Supplier Management Lessons From Steely Dan

A couple of weeks back, I went to a Steely Dan concert for the second time this summer. That's right. Much to my wife's chagrin -- she's the kind of women Donald Fagen talks about in "Hey Nineteen" -- I had to see the old duo again, especially considering a friend offered me his tenth row seats at face value this time around (don't ask me what I paid for the front row seats earlier this summer). I'll spare you my musical critique other than to say if you're into jazz, this is one act you should not miss. And I say that even if you don't like their 70s rock hits. But the key takeaways I had for this audience are somewhat universal. In fact, I'd wager that there are a number of supplier management lessons we can learn from the old Walter Becker and Donald Fagen duo.

The first lesson (like the rest) is basic -- make everyone want to work with you. By nature of their standards, musical prowess and the artistic license they've granted what was probably the best back-up band I've ever heard, Becker and Fagen were able to source world-class talent to play with them (even in fairly small venues where the upside is not that significant). Like a Honda or Toyota who engender respect from their suppliers (even though they can be extremely demanding), Steely Dan does the same, which makes suppliers (i.e., their back-up band) seek them out.

The second lesson is simple: it pays to have your best suppliers stick with you for good times and bad (and to know when to rely on them). To be truthful, Walter Becker was a bit washed up on guitar. But they had a new guitarist (also the musical director) to play his classic licks for him -- smart decision all around. As in procurement, sometimes it makes sense to outsource aspects that require superior performance to a third party.

The third lesson is something that only experience can teach: stick to the oldies but goodies. Sometimes, the best way to win over your suppliers, customers and internal stakeholders is to go with the tried and true. In Steely Dan's case, this meant spending about a third of their set playing their old standards, albeit jazzed up for a live, more experienced musical audience (we've all grown up since the seventies). But in procurement's case, this can mean using standard tactics such as supplier rationalization where everyone appears to win -- suppliers are happy because they get more business, internal stakeholders are happy because they don't need to risk working with a new supplier and finance is happy because there's straightforward savings associated with the procurement. Sure, advanced sourcing techniques such as optimization or downstream procure-to-pay initiatives like EIPP can pay huge dividends, but sometimes it pays to stick with the classics.

The fourth lesson is to figuratively know when to sing the song "Hey Nineteen" to your suppliers. For those who don't know this classic, it's one of my favorites. The song is essentially about trying to talk to a 19 year-old girl in a bar who completely lacks the cultural literacy of recent decades. The lyrics say it best: "Hey nineteen, that's Aretha Franklin. She don’t remember the queen of soul. It's hard times befallen Sole Survivors. She thinks I'm crazy, but I'm just growing old -- Hey Nineteen". In the procurement world, sometimes you need to remind your suppliers (and your stakeholders) about the past. For example, if a supplier is threatening to stop shipping goods if they can't pass along a price increase (even one that's not allowed per contract), remind them how five years ago, the same tactics resulted in another supplier getting blacklisted from future business -- even if they got the short-term increase at the time. Teach your suppliers some history -- and let them draw the conclusions.

The last lesson from the night is to diversify your customers and supply base. The audience in attendance at the show represented just about every generation (even some past the Baby Boomer era). The fact that Steely Dan has been able to recruit such a diverse following is testament to the timelessness of their music. For procurement organizations, this can also offer a valuable lesson. By pursuing diverse supply bases and new customers and geographies, you can create natural risk hedges should an incumbent supplier or strategy not pan out.

- Jason Busch

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