The threat of extinction has forced many U.S.-based companies to take advantage of low-cost sourcing or tap into emerging consumer markets. In their rush to save themselves, however, they often overlook the fundamentals of good communication with global trading partners and 3PLs.

The benefits of multinational capabilities are certainly inviting, but they cannot be fully realized until all supply chain partners are speaking a similar “language” of collaboration. And as many supply chain executives have been surprised to learn, a badly-timed handshake, the use of slang, or the placement of the wrong person in a critical global position can put the brakes on even the most thoughtful plans.

To help logistics and supply chain managers bridge this cultural gap, Logistics Management has brought together a panel of four experienced supply chain executives to discuss the ins and outs of establishing productive, long-lasting global relationships.

Leo Bischoff is vice president, global logistics for Hewlett-Packard (HP) and is responsible for strategic and operational logistics management across business groups. Brad Gray is global purchasing director for the Dow Chemical Co., a role he assumed after heading up global logistics purchasing for many years. John Mascaritolo is director of global logistics, corporate global procurement for NCR Corp. He has more than 30 years of experience in all aspects of global logistics. And Robert Schirmer is president of RAS Associates International Inc., a supply chain consultancy he launched after 25 years as an import manager and supply chain director at DuPont.

What advice would you give to logistics and supply chain managers about setting up effective communications with overseas suppliers and 3PLs?

Robert Schirmer: I would first say that you have to step back and determine what type of a global supply chain organization or operation you want to become. Will it be a centralized operation headquartered in the U.S. with all major areas—distribution, transportation, procurement—reporting directly to a chain of command originating in the U.S.? Or will there be separate, independent organizations in each country or geographic area?

Once this is determined, you can go about putting the proper communication elements in place. What traditionally works best is a geographic setup operating independently, but with overall financial responsibility linked back to the home organization. No matter which direction you take, understanding the parameters is essential to achieving a cohesive, functional communications plan.

John Mascaritolo: Once those parameters are understood, getting the right message to everyone in the global supply chain is a difficult process to say the least. There could be more than one point of contact within a company, or a language barrier to overcome.

With that in mind, you have to make sure that your internal communication among buyers and supply chain managers is consistent and thorough, and that your external communication among sales reps and operations managers is consistent and complete. It is also critical for logistics professionals to make sure they’re involved with all strategic planning with suppliers. This way the logistics functions of the supply chain are in sync, and there’s a clear understanding of all logistics needs across the board.

Woody Allen once said, “Eighty percent of success is just showing up.” How important is “showing up” when setting up supply chain partners overseas?

JM: “Face time” is extremely important, it’s easy to do, and it should be done often. First, you build your relationship through e-mails and conference calls. Then, you make the effort to meet your staff and suppliers in person. Face time is the cap to all forms of communication. It builds a solid foundation from which the willingness to cooperate improves.

RS: In my experience with quality and supply chain management in a joint venture between Philips in Holland and DuPont in the U.S., I was dealing with our overseas organization on a daily basis. Before I even started the job, I was sent to Europe to work with the organizations in Eindhoven, Holland, and Blackburn, England. This was an outstanding way for me to meet the individuals that I would be working with. It also helped me to understand their pressures while absorbing significant cultural aspects of their lives.

Brad Gray: When working overseas, especially for the first time, meeting the people face-to-face and getting to know and respect their culture will only add to the success of the relationship. You want them to get to know you and your culture, and spending time together facilitates this process. When you are forging long-term relationships, face time is a great investment in building a global relationship.

What advice do you have for building new global relationships?

Leo Bischoff: With any new relationship we establish, it’s important to achieve a common understanding of our requirements, our expectations, and our “operating guidelines.” This includes not only the quantitative factors (cost, service-level agreements, key performance indicators, measurement of cost savings, and strategic initiatives), but also the qualitative factors (best way to engage on ideas, and communication options). There also needs to be a thorough understanding of standard business conduct, such as relationship-building events, dinners, etc. The key is to move an existing transactional relationship to a long-term, strategic relationship that will drive value to both companies.

What role should third parties play?

RS: Third-party providers, no matter what functional role they play, should be considered part of the organization and be included in all “need to know” communications. Information they accumulate through their normal operations is key to helping the organization perform in the most efficient and effective way.

JM: I’ll take it a step further: It’s critical that local 3PL representation be established and that the relationship be strong. Suppliers will usually rely on the buyer’s carrier network, so local presence and solid points of contact are critical to building and solidifying a good supply chain. Your 3PL represents you, so to ensure a consistent and complete message when working with the supplier, you should make sure they understand your instructions and your needs.

How does a company choose the proper local 3PL?

BG: It’s based on the unique company strategy. At Dow, for example, we’re committed to developing fully-integrated supply chain operations that drive down our total costs and generate value for customers, suppliers, and other value chain partners. If you’re looking to achieve this integrated goal, then you want to find third parties that bring value to your particular supply chain through their service offering. Each supply chain will have unique needs, so look for a third party that delivers against your safety, service, and cost objectives.

LB: Because of HP’s size, scale, and leverage opportunity, we have direct relationships with each logistics provider, and they, for the most part, engage with global partners. In the incidences where the only viable solution to meet our needs is a local, in-country partner, we have a regional logistics team that will foster relationships as well as global logistics procurement.

