largest line item in most of our budgets. So we are a strategic player when it comes to the whole area of partnering and outsourcing. We saw it in the mail room, we saw it in the reprographics area, and now we are seeing it in the manufacturing process and the administrative process. In the next five to ten years, strategic alliances and partnering will become the common way to do business.

THE PRICE OF PREFERMENT 

Delbert S. Conner (USCO Distribution): Larry's point about price is interesting. We haven't found that price has as much of an effect. Some of our clients are saying, "Hey, price? We want to pay a reasonable price, but we want super service."

Reed: Price, from our side, if you do all the other things, becomes a much lesser customer concern.

Conner: I don't disagree with you. We're a small service company in relation to some of yours, but in our industry--the warehousing industry--we're the largest distribution company in the U.S. Our growth in the past five years has mainly come from companies who are electing to outsource those functions that they best feel can be done by a third party. We take a lot of pride that 14 of our customers are number one or two in the world in their particular niche. Firms are concentrating their vendors, and that's great for us. But the idea of what a vendor is, I must say, is changing. The new vendor has to really become a first cousin. If you're chosen to be the prime supplier you'll have a powerful effect on marketing and sales. I'd like to see what we can do to further enhance the vendor relationship. We do some light manufacturing for some companies where we're assembling the products and shipping to their customers directly. That's a lot of responsibility on our part, we feel. So there has to be a high trust factor, and they said to us, "Look, you weren't the lowest on this bid; we really selected your group because of the top-down line that you mentioned, and the confidence that you're not going to screw up. Because if you screw up, then you jeopardize our relationship with our customers.

Serpa: Larry, once you have this relationship in the area where you folks are very strong in innovation, wouldn't that to some extent preclude relationships with others, and does that mean that the synergistic relationship has to be extremely powerful? If it's not, your customer may miss other innovations from other suppliers, and that would put them at a disadvantage.

Bersticker: When you develop a technical alliance with a supplier, you'd better pick the right supplier to do it with. But when there's nothing involved other than product, you need to check prices pretty particularly. If you're offering a highly engineered or a specialty product or specialty service to a company then price becomes less of a factor.

J.P. Donlon (CE): Have you found yourself in a position where price does make a difference?

Bersticker: Most of our customers are not involved with that. We go about creating the relationship in a number of ways. We solve one problem with research. In automotive we've done a lot of research, and one of the problems that we've encountered in this business is clearly the idea that problems are ingrained in the manufacturing process. Suppliers can clearly help through research.

Liguori: I think that pricing is relative to economic conditions. When times are better, the focus is clearly on service and quality. But when times are tough I think the focus kind of shifts. Service and quality are still very important, but there's an eye on the bottom line, and a lot of suppliers have to sharpen their pencils.

Bersticker: It's true that there's always somebody out there that's cheaper. And we just recently had an issue where there was some business we just had to let go because we just couldn't meet their price. But I think we see less and less of that.

Jack B. Critchfield (Florida Progress): It's been our experience as a purchaser that quality and reliability count most of all. But in the utility business we've had to escape the old-boy-network, where purchasing managers and sales managers had forgotten about the need to compete. That's one reason that CEOs must get involved in the supplier relationship.

Reed: One of the problems in buying a commodity is the cyclicity of the pricing. If there's a shortage the price is way up here, and if it's an excess of a commodity the price is way down here. If it's way down here, that's wonderful, but that doesn't last. We can't pass through those kinds of price increases in the raw material in our industry, so it really is kind of driving us bananas, and so we work very hard with our suppliers to see if there's some way that we can stabilize prices, to get out of some of these swings. And the first time around everybody said no, that's impossible, this is not dealt with, those changes you can't do anything about. Our purchasing people came back with the answer and they were told no. But we said somehow there has to be a way. Well eventually, one of our suppliers was willing to work with us to come up with a way to take risk from both sides and find a way of stabilizing the price. So if it was going very high, our price would not go up as much, and on the other hand we established some floors that would protect them on the downside. Now they are one of our principal suppliers because they were able to come up with a way of helping us solve a real problem.

Edward M. Kopko (Butler Services): We generate over 50 percent of our revenue from Fortune 500 companies who have chosen to outsource their engineering capabilities, and who had been a client of ours for a number of years. We also own a quality consulting company that helps many of our clients put into place supplier certification programs, supplier audit programs, and quality inspection programs. We've seen that the struggle is between required quality programs, where we provide inspections for our clients, and what kind of prices we're willing to pay to meet the demands that are put upon suppliers.

FROM SUPPLIER TO PARTNER

Akiya Imura (Matsushita Electric of America): We have found a lot of differences when it comes to comparing Japanese and American manufacturing--particularly in the area of quality programs. Those differences area a tough barrier for Japanese companies manufacturing in the U.S. who want to increase the American-made content of their products.

