Sedat Onat
- Oct 2, 2023
- 3 min read

Friendshoring

In the dance of global business, trust is the rhythm, and friendship is the choreography." -Linda Matheson

Definition

Friendship, whose origins go back to the beginning of trade, means having business relations with the close circle.

History

Since the first years of trade, all merchants have preferred to do business primarily with people in their immediate circle, for security and other reasons.

This approach, which is in practice with globalization, has found its place in theory as Firendshoring. If we consider that the way of doing business in trade is not only based on costs but also includes business relationships and trust, we can define Friendshoring better.

The article covers procurement processes, but also covers Firendshoring service procurement.

Benefits for Material / Service Procurement Processes

Less Risk: Potential risks are reduced because friendships often create a deeper understanding and trust between supplier and buyer.
More Collaboration: This approach enables a higher level of collaboration between supplier and buyer, which can help make processes more efficient and effective.
The Power of Personal Relationships: Personal relationships can help the supplier and buyer better understand their needs, expectations and concerns. In addition, using close relationships at difficult points can speed up the solution of problems.

Opportunities

Strengthening Relationships: Friendship creates strong relationships between suppliers and buyers that are not only business-oriented but also based on personal foundations. This allows both parties to better understand their needs, expectations, and concerns.
Flexibility: As a result of mutual trust, suppliers tend to be more flexible in friendshoring relationships. This situation causes demand fluctuations (Bullwhip Effect) or may increase the capacity to respond quickly to unexpected situations.
Better Pricing: Friendship relationships can often lead to better pricing opportunities. The supplier may be inclined to offer more competitive prices when he knows the buyer is a loyal customer (The opposite is also possible).
Faster Problem Solving:When problems arise, a faster and more effective problem-solving process is often expected thanks to strong relationships.
Sharing Sensitive Information: Particularly sensitive information sharing between supplier and buyer may be more frequent and open. This could allow both parties to gain an advantage in the market.
Long-Term Collaboration: Friendshoring requires long-term collaboration. In this way, it can create synergy by enabling institutions to be more open and helpful to each other.
Risk Reduction: Since Friendshoring's infrastructure is based on close relationships, it can be more resistant to problems that may occur in the market. Since both parties tend to be more transparent towards each other, possible risks can be more easily predicted and managed (Supply Chain Visibility)
Increasing Brand Reputation: Friendship relationships can increase a company's brand value and reputation. A strong relationship with the supplier supports commitments to quality, reliability and sustainability.
Access to Global Markets: Friendshoring allows companies to operate more effectively in global markets. Particularly for companies looking to enter new markets, this means access to local knowledge and expertise.

Risks

Overdependence: Friendshoring can lead to over-dependence on the supplier. If the supply is disrupted for any reason, this may cause serious problems for the buyer.
Mixed Business and Personal Relationships: Having business and personal relationships within the same framework may cause loss of professionalism and objective perspective.
Loss of Flexibility:In some cases, a close relationship with one supplier can weaken relationships with other potential suppliers and limit the buyer's flexibility.
Pricing Issues: Mutual proximity can lead to transparent and competitive pricing being overlooked. This may lead to higher prices without being noticed.
Confidentiality and Intellectual Property: Close relationships can lead to blurred boundaries regarding privacy and intellectual property issues. In other words, an advantage can turn into a disadvantage.
Emotional Decisions: The intertwining of business and personal relationships may cause emotional decisions to be made. This close relationship, which may seem advantageous at first, can actually cause problems to begin.
Lack of Development and Innovation: By constantly working with the same supplier, the buyer may limit its access to new technologies, products or services in the market (See. Keiretsu / Carlos Ghosn – 1999 Nissan Rivival Plan).
Cultural and Ethical Differences: Although both parties are close, differences in cultural and ethical values can cause disagreements.
Conflict of Interest: Conflicts of interest may occur between business and personal relationships, which can cause much bigger problems in the long run. At this point, it should not be overlooked that sharing sensitive information due to the close relationship of institutions will further aggravate the consequences of the problems.

Friendshoring vs. Onshoring

Conclusion

Friendshoring is not only a purchasing strategy, but also a method of establishing long-term and sustainable relationships in the supply chain.

However, Friendshoring is far from being a corporate approach. Because it carries serious risks, institutional approaches should not be abandoned due to the blindness that trust will create.

Resources

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