How do you go about choosing the right team members to send overseas to build relationships?

BG: Since we’re a global company with employees based in many geographies, we try to choose experienced and qualified local personnel. But when we need to send someone abroad, we look for candidates who have a balance between job experience within Dow, an understanding of our global-sourcing work processes, a high capacity for change management, and a drive to learn and work with new cultures.

LB: We go global. What we’ve found is that it’s important to hire regional talent for a global logistics team in a major overseas country. Internally, it fosters a better understanding of the local challenges and promotes an internal regional/global relationship that cannot be achieved by U.S. employees flying into a country for a short stay. Only when they’re on the ground, living and breathing the regional complexities, can they gain the level of collaboration needed to leverage global processes and logistics spend.

What’s the best way to prepare U.S.-based staff for the business culture they’ll be working within?

LB: Cultural-awareness training is the best way to prepare. We have an internal training tool that educates our staff on the basics of a country’s gestures, practices, customs, etc. Before any major engagement, we have an internal meeting with our local logistics staff to achieve an understanding of the current issues. We also create a “bio” of the people we are meeting with. This “bio” includes not only professional aspects but also personal accomplishments, family information, and background on that person’s interests—background we’ve gained through relationship-building. Business trips and short-term assignments are also considered very important to accelerate the learning curve.

JM: The training Leo mentioned is critical no matter how qualified the candidate. All of our managers involved in handling global business are exposed to multicultural training.

RS: Too many mishandled cultural situations have caused irreparable damage to customer relations and have disrupted otherwise stable working environments. Training will help avoid those situations and keep things running smoothly.

Can you share one global communication breakdown you experienced, and explain how you solved the problem?

LB: Sure. We were experiencing some performance issues moving product from Singapore to India. We saw it go from a positive local working relationship to an emotional situation. Once it became emotional, communication broke down, solutions were not developed, and the end result was a direction to eliminate the partner.

We solved this emotional behavior by reaffirming that we not only valued the relationship but we were also willing to host a two-day workshop to understand the challenges and co-develop solutions that we both could benefit from. We sent a U.S.-based manager to join the local team for the meeting in Singapore. The end result was a collaborative meeting that produced some short-term and long-term solutions that promoted a win-win environment.

JM: Even though English is the language of global business, it may not be as fully understood as you think, even when it’s spoken fluently by your partners. One sign that a misunderstanding may occur is when a supplier seems to have no questions regarding what you have presented to them. When this happens, you should submit what you have discussed in writing for their further review and study.

During a negotiation with a supplier from Taiwan, I was discussing terms of sale and wanted them to operate under the Incoterm of Delivered Duty Paid (DDP), where they would be fully responsible for a complete door-to-door delivery of their product to us in the U.S. On the phone, I explained the need and the process, and they completely and quickly agreed. Knowing this was too good to be true, I sent them my request and plan in writing. After they reviewed what I sent, they replied that they were thinking “Ex Works” terms and thought DDP was the same thing. After more discussion and finding out their international limitations, we settled for the Incoterm of Free Carriage Allowed (FCA), which benefited both parties.

RS: I’ll cite an experience involving both a customer and a partner. It seemed that hurdles were a part of everyday life at Philips and DuPont Optical—a joint venture between Philips in Holland and DuPont in the U.S. called PDO. I had been sent over to Europe prior to the start of my job to get an overview of what I would be doing and who I would be working with. Since PDO was the pioneer of CD technology, many quality problems occurred early in the development process. Customers were returning 15 to 20 percent of our products for quality problems. While technical reps were acting as the intermediaries, many of the other functional areas of a successful supply chain were not included in the dialogue, and many misunderstandings occurred—and in some cases tempers flared. By bringing key elements of research, tech support, and logistics together for our major customer, everyone was able to state their concerns and hear those of everyone else. By utilizing a skilled moderator and concentrating on solving problems and issues, we created a solid partnership between manufacturer and vendor

Is there a “golden rule” that you have learned in your global supply chain experience?

JM: My golden rule is to expect the unexpected—and plan for it. In the U.S., we are spoiled by a strong logistics infrastructure, and tend to think the rest of the world has the same infrastructure but this is not the case. Yes, there are countries with good logistical infrastructures, but as you go farther east, especially into emerging countries, you see weaker structures. As you travel to other countries, you see similarities in logistics but the overall process is limited.

BG: Here’s one of the most vital lessons I’ve learned: Even in global business, people have a tendency to use various slang words when speaking with others. In the global economy, you will find that the person on the other end of the phone is translating what you are saying into their first language, which is probably not English. I would strongly suggest eliminating slang whenever possible.

It’s also a good idea to follow up your phone conversations with something in writing confirming what you feel was agreed to on the phone. In some cultures, “Yes,” means “I heard you” and not “I agree with you,” which in itself can lead you to believe you have an agreement, when in fact all the person is telling you is that “I hear what you are telling me.”

RS: I firmly believe that you not only must have a win-win relationship with your vendors and third parties, but you must also treat them with respect and make them partners in your operation so they become stakeholders and feel that pride of a successful cooperative operation. If you constantly beat your vendors down it will come back to haunt you.