It’s Not A One-Sided Approach: Working With Suppliers To Generate Better Business

StrategyDriven Managing Your Business Article |Working with Suppliers|It’s Not A One-Sided Approach: Working With Suppliers To Generate Better BusinessEvery company has its crosses to bear. Usually, this is in relation to excessive expenses, whether you are concerned about the costs in the supply chain or you are not improving your bottom line, sometimes we have to look further outwards to ascertain better cost-cutting methods. Our supplier is a very notable example because it can be a very fraught relationship when we don’t do things our end or sometimes we end up relying on them for so much, but they don’t deliver. What can we do to ensure that we improve our relationship with any supplier so we can generate better business?

Do What You Can To Maintain A Strong Relationship

It is not a one-sided approach. Sometimes we need to remember the importance of doing what we can to maintain a good working relationship with our supplier. Sometimes we can be on first name terms with people. It all depends on the industry you work in because if there are companies that are operating on a mass scale, like PEAKHD that provides fluid for diesel engines and industrial equipment, they will have numerous other businesses to contend with. From your perspective, think about improving your communication and keep them in the loop when possible. Working with a supplier on a long-term basis is a beneficial practice. Having clear and consistent communication will result in a more organic relationship further down the line.

Using Technology To Manage The Relationship

As there are so many plates to spin (especially if you are working with numerous suppliers) it’s important to make sure that you have everything in order. Supplier management software can help you keep track of information about every supplier in one handy place. But we have to remember that technology can result in us being somewhat faceless with regards to the supplier relationship. Use the tools, but make sure that they are the support network that helps you and your suppliers.

Consider The Cultural Impacts Of Your Supplier

While the world is becoming more connected we can find ourselves dealing with suppliers further afield. Sometimes they’re on the other side of the country, but increasingly they are on the other side of the world. This means that we’ve got to think globally but also think about the cultural and language barriers that may present themselves. At the same time, we must remember that the documentation can vary from country to country. Having an adequate Service Level Agreement (SLA) that you have drafted can help to navigate any potential problems. You must also think about the differences in currency. And perhaps, most obviously, think about the differences in time zones.

Working with your suppliers to generate better business is almost as important as the relationship you have with your customers. When we choose the right supplier it can be a long-lasting relationship but this means that when we work with suppliers there are components we have got to consider to make life easier for them and us. It isn’t a one-sided approach.

Never Take Your Suppliers For Granted

StrategyDriven Tactical Execution Article |Suppliers|Never Take Your Suppliers For GrantedThere are many pillars upon which a competent business rests. See how even the most successful business operates with only 20% of its staff turning up for work, or only 20% of its IT systems functioning that day, and you’ll see just how quickly even the most titanic corporations can lose value quickly.

This is why it’s important to never take those pillars for granted. Included in this definition, often forgotten, is the network of suppliers you use. No business can function without a supplier of some kind, even the most self-reliant and self-sufficient firm that seems to construct most of their output themselves. Even those businesses that craft raw materials for other production capabilities will need to rely on tools, security, IT infrastructure and more from a separate source, and this applies to your business also.

This means that it’s important to consider the value of your suppliers, and to understand just how to build that business relationship effectively. This can help you both isolate the best and worst suppliers you may have to use, and that can be important.

Consider the following advice:

Customized Services

The best suppliers offer customized services to help you realize your ambitions as a firm in the best manner possible. This is because over and above the normal applications your firm may have for their product line, applications such as metal stamping, plastic moulds and storage solutions can add or subtract from your final product depending on how you use certain implements. When you realize this, you can hold onto those suppliers that are familiar with your firm and are willing to work with you to the best solution.

Loyal Goodwill

There’s a sense of goodwill that develops when you continue to use the same services. Perhaps this may even run two-ways. If you are known as a client that pays their invoices within a matter of days, if you have clear and consistent communication and you’re also forthright about your needs surrounding a new project, then you are both an exciting and dependable client to work for. If you appreciate your suppliers in return and practice goodwill from time to time, they will return that, potentially even placing you at the top of their priority list.

Supporting Your Local Businesses

Supporting your local businesses can be a worthwhile stance to take in itself. Sure, blindly supporting the businesses around you without any consideration for how they treat their customers or clients is not the way forward, but at the same time, if you have the choice between two suppliers and one is local and smaller and can fulfill your orders just fine? It may be worth utilizing them, to bond with the strength of community, and to abide by ethical business practices that may just return back to you. You never know just how this web of complex mutual support can truly improve and raise a local economy, and help you craft more thorough business ties.

With this advice, we hope you’ll never take your suppliers for granted.

Executive Briefing Cost Reduction Opportunity: Inventory Optimization

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When You’re Tied Up In Supply Chains, You Need A Strategy

According to estimates by supply chain management organizations, the global supply chain market is worth more than $10 trillion a year. In short, it’s an enormous business, consuming some 6 percent of total world GDP, more than military spending and education combined. Getting our goods from one location to another is just really, really expensive.

As a company, managing your supply chain, organizing shipments and coordinating your efforts with other companies takes a lot of planning and effort. Here’s how to execute a great supply chain strategy without getting tied up in knots.

Get Better At Returns

Even in the most solid of supply chains, there’s a risk that either you or those further down the chain will receive goods they don’t want. This is an inevitable part of business and something which can never truly be eradicated. But it can become costly, especially if you don’t have the processes in place to reprocess or return items quickly.