The Japanese auto industry has made efforts to respond to criticism about the trade imbalance, and invested in manufacturing plants in the U.S., substituting U.S. production for direct exports. But this has only shifted the criticism to complaints that these plants assemble cars consisting of a high percentage of imported parts. Procurement from U.S. suppliers is still scarce, and this has generated new trade friction between the U.S. and Japan, particularly because it is an economically difficult time for the U.S. auto industry.

The reaction can be found in the American press, with Investor's Daily reporting that "car parts accounted for about a third of the overall auto trade deficit with Japan ...and U.S. parts suppliers frequently complain that structural barriers impede their penetration of the Japanese market." And Mr. O.B. Marx, a Ford vice president, has charged the Japanese with the responsibility to increase purchases, and, if necessary, to go out of their way to help U.S. suppliers improve their operations. On the other hand, Mr. Noguchi, Toyota general manager of international purchasing, has said at a University of Michigan auto conference that the real problem is not trade barriers--but competitive capabilities. He cited an MIT study which reported "a difference in management efficiency between Japanese and American parts suppliers.

At Matsushita, we have been making a continued effort to transfer production to the U.S., and to include as much local content as possible. We aim to use as much as 70 percent local content on average in 1993. Additionally, we currently employ more than 11,000 people in North America, of which about half are involved with manufacturing for 17 product categories. We have also found that the competitive edge that has made consumers worldwide reward Japanese products has not been dulled by our vigorous transfer of production overseas. That's despite the fact that many once believed the Japanese competitive edge to have been shaped by the Japanese cultural background.

Now it is explicit that indigenous Japanese cultural factors are not the fundamental reasons for increased Japanese competitiveness. And in the electronics industry we have worked painstakingly for many years to use as much local content as possible. The Japanese auto makers in the U.S. have gotten local content up to 60 percent. But the adoption of higher local content remains an extremely tough thing to do. One of the problems is that Japanese supplier standards have been honed by the high level of competitiveness in Japan. Japanese suppliers have manufacturing know-how that is the aggregate or fruit obtained through manufacturing experience, and because of closer supplier-manufacturer relationships. These are reflected in our own experiences at Matsushita of America.

We have found that the biggest difference lies in the area of quality control. If you take a river as an analogy of the manufacturing process, in brief, the Western way of quality control involves the downstream, while the Japanese are concerned with the upstream. This is related to the fact that Japanese industry had to start from scratch after World War II. That rebuilding incorporated new thinking about production, which in turn is reflected in high standards at every stage of the production process. The difference shows up in our capacitor demands, which we have tried to outsource. In this case we sought to obtain raw aluminum foil in Tennessee; however, the rolling mill's limited experience with thin foils resulted in a stability problem, and despite a joint effort on our part, we are still having to import foil from Japan. Similarly, when it came to making refrigeration compressor parts in Tennessee, we experienced a number of problems that continue to cause difficulty. One had to do with the magnetic properties of steel, resulting from differences between U.S. annealing processes and those in Japan. Despite sincere efforts on the part of the supplier, our stress-annealing process still gives better results.

But we have also been successful cooperating with U.S. suppliers. We are involved with Whirlpool in a vacuum cleaner manufacturing project in Kentucky. Design appearance had been affected by the fact that U.S. polystyrene is poorer in gloss level than the Japanese product. But we have now found a volunteered supplier who wished to develop polystyrene with a similar gloss level--eventhough the cost is greater than for the imported source, and despite the fact that U.S. resins are generally cheaper than Japanese. In some cases we have adjusted our designs to accommodate domestic suppliers. This was the case in Georgia, when we turned to manufacturing cellular telephones. There the problem was one we could deal with because it was rooted in the clash of English and metric measuring systems.

Hobart Manufacturing is the sole distributor for our welding machines in the U.S., and well established in the welding field. In 1987, we imported samples of solid core wire from Hobart to Japan, for use there. But rust developed in the wire soon after, canceling its commercial value. By cooperating with Hobart, and making our engineers available for a full year, we were able to improve quality. Hobart supported this effort with both hardware and software acquisitions, and were able to produce with full satisfaction of our quality standards. Their 1991 sales to Japan are now estimated at $1.7 million, with increased future projections, and I think as our relationships with suppliers increase we will achieve the same kind of goals by dealing jointly with our problems.

Jacobson: We're now working with a Japanese trading company that distributes our products in Japan. It's probably one of the best distributor relationships we have anywhere in the world. We find working with this company perfectly transparent--what they say they're going to do, they do, and what they say they're not going to do, they don't. Everything is carefully spelled out, and the working relationship is excellent.

