CPO Agenda reported recently on John Henke's presentation at ProcureCon 2008 in Geneva in which he presented the results of his research into the financial value of stronger supplier relationships.

Henke, President of US consultancy Planning Perspectives analysed a decade of data from the US automotive industry, finding:

• 14% of revenue
• 33% of profit, and
• 56% of profit per vehicle   

could be attributed to to 'trusting supplier relations' rather than a company's own people, skills and other internal capabilities.

Henke admits the analysis can not pin point exact figures for each manufacturer but industy averages could be applied to indicate the importance of trust.

In Toyota's case, for example on 2006 financial performance that would translate to more than $21b of revenue and $1.1b of profit as being 'directly attributable to trust rather than other factors'. 

Henke added that even if the benefit estimates were halved they would remain very substantial.

He is quoted concluding that "This suggests to me that it might be worthwhile spending a couple of million dollars to improve your supplier relations" and that procurement was "unquestionably the primary driver of supplier relations in the organisation".