Have you ever stopped to think about how important your suppliers are to your business? Do you view suppliers as business partners and an extension of your business, or do you see them as a reactive service provider that exists solely to fulfill your orders?
All too often we tend to treat supplier relationships as contractual agreements rather than mutually beneficial partnerships. This behavior grossly under-estimates the tremendous benefit suppliers can provide to your firm’s day-to-day operations. This “servant” paradigm is not the right way to go about maximizing your supplier network to drive enterprise value. Instead, let’s talk about three key reasons why you should pivot from treating suppliers as servants to treating them as friends, a business practice that will ultimately create value for both parties.
Reason # 1:Start with Trust
Relationships with suppliers are like any other business relationship. There are contractual obligations that both parties have to one another and those expectations evolve over time. Once the contract is signed however, how do things play out? If your supplier delivers products late or if you continually provide suppliers with inaccurate forecasts, your relationship will lack a foundation of trust.
A supplier relationship based on trust means that both parties operate with transparency and accountability and that they work collaboratively to tackle problems when they arise. One way this type of relationship can be achieved is by providing real-time access to supplier dashboards where key KPIs can be shared and monitored. Including suppliers in the design of these dashboards so they can provide suggestions relating to manufacturability, raw material selection, and shipping builds trust and naturally fosters accountability, transparency, and collaboration. Helping suppliers get access to data that communicates their performance helps them be proactive in addressing product, service, and informational pain points, thereby building a stronger, more trusting relationship. When a foundation of trust exists, all parties involved are more willing to go above and beyond to work well together. This ultimately saves businesses money as you can spend more time on creating value for customers rather than micro-managing suppliers.
Reason # 2: When the Going Gets Tough…The Tough Ask for Help
At some point in the business partnership, things will get complicated. A company undergoing rapid growth will need its supply base to grow with it. In some cases, this may require significant capital investment from both suppliers and their customers that was not originally planned for. A strong supplier network will help your organization remain flexible and adapt to changing market conditions. You’ll need to help your suppliers in those situations by taking on appropriate levels of risk on their behalf. But at some point, you’re going to have to rely on your suppliers to help fill the gap. Some situations may be related to the discovery of a flaw in the design or materials used in your products. Regardless, you’ll need to work with everyone involved to minimize the impact of these issues on your customer base. The ability to assign tasks and monitor completion, work with relevant stakeholders including suppliers to identify root causes, and execute on corrective action plans are critical in these situations. New industry, statutory, and regulatory requirements may also have a significant impact on your supply base and your organization. Having a system to help manage all of these changing requirements is the key to helping you and your suppliers continue to be successful together. How well you can partner with your suppliers to get through these obstacles along the way will be a testament to the strength and resilience of your supplier network.
Reason # 3: Tackling the Problems of Tomorrow
Just like your company, suppliers need to conduct research and development in order to uncover new ways to create value for customers (companies like yours). They also need to listen to the challenges that their customers face so that they can prioritize which problems to tackle first. Keeping suppliers in the loop on the problems of tomorrow will help you remain competitive as well. Recall what happened when Apple was secretly developing the iPod. Once Apple learned there was a 1.8 inch storage drive in existence that could hold 5 gigabytes of data after a regular supplier meeting with Toshiba, they realized that they had what they needed to dominate the MP3 market. The rest is history. You never know where your next major breakthrough or enabling technology is going to come from. It might be from within your own walls, from your suppliers, or more likely, both. Don’t discount how important your suppliers are for business today and tomorrow at your company. By treating your suppliers as equal partners instead of just a means to an end for your success, you position yourself to take advantage of opportunities for cost savings, problem-solving, innovation, and new market penetration more quickly than the competition.
Giving your suppliers a seat at the table will go a long way to improving the effectiveness of your business relationship. Along the way, you can use a variety of methodologies to support and implement the systems necessary to a collaborative partnership. Incorporating principles and concepts from organizations like APICS (American Production and Inventory Control Society) helps to strengthen supply chains in organizations and become a source of competitive advantage. Manual processes for supplier assessments, qualifications, audits, and handling supplier nonconformances are often incredibly confusing. These processes are a great place to start when it comes to implementing software. Collaborating with your suppliers to standardize routine activities sets the stage for how future business will be conducted. This collaboration also factors in interests, needs, systems, and people from both sides of the table, ultimately laying the foundation of trust necessary to sustained business excellence.