Now as the Japanese market for our products shifts, we're proposing partnering ventures with our distributor. But the sense I have in trying to develop this relationship is that I am culturally blocked from doing business in Japan, and that the block is at the level of language. Underneath that, the sense I have is that it's undesirable on the part of my Japanese partners, despite our good relationship and joint financial success, for me to participate more fully in the Japanese market. I think a lot of U.S. companies feel the same frustration, when it comes to increasing market share in Japan.

Taketo Suzuki (NTT America): NTT's procurement policy stresses open competitive opportunities. That means that we affirm that all suppliers who participate in the competition are treated equally, and that we provide non-discriminatory opportunities for both domestic and overseas suppliers. We have been increasing the use of overseas suppliers in terms of dollar volume year after year. But in utilizing more overseas suppliers we have run into both strengths and weakness. On the plus side we evaluated excellent concepts for development, and encountered a positive human interface. But we have also had to deal with issues involving quality, adaptability on the supplier's part, and price competitiveness.

Reed: One key issue for the supplier involves evaluating the choice of potential partners, that is customer partners. We want to sell to everybody, but we can only have so many customers that you can partner with, a finite number. The Japanese--and I'll be interested to hear some comments on this--have solved this problem through the keiretsu approach. In Japan, they have a family that they string together, a family of companies working together for many, many years. We haven't had that kind of situation in the U.S., and so it's a question for us of more picking and choosing.

Suzuki: Importing from the U.S. is not as easy as everyone thinks.

Bersticker: We have close relationships in the compound area with the Japanese, and we've found that some technical innovations are not available to us. We have been working with a number of companies to try to overcome that and develop products that are not available. A number of these Japanese corresponding companies continue to be important; so we're trying to work closely with the chief import sources.

Donlon: What do you think you have to do to insure they will continue to work with you--and maintain a special relationship?

Bersticker: Well, we have allowed them something that our competitors can't. We try to convince them that the relationships we have in sales offer a competitive advantage. But there's no question in my mind that throughout the world, we will have to come to terms with this, we'll have to develop technical alliances with the Japanese.

Suzuki: We have been suggesting that overseas suppliers emphasize four basic principles that underline the preferred supplier relationship. First, we feel we need a long-term commitment that involves a long-term strategy. Secondly, we stress openness in architecture and interface--that's again the question of how adaptable components or systems are. Third is the issue of feedback. The communications channel must definitely be two-way. We expect cooperative efforts from the supplier and open ears too. Lastly, is the matter of cooperation with the customer, the end user. That's a feature of supplier service that we look for.

Kopko: One of the things that we've found is that there's a definition problem with the standards involved with becoming a preferred supplier. Do you set a quality standard program geared to Baldrige, or to ISO 9000? It's necessary for both sides to set a clear standard, since all of us are forced to respond to our clients' different understandings of what a preferred supplier is. The trouble that we all have as CEOs in this area is really understanding that our customers have different definitions in relation to the end product. But becoming a quality standard with the major multinationals who have fully-documented quality programs is going to be an absolute necessity in order to be a long-term supplier to them. There is just going to be no flexibility in terms of that. But some of us who are running a little larger companies have to be a little careful that we don't get too anxious with our quality drive that we end up in the long run making ourselves less competitively strong because we're prohibiting very qualified companies from doing business with us by setting an artificial standard of some sort.

Donlon: Is this simply a hurdle which you have to get around just to be considered?

Kopko: That's an excellent point. There's some new studies coming out in terms of supplier relationships, and most of us do not have what is now considered to be a "seasoned" supplier program. Many of us are starting to put something in place. A mature program typically has two or three different designations: you become an approved supplier, you become a preferred supplier, you become a certified supplier, which means that you meet even a higher standard than a preferred supplier.

Serpa: Some companies have decided we just cannot afford your business, I'm sorry. We'd love to do it, but the requirements that you have are either too stringent or too numerous for us to fulfill. There's still a lot of work to be done in that area.

THE STRATEGIC SUPPLIER

Jacobson: We're a software vendor. We sell knowledge-based systems technology, packaged for commercial use. Our customers use our software to automate business operations. That's because this technology offers value by enabling large quantities of business information to work within the software. It's a very new technology, and from the point of view of standard software, it's a departure technology--programmers use it differently than they use conventional tools. Our customers--including AT&T--are buying technology that they're going to use to change their business operations. They want to make their operations more efficient and flexible in order to respond to rapidly changing market circumstances. Therefore, as a supplier, we see our products considered in a strategic sense by our customers. They tend to think of us as supplying a technology that they can use to implement strategy decisions from the CEO on down.