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Photo courtesy of Wikimedia Commons

Returns management should be a major focus. You need to inform all staff on a standardized return process so that if a return is required, it can be dealt with as quickly as possible without imposing further admin costs. With a good returns policy in place, your company can stand to benefit too. If you notice the same items coming back to you, again and again, you can collect data and use that information to improve your processes. Collecting proper records of returns helps to reduce defects and deliver a better quality product to your clients.

Monitor The Performance Of Vendors

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Photo courtesy of David Pogrebeshsky via Wikimedia Commons

As a business, you also depend heavily on the performance of your vendors. If they continually make late shipments or fail to supply adequate products, it can have a knock-on effect on your business. Making sure that your vendors are regularly monitored is essential. Monitoring provides you with direct evidence of their performance and allows you to target specific issues of concern. Today’s modern vendor management software provides all this information on an easy-to-understand dashboard, allowing you to see their performance in real time.

Improve Your Distribution Network Through Standardisation

If you’ve ever watched a large commercial logistics operation at work, you’ll have noticed something: everything is standardized. The reason for this is that standardization makes things predictable and easy to manage. Having the same model of truck, or the same kind of docking bay at a warehouse helps keep maintenance costs low and predictable. If you need a particular kind of truck, you can find a dealer here. Utilising the same equipment across your entire fleet allows workers and drivers to use any machinery that happens to be available without having to be retrained.

Use Data At Every Stage Of The Process

Businesses are beginning to realize that data holds the key to greater efficiency and profits. With the right data collection methods, you’re able to collect information about precisely what’s in your inventory, what’s on its way to your warehouse or facility, and what needs to be shipped in the next hours, days or weeks. The gives you an unprecedented ability to control and manage your stock and provides you with clear guidelines about which jobs have to be done by when.

Reduce Waste, Shrinkage, And Fraud

Supply chains aren’t impervious to human error or malicious acts. They can be exploited by criminals within your organization, or become the victims of accidents. Some companies never fully investigate leakages like this, while others make a point of it. A leak in your supply chain could ultimately wind up costing you a lot of money. That’s why leading companies always make sure that the numbers reported in their software matches up to the figures after a physical count.

The best way to do this is to use scanning technology. Rather than have workers go out and manually count all the items in your inventory (with all the human error associated with that process), it’s much better to count items both in and out of your facility so that you can isolate problems in your supply chain. Running a tight ship will quickly tell you whether shrinkage problems are arising upstream or downstream from your facility. Once this happens, you can then pass on your data to the affected parties and help them resolve any security issues they may be having.

Automate Everything

Automation technology has come on leaps and bound in recent years. The annual demand for tactile robots is doubling, and by 2020, the market for robots will be nearly 10 times what it was in 2010. With so many robots coming onto the market, the cost of automating supply chain processes is going to fall dramatically: in fact, it is already.

Currently, the majority of robots are software-based. They do things like buy inventory automatically if levels start to fall, negating the need for human administrators. They’re also able to monitor inventory levels and issue warnings if levels fall too low and production is jeopardized.

In the future, robots will become an increasingly important part of the entire supply chain process. Driverless trucks will deliver payloads to robotic warehouse robots, which will then ferry components to their designated areas. The only job for humans will be to supervise the process, and fix the robots when they go wrong.

Get Your Team To Understand The Cost Of Managing A Supply Chain

A supply chain is an interdependent economic construct. Each element in the chain depends, indirectly, on the costs imposed by every other link. Although it is difficult to communicate across companies and coordinate, getting your own team to cooperate on matters of cost is a lot easier. Make sure that senior managers in your company are talking to each other and understand how costs they impose on their part of the supply chain impacts other departments. Knowing exactly where your business is spending money is a surefire way to improve the performance of parts of the business which are not so cost-sensitive. Having a central database of departmental costs across your entire company will make it easier for you to streamline your operations.

StrategyDriven Podcast Special Edition 50 – An Interview with Marshall Fisher, co-author of The New Science of Retailing

StrategyDriven Podcasts focus on the tools and techniques executives and managers can use to improve their organization’s alignment and accountability to ultimately achieve superior results. These podcasts elaborate on the best practice and warning flag articles on the StrategyDriven website.

Special Edition 50 – An Interview with Marshall Fisher, co-author of The New Science of Retailing examines the use of analytics to improve an organization’s supply chain performance in a way that ultimately enhances the bottom line. During our discussion, Marshall Fisher, co-author of The New Science of Retailing: How Analytics are Transforming the Supply Chain and Improving Performance, shares with us his insights and illustrative examples regarding:

  • actions business leaders can take to improve their forecasts
  • what a ‘Flexible Supply Chain’ is and the benefits it provides
  • capabilities an organization needs to possess and steps leaders must take to develop a ‘Flexible Supply Chain’
  • methods to determine the amount of supply chain flexibility needed
  • how leaders can align their supply chain operations with the organization’s goals
  • key factors executives should consider when making decisions regarding which technologies to pursue in order to enhance their supply chain operations

Additional Information

Marshall’s book, The New Science of Retailing, that he co-authored with Ananth Raman, the UPS Foundation Professor of Business Administration at the Harvard Business School, can be purchased by clicking here.

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About the Author

Marshall Fisher, co-author of The New Science of Retailing, is the UPS Professor of Operations and Information Management at the University of Pennsylvania’s Wharton School of Business and co-director of the Fishman-Davidson Center for Service and Operations Management. To read Marshall’s complete biography, click here.

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