Today’s volatile business environment is predominantly characterised by very short product life-cycles, leading to faster production cycles and often highly-sophisticated market segments which give rise to calls for increased supplier collaboration strategies.
While a precise road-map for achieving best in class procurement efficiencies remains unknown and continues to be elusive, there is a general consensus among many procurement practitioners that the concept of supplier collaboration is the way to go. For a surprisingly large number of organisations, suppliers are slowly being regarded as their secret competitive weapon and a hidden resource for competitiveness.
Conventional wisdom tells us that customers are an integral part of the organisation’s future business. So are suppliers. Supplier collaboration initiatives can be regarded as the key to unlocking the next level of value. The journey of a product – from raw materials to the end consumer – requires multiple companies to come together. The ultimate goal of supplier collaboration is to optimise the entire supply chain rather than each entity focusing solely on its own interests.
The concept of supplier collaboration is now a common feature of corporate boardrooms, separately capturing the executive and media spotlight. As we move into the future, supplier collaboration has generally been regarded as a magic ingredient behind the supply chain’s biggest success stories.
There is now renewed thinking in modern-day procurement conversations that supplier collaboration strategies could easily be the biggest game changer for those companies that want to stay ahead of the pack in this highly competitive business environment.
Various segments of the supply chain community have often proffered compelling arguments in support of supplier collaboration since a well worked out supply chain network is a great source of competitiveness. It ultimately makes suppliers vested partners in the supply chain of the organisation.
User departments generally treat suppliers as second cousins or enemies. Such negative energy is not only archaic but very retrogressive. We cannot call our suppliers partners and then treat them differently with actions that are in a way contrary to our verbiage.
In today’s business landscape, it is no longer advisable for procurement to take a zero-sum game approach by squeezing suppliers using the sledgehammer approach. The procurement field has got no place for people who see all negotiations as zero-sum games and consider any “money left on the table”, a failure. On the contrary, maintaining amicable mutually beneficial relationships with the vendor community can be an invaluable tool in the quest for business success.
- Lupane man survives axe attack
- I don’t have depth: Bosso coach
- Farm wrangle sucks in Lands official
- In defence of Trevor Ncube
Keep Reading
Industry experts contend that innovation based on a close working relationship with suppliers far outweighs the short-term cost savings offered by arm’s length competitive bidding process as well as hard-nosed negotiations with suppliers.
By integrating systems, exchanging information freely, making coordinated decisions, and sharing risks and rewards, committed supply chain partners can achieve significant cost savings, faster innovation and high responsiveness crucial for competitiveness. In future, companies will not compete against each other.
Supply chains are the ones that will compete. There should therefore be an attitude change in favour of a more balanced and trust-based supply chain relationship.
Supplier collaboration strategies are key in the design phase of production where combined teams are required to identify cost effective raw materials or production methods that align with the company’s quality standards.
Such strategic collaboration initiatives will seek to identify and eliminate waste, reduce variability and improve operational efficiencies early on. This will lead to improved product design, customisation, and the introduction of innovative features. Collaborative supplier relationships will promote knowledge sharing, innovation and improvements in product quality and service delivery with both parties benefiting from each other’s strengths. It will allow procurement professionals to tap into suppliers’ ideas, benefit from immediate feedback from suppliers, leading to the co-creation of innovative solutions. It will certainly encourage the exchange of the best practices, previous lessons learnt and market insights. It will obviously help to drive continuous improvement, innovation and optimised procurement process flows. Suppliers and procurement professionals will work together — and win together — to achieve the best outcomes for the supply chain even when the economic forecast is cloudy.
Supplier collaboration strategies can be used as a way of soliciting process improvements from the supply chain community. Some organisations are still stuck in certain traditional production processes that tend to give rise to higher overhead costs when in fact the supplier community is readily available to provide better modern alternatives.
The need for organisations to keep pace with changing designs and customer requirements should give renewed pressure on supply chains to ensure that open lines of communication between procurement and the supplier community are kept open at all times.
Supplier collaboration strategies are also very critical in that suppliers may take the leading role in identifying new sources of complementary raw materials and or new complementary production processes on the market since they deal with many other customers. Suppliers are also often sources of suggestions that will go a long way in assisting with coming up with designs that hold tolerance at the time of manufacturing.
Sometimes the best answers to questions lurk in unexpected places.
The supplier collaboration concept is now regarded as a strategic imperative because it can be utilised as a lever for promoting a well-integrated supply chain system that can serve as a cost-effective business strategy since it minimises the potential duplication of inventories at each supply chain point. Collaboration in areas such as joint demand forecasting and inventory management can lead to reduced operating costs, minimising waste and excess inventory. Where the supplier and the procurement department are in constant touch there is hardly any need to keep safety stocks because inventory conversion cycles are known at all points in the supply chain. Independent observers in the supply chain have often strongly advocated for the free exchange of information especially when forecasting supply and demand patterns since such a business initiative will take significant amounts of inventory out of the supply chain. By sharing demand forecasts, inventory levels and production schedules, supply chain professionals can synchronise activities across the supply chain, leading to better decision-making and improved responsiveness.
Supplier collaboration strategies will also assist in supplier evaluation exercises in that whenever there is a close working relationship between a supplier and the procurement department, supplier performance monitoring is very easy. It will be easy to pick early signs of poor performance by suppliers.
Consistent monitoring of suppliers is very important in supply chain management since “the good performers of today can become the problem children of tomorrow”.
Supplier collaboration and cooperation will form the primary basis for developing long-lasting mutually beneficial business relationships with sustainably high performing suppliers. Such strategic and synergistic coherence will promote vendor relationships that are built to last. Frequent communication fosters trust and enables real time problem solving, helping to prevent supply chain disruptions and enhance overall efficiency. If you want to enhance collaboration with your suppliers, get them involved early and talk with them about what you are doing and why. It is therefore important to promote a culture of continuous evaluation and monitoring of performance.
That is where collaboration shines the strongest.
In today’s regulatory environment, compliance with environmental, social, and governance standards, or industry specific standards such as risk management in banking or safety in pharmaceuticals, is non-negotiable. Suppliers play a crucial role in ensuring your business adheres to these standards.
By collaborating closely with suppliers on compliance matters, you can reduce or mitigate risks, uphold your brand’s reputation and meet the growing demands of socially conscious consumers. Supplier collaboration requires a transparent and open flow of communication — which may include regular meetings, joint planning sessions and feedback exchanges to align objectives, address challenges and discuss potential regulatory or sustainability challenges.
Collaboration helps organisations respond more effectively to sustainability challenges at all material times. By aligning sustainability initiatives, organisations can improve product quality and appeal, shorten lead times, reduce the carbon footprint, leading to increased customer satisfaction amongst the more environmentally conscious consumers.
Nyika is a supply chain practitioner based in Harare. — nyikac@yahoo.com.
