Supply Chain Relationships

Over many years in Supply Chain Management I have had to understand how supply chains are actually structured, there is a clear similarity across all the supply chains irrespective of the industry being researched. I have spoken with many CEO’s, CPO’s and CFO’s and they have all told me “in our industry we do things differently”. I am sorry to say that this is not the case! So we have pretty much a situation where every industry does the same thing and has standardization in processes, so what makes things different? The main difference is each of the supply chains are the strategies we use and our relationships with our supplier base. How we choose a strategy and how we work with our suppliers defines who we are as a company and how the supplier network regards us.

Success in our supply chains relies heavily on the relationships with our partners. How well do you work with your suppliers? Contract manufacturers? 3PL and 4PL partners? These relationships hold the key to a well made product or service delivered to your customer on time and within cost.

The first step in this journey is to understand which suppliers you need to have strong relationships with. Just as in our social and professional lives where we know many people but spend most of our time with a few select friends and colleagues, your business has many suppliers but only needs close relationships with a few. So where should you develop your close relationships? The answer lies in your business plans and supply chains. Look for those suppliers that represent a significant portion of your spend, provide critical components, or support strategically important product or service lines. These are the companies that you want to be close with.

Close relationships don’t just happen, and they do not just involve your procurement personnel and their sales force. Relationships should begin with product or service design, making sure that the supplier’s role in producing the product or service is clearly understood and fully integrated with the overall product/service design and specifications. There also needs to be a shared understanding of the production and supply chain objectives as well as roles and responsibilities. Finally, a good relationship relies on communication, including understanding who to call and making sure the phone is answered. Open communication is built on trust and respect. In every supply chain, things go wrong, working with partners means understanding that and working together to resolve the minor issues that arise. Penalties should be reserved only for the major transgressions.

So, how are your supply chain relationships? Spending your resources and time with the partners that will generate the most benefit is critical to improving your supply chain and delivering better products and services to your customers.

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