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Archive for July, 2023

Supply chain collaboration
– are you ready for the uncomfortable truth?

Tuesday, July 25th, 2023

 

It has long been recognized that effective supplier relationships are based on collaboration not confrontation. Japanese manufacturing techniques and Lean thinking brought the practice of Partnership Sourcing to the West in the 1980s when most supplier relationships were then adversarial. However in many industry sectors these old behaviours still hang around….

In many ways a successful relationship with each supplier is like a marriage:

  • You want the best for each other.
  • You need openness, honesty and straight-talking to hear and understand
    your partner.
  • You are willing to address any problems to keep the marriage mutually beneficial.

How many businesses are ready for this type of openness with their suppliers? Ready to hear uncomfortable truths about their business practices and their people? Open to accept rather than reject such information? Committed to taking action to address problems identified by suppliers?

Procurement and Supply Chain managers need have a strategic outlook and be strong enough to bring feedback and criticism from suppliers into the business and not feel threatened by it. They must not consider such a ‘public appraisal’ as a sign of poor management of their functions. They must not fear that the board might consider new management is needed in these functions given the problems revealed. Instead they must embrace the feedback and see it as providing opportunities for improvement.

As shown in the table, driving performance improvement through effective and sustained collaboration with suppliers can only be enabled when the Supply Chain/Procurement Leadership has a strategic focus on the inbound supply chain. They will thus accept the need for free and honest dialogue with suppliers (including sharing uncomfortable truths) as a key part of the improvement journey. The business culture also needs to be progressive enough to encourage and fund such collaboration. Digital tools can help businesses build on this solid foundation to enable effective collaborative improvement.

In marketing our new zuppli digital service, that uses two-way assessment to drive supply chain performance improvement, we have seen these challenges first hand. zuppli provides each supplier with a quarterly assessment of their performance against key metrics such as delivery, quality and transactional cost and shows each supplier how they compare in these metrics with other suppliers (anonymously). This information catalyses supplier improvement and helps them focus their improvement activities. Companies like this functionality. This helps amplify the resources and efforts of their internal Procurement/Supply Chain resources.

But zuppli also provides companies with an assessment of the company’s performance in the previous quarter – made by their suppliers – against key metrics such as demand planning, order management and ease of doing business. It also captures and shares supplier critique and improvement suggestions (anonymously to encourage straight-talking by suppliers).

Such feedback is key to supply chain improvement as the company’s people, processes and systems define the environment that suppliers to operate in. That environment can help or hinder supplier performance. For example, late deliveries by suppliers may well be due to many short lead-time orders placed by the company – rather than poor-performing suppliers…. An effective supply chain requires good performance at BOTH ends of the chain.

So just like a marriage, a healthy relationship is needed to ensure a couple stays together in a mutually beneficial relationship. And that includes open and honest communication. It includes the ability to give and receive the truth ̶ often uncomfortable at times  ̶  and to take action. Unfortunately too many businesses lack the supportive culture and a strategic focus in the supply chain to recognize the need and the value of really listening to their suppliers, hear uncomfortable truths, capture their improvement ideas and then take action to address root cause problems. The impact of Covid and the war in Ukraine have reduced many Procurement/Supply Chain functions’ ability to take strategic initiatives; instead driving a tactical focus on availability and price. This has pushed supplier collaboration further down their agenda.

Companies need to see their suppliers as more than simply supplying parts, materials and services. They need to see them as also supplying information and ideas. To consider them as external collaborators with capabilities to help drive innovation within the shared supply chain  ̶  for the mutual benefit of the company, its suppliers and ultimately its customers.

 

Thanks to Frits Thomsen, Director SCAT3 and Dave Carter, Codexx Associates, for their ideas and comments on this article.

For more information visit www.zuppli.com

 

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