I just finished reading a paper on Supplier Collaboration, where the key message is that collaboration with suppliers needs to be far beyond tactical exchange of data. It defends a more mature and trusting relationship with key suppliers, where there is sharing of business strategies, joint work on investigation of risks, threats, and opportunities and where partners develop and link plans and targets.
As economies in low cost regions improve, labor costs will increase and work may have to shift elsewhere. Whether the latest trend will lead companies to continue outsourcing their operations to foreign countries or bring them back home, these decisions seem to be cyclical (almost like in fashion, these trends come and go). The truth of the matter is that independent of where your suppliers (and customers) are, no company is self-sufficient, but rather they depend on a complex chain of value added operations that need to be well synchronized to optimize the flow of products and services.
With the recent discussions involving global warming and the need for ‘green’ operations, we’ve been forced to learn and think more about total systemic cost. With that, there is more interest about what happens in the operation before or after ours in the chain. I think that the new way of doing business to satisfy green requirements will help approximate companies and enhance relationships.
This is because in order to improve efficiencies and supply chain coordination, companies will have to start seeing themselves as part of a complex chain of value added activities, and spend time studying the appropriate management of complicated networks of companies and markets. The fact is that leading companies don’t act as standalone firms.
Flexibility and agility don’t come solely from well designed and implemented supply chains – as the paper mentions, they are highly influenced by the quality of the collaboration process. The technology to collaborate and manage information and transactions is available. What needs improvement is the ‘soft’ side of the relationship: built based on trust and integrity so that companies can follow those leading enterprises which strive to ‘define mutually beneficial strategy and cross-enterprise processes’.
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Tags: Collaboration, Globalization, green supply chain, Outsourcing, Performance management
Posted in Supply chain collaboration
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I would agree, the changes in what one would call the hard core processes of supply, i.e. the changes from forecast based scheduling to demand based scheduling, the need to mitigate supply disruptions, advent of EDI, outsourcing and the need to manage consistency of quality and costing have all levels have led to the greater need for sharing of information on both sides of the fence. Nearly every supply agreement we write today has verbaige regarding how we will all manage and share information about all levels in the supply chain from third or fourth teir supplier, up through our manufacturing process and out to the end customer and warranty service after the sale. If we aren’t bringing Sales, Engineering, Quality and Manufacturing into the supply decision and attempting to manage activities deep into the supply chain of events we are seriously remiss.
While I agree in principle with the paper, I take exception to the title. Building data based
relationships is easier than building trust based relationships. Building relationships between
suppliers and retailers is very difficult as many of their goals are at cross purposes. My
experience has been that after the hard work of building the relationship is done the work of
agreeing to share data or information becomes easier. Maintaining these relationship can be
difficult as the pressures on both sides willl be tugged to focus on their goals and objectives
and will require a lot of energy and commitment to keep the relationships moving forward.
I am amazed at how few meaningful (from a business perspective) relationships are in place
between suppliers and retailers who have such great dependance on each other. There are
certainly tools in place to facilitate building these relationships.