Trust = Profits

In a recently published study of the automotive industry by Henke, Stallkamp and Yeniyurt it was revealed that Chrysler missed out on $24 billion in profits over the past 12 years due to lack of supplier trust in the automaker.  The premise of the study was that as suppliers gain more trust in their customers they will provide more profit opportunities to those customers.  In the Chrysler example it was calculated at $688 per vehicle between 2001 and 2013.

Chrysler had a rocky past – Daimler merger in ’98, Cerberus takeover in ’08, Government loan in ’09 followed by bankruptcy in ’10 and the Fiat merger later that year. As the trust waned in these years so did the profit opportunities presented by vendors.  Through this period, Toyota and Honda retained the trust of the suppliers and enjoyed both price concessions and non-price benefits from them.

Let’s take this to the produce industry.  Our entire methodology of operation is built on trust. We negotiate on a perishable product sight unseen, send it across the country on a truck that we probably don’t know the driver of and trust that it will arrive on time and in proper condition.  As a shipper gains trust in the receiver, the benefits begin to appear.  It might be a price concession, or a shipment during a time of shortage, or support at a food show; all of these help the receiver gain overall profitability.  And it all starts with trust.

I think deep down we all know this paradigm.  Some receivers are impossible to work with and the shippers avoid selling to them.  Some shippers knowingly operate on a one way street and receivers shy away from them.  When there is true trust, the collaboration between the parties takes precedence and great things happen.