Leading companies have reinvented the way they work with their suppliers and are enjoying a sustainable competitive advantage.
Businesses that initiated their supplier management transformation over the last several years have been rewarded with increased profitability, reduced supply chain risk, and productive & efficient innovation pipelines. Supplier Management practices that focus on collaboration have unlocked benefits that will continue to pay dividends as emerging tools and technology enhance supply chain processes.
The time is right for middle market companies to leverage lessons from early adopters to set long-term supplier management strategy. In fact, there are many quick wins that can be implemented within 4-6 months that can deliver tangible value.
– W. Edwards Deming
How has Supplier Management Evolved?
Leading organizations take a long-term view on how and when they interact with suppliers. A supplier segmentation approach is used to identify which suppliers are strategic (those critical to competitive advantage and hard to replace based on differentiated technology) versus those suppliers which are more transactional (those that provide little value and are easy to replace).
For suppliers deemed strategic to the organization, the aim is to foster a culture of trust and transparency and use it as a foundation to drive initiatives that support overall business strategy. Using supplier management practices to uncover hidden opportunities and bring clarity to previously unidentified risks that need to be mitigated, companies position themselves to outperform their competition.
At Fisher Management Partners, we understand the areas where supplier collaboration and co-creation can deliver the most value to an organization include:
- Product & Service Innovation
- Product Development and Engineering
- Planning (forecasting, risk management, and regulatory planning)
- Technology & Tools Integration
- Multi- Tier Supplier Visibility & Management
Product & Service Innovation
We have worked with product and service companies that push their supply chain partners to explore the boundaries of current technologies and business models symbiotically. For example, one way to identify and leverage product & engineering expertise from the supply base is to incorporate a detailed technical evaluation into the RFQ process and involve the technical / engineering teams in the supplier selection process. Championing quarterly technology round table workshops with the most strategic suppliers is another way that leading companies collaborate with their supply base. Through these types of collaborations, companies can determine where to apply their core competencies along the value chain and where to leverage supplier expertise. By sharing knowledge, experience and skills while equitably sharing risk, supply chain partners can unlock new potential.
Product Development and Engineering
In order to design products efficiently and effectively, development teams need to collaborate early and often. Aligning on frameworks and expectations early streamlines go/no go decisions, accelerates the pace of development, and reduces time to market. Tight coordination in the early design phases can significantly reduce waste and re-work that is often caused by missed communication or poor decisions made based on limited, incomplete or incorrect data.
In addition, identifying, implementing, and leveraging technology tools to streamline engineering collaboration between companies can also provide significant value. Product Lifecycle Management tools can significantly reduce product development time and bring products to market faster when used appropriately. Rather than the legacy view of PLM, which was focused on CAD file management, modern PLM tools have incorporated requirements management, MRO and even voice of the customer so that end to end engineering coordination is managed entirely within one tool suite. Leading companies are improving efficiency, increasing accuracy and reducing time to market by including strategic suppliers in their PLM processes and tools.
Forecasting, Risk Management, and Regulatory Planning
Working with your supply chain partners towards a unified planning strategy can unlock mutual benefits. Aligning on planning and forecasting can improve product lifecycles, enhance customer experience, and prevent supply chain blunders, like Cisco’s $2.2b excess inventory write off from inaccurate forecasting and Target’s poorly planned 2014 entrance into Canada that resulted in a $2b loss, while ensuring that suppliers are prepared for your demand. Supply chain partners can also provide deep knowledge and insight into regulatory trends and risk management levers that may be available and mutually beneficial. These are valuable opportunities to leverage external product and industry experts as an extension of your team.
Procurement Technology & Tools Integration
Investing in the right procurement technology and tools can generate more than cost savings – it can unlock a competitive advantage in your organization. Cloud-based software can now “link” your procurement team to supplier partners. Metrics, scorecards and dashboards become shared, which enables greater collaboration. Today’s software functionality allows for searchable contract repositories that locate contractual terms and conditions then connect to your transaction history to measure actual vendor performance against agreed-upon obligations. Organizations can gain the insights needed to create strong and agile relationships to maximize value, align goals and drive KPIs – such as cost to serve, first time fill rate, and the perfect order.
Multi-Tier Supplier Visibility & Management
Increasing supply chain complexity impacts all major industries and magnifies risk exposure with sub tier suppliers. A lack of visibility into the depth of your supply chain can leave a company vulnerable to costly disruptions, while switching suppliers after failure can take a significant amount of time and the required resources to do so can be substantial. Performing multi-tier supplier risk assessments can help organizations protect themselves from a supply failure, by analyzing risk across the following areas:
Operations: Supplier Responsiveness and Quality, Natural Disasters/Pandemic/ “Acts of God”
Financial: One of the likeliest risks of a supplier failure is financial. As of August 2020, the US is experiencing a 10-year high of bankruptcy filings.
Regulatory: When a supplier violates laws, rules, regulations, or is noncompliant with internal business standards, the liability and risk may extend to its supply chain partners and customers.
Ethics: Companies that partner with suppliers that are found to be unethical are at risk for damaging brand reputation.
Engage and align with suppliers early in the product or service development process and establish structured processes and programs to foster supplier co-creation and innovation.
Example Practices: Phillips Supplier Collaboration Portal, Automotive Industry RFQ + Technology Competition
Leverage best of breed tools to enable the efficient and secure exchange of product data, engineering data, and contract data.
Example Tools: Siemens Teamcenter, SAP PLM, DocuSign, Coupa and Apttus
Routinely perform multi-tier supplier risk assessments to protect your organization from supply chain risks and failures.
Example Tools: Coupa Risk Assess, Ivalua Supplier Risk Management, JAEGGAER, GEP
Align supplier management metrics with those of internal customers (Product Development, Sales, Finance, etc.)
Example Metrics: Time to Market, Supplier / Partner Innovation, Cash-to-Cash Cycle, Inventory Turnover, Days Sales Outstanding
If your organization is looking to enhance or transform your supplier management approach, ask us how we can help your team:
- Conduct a supplier management maturity assessment
- Identify gaps to best practices and quantify opportunities
- Assess organizational readiness to change
- Select quick wins to pursue
- Scope and execute successful initiatives