We, as a vendor, are one of the companies that pioneered expert systems technology. We were formed in 1980, before business had ever heard of the term "artificial intelligence." AI was not on the business community's agenda, and this forced us to attempt to introduce the technology. In 1989, meanwhile, AT&T, having worked with AI technology in its Bell Research Lab for five years, decided they wanted to roll out the new technology. They were redoing most of their business systems, with plans for long-term use of knowledge-based systems technology, and our own technology would be one of the critical resources. This was a strategy decided on at the executive level of management, and the responsibility for rolling out the technology was handed down to the MIS staff headed by a CIO. This group established a process to bring in a vendor that they could rely upon to supply AT&T with the technology in the form of products and services--rather than rely upon in-house suppliers. They could have gone to Bell Labs, but they decided it was in their best interest to go with a commercial vendor.

Being a major buyer--they also felt that they had to have a little playing field. They could not say simply: "you guys are the best in the business so we're going with you." So late in 1989, they invited 32 suppliers--actually ten suppliers more than were actually vending knowledge-based systems technology [laughter]--to compete to be preferred vendors. And after many months of presentations and evaluations and interaction between supplier executive management and AT&T technology staff, they whittled the list down to two firms, one of which was my own company. Next they decided that to determine which of these two firms would be the preferred supplier, rather than make a purely intellectual decision, they would seek a test case. They waited until an operating division had a requirement for an expert system, and we--the two firms--were ordered to compete for that business, while the executives managing the vendor selection process in that instance stood aside.

We went into the division where the application was required--it happened to be the largest manufacturing division of AT&T in the Merrimack Valley in Massachusetts--and we competed head-to-head. The people in the division didn't know us from Adam when we first started calling. We got very involved, and it turned out that we won the competition. At that point, we were told: "You are now in a position to be named preferred vendor." The other supplier was named number two. But at this point, really, nobody had won or lost. In order to win or lose what we had next to do was meet the terms of the contract we had signed with the division. That took another four or five months of work. Fortunately, we were able to meet the terms successfully, and only then, after some ten months and having invested an enormous amount of contact time, were we named preferred suppliers.

They paid us for the contract. And we made some money in the bargain, but they didn't pay us for the ten months of work it took to prove we were numero uno. But we were identified as the preferred supplier, and then the company explained to us just how they were going to work with preferred suppliers. The emphasis was on partnering, as you've heard around this table. We've now done a lot of business with them on a preferred basis, and they have now put a zero-defects quality program in place for their preferred suppliers. As such we became acculturated to their conception of supplier quality.

The only difficulty we have had involves the pace at which corporate culture changes. You can write charts that make sense, but implementation can be difficult to accomplish. That takes real executive contact, and contact can be very difficult to establish at the executive level. Being blocked as you go up the ladder can create a communication burden that's overwhelming. Urgency can be lost if you have to check up and down the management chain before trying to reach a CIO or CEO.

Donlon: Did you try to contact Bob Allen [CEO of AT&T] directly, or is that too explosive?

Jacobson: It can be tough to change the management relationship in the U.S. once it gets into place. But we're very optimistic because we are regarded as a strategic player at AT&T, and our company made the top-ten preferred vendor list at AT&T in only two years. Prior to that, no other company had made the list in less than five years. So we really matter.

Serpa: Just the fact that a company like that has a list is a great step forward no matter how difficult the communication problem is. The list says that they had problems that had to be overcome, and that change was needed. It's not just a matter of a human relations fit--it's a cultural fit that's needed, and to really define a cultural fit one has to start at the top of the organization. Unless senior management works together, it's hard to have relationships at the lower staff levels.

Jacobson: The need to compete was the real incentive.

Critchfield: We've learned the importance of becoming a preferred supplier, rather than the only supplier.

Kopko: We've actually been asked by one company to bid on managing all their suppliers for them. That's taking things to a new level when it comes to partnering and communicating.

Suzuki: That's another aspect of the difficulty we have with the local supply situation. The relationship between the CEO and the company is different in Japan and the U.S. And the communications problem can reflect that cultural difference.

Conner: We're a big believer that a partnership meeting is not one where you go to listen to what the client wants you to do, but you go there with as many ideas as they have.

Reed: In partnerships where we are the most successful, it's important to have really strong relationships all the way up to the highest levels of management in the company. You can see eyeball to eyeball and talk about issues and talk about problems and be able to solve those in ways that can legitimize them for lower levels of people. The relationship really has to have the openness and the trust that you need to have in order for it to work. Without legitimization on the higher levels of management, those things tend to be blocked because people are afraid to take the key step because if something goes wrong, then you know "Who let us do that?" will be an issue.