Supply chains aren’t what they used to be. They can be deceptive, overly fragile and just not delivering what their stakeholders require. Some of these realities can be blamed by a few areas we have been taking for granted.
Relationships don’t matter? Building and sustaining client and customer relationships in todays’ business is crucial. It is now the bread and butter of most success stories and even if it’s not mentioned by the storyteller, it’s in there somewhere.
In supply chains, suppliers have learnt to put buyers into quadrants and if you find yourself in one of those quadrants that will not bring in the business for suppliers in the medium to long term then you are on your way out of their value chain. So, what should we be doing? Developing contracts that reflect win-win outcomes could be a start, enticing the supply side of the chain to stay on board through thick and thin. Suppliers, like buyers, enjoy longevity of business that benefits everyone so having another look at the terms and conditions and being open to renegotiate again and even again could be the start of a fruitful journey.
We must remember that people still function within supply chains and that we can’t rely on technology to do just about everything. This means that meeting up with your supply chain partner formally or informally to discuss challenges and best practices, or to disclose future opportunities while having a cup of cappuccino is a good step forward. In fact, this gesture might save you tons of emails, which is often littered with miscommunication and emotions that should be left aside.
Being lean to death. Being lean refers to adopting supply chain practices that help with efficient, economic, and successful supply of goods with ample flexibility to adopt to changes, if needed. This strategy has been spoken about by many and though it has been mastered by Toyota, they themselves had to admit that they had become lean to the point of being anorexic. So, what’s the lesson here? When Japan was hit with the tsunami back in 2011 triggered by the Tohoku earthquake, they struggled to restart their supply chain for obvious reasons. Their lean supply chain was buffer free with little or no raw materials to restart their manufacturing plant. Since then, they have reformed their lean concept and have blended the strategy with anticipatory based models which allowed for some buffer where necessary. Organizations even now have benefited from a lean and agile strategy but have not given much thought to natural disasters and emergencies triggered by market shifts. The message is to be lean and agile, but make sure to have contingencies ready when needed.
Ignoring the unethical truth. If a customer asks for the source of the rubber soling on a pair of branded boots, it may feel absurd and extreme. However, there are customers who are more curious about the products that they purchase and when they do, the supply chain must be ready and waiting with the answers. Supply chains have not been focusing on visibility as they should despite knowing fully well that they are often the unintentional collaborators and supporters of modern day slavery, child labor, corrupt government practices and everything else that’s unethical and not supportive of our existence, plants and animals included. We must now demand visibility upstream where the source of our sub-assemblies, raw materials and even finished products are mad, harvested or assembled. And this does not mean stopping at the first tier but, extending the binoculars to second, third and even fourth.
The ‘anyone can buy, anyone can source’ attitude. It’s true that anyone can buy or source but at what cost? Procurement is still seen as place where you can put anyone, at least just to ‘try them out’ or to see if they like this job or not. Now, will the chief pilot put an untrained member of staff who never even logged in a single flying hour in the cockpit and have them land and take off on a busy day? That’s how we must feel about having untrained staff run a procurement department or having someone negotiate or executing even the simplest task of raising a purchase order. Every procurement professional must be trained to do the job if we really want the best out of supply chains. Remember a happy customer downstream could be dependent upon a well-oiled supply chain machinery and qualified people running the chain is an essential part of the process.
The supplier is not your enemy. While increasing the profit margin and reduction of cost lies at the core of any business, there is a fine line that must be drawn to differentiate ethical practices from unethical ones, that may push boundaries of partners, clients, suppliers, and buyers. Such myopic approaches may lead to a start of a poor relationship that has the potential of having a negative affect on businesses and their owners, in the long run. Considering the interests of fellow business associates or customers is a good step forward. Understanding the requirements of the opposite party, while laying your terms and finding a middle ground so both parties receive optimum benefit from the business transaction, is key to building and retaining professional relations.
Chartered Management Institute (CMI)
2 Months
