Why Supplier Collaboration is the Key to Success
Companies around the world are shifting to global supply chains, which although allows companies to source materials and manufacture products more cost-effectively it comes with many challenges. It can make it more difficult to connect with the right people in the supply chain, resolve concerns, and respond quickly to changes and unexpected events otherwise known as supply chain disruption.
According to Zurich insider, 51.9% of organizations experienced supply chain disruption in 2019. And again, we are currently seeing significant supply chain disruption due to the Covid-19 pandemic with reports stating 75% of US companies are being affected. For businesses to achieve success within today's competitive markets, it's crucial for supply chains to be at their strongest. To help enforce this companies are turning to greater supplier collaboration. By working with their supply chain partners, whether they’re located in the building, across the country or around the world and entering into alliances, they will be better equipped in dealing with such challenges.
The importance of supplier collaboration
It is important for businesses to know where to collaborate to combine strengths. They should effectively communicate with common understanding and clear goals, plus their relationships need to be based on trust to successfully implement and execute supplier collaboration. Earning their trust by using honest communication, listening to their concerns and involving them in your processes ultimately makes them a vested partner in your supply chain.
Key benefits of supplier collaboration
Companies that understand how to motivate supplier collaboration and manage their relationships accordingly are far more accountable to each other and benefit more than those that don't. Those benefits of participating in supplier collaboration include improvement in business performance, customer satisfaction, market share, and more revenue, while at the same time enhancing positive relationships with supply chain partners. Supplier collaboration can also provide the competitive edge that enables all the trading partners in a supply chain to succeed and grow. In fact, according to a McKinsey survey of 100+ large companies across sectors, companies that regularly acted on collaboration had higher growth, lower operating costs, and greater profitability than other competitors in their sector.
The main benefits of supplier collaboration include:
- Improved communication
- Manage any supply chain risks
- Improved stability
- Better deals negotiated
- Best practice shared
- Competitive advantage
- Lower costs
Steps you can take to improve supplier collaboration
If companies are ready to tackle their supplier collaboration issue in their supply chains, there are some steps that they need to consider:
- Select the right supplier or customer – Many companies aim to collaborate with their largest suppliers or customers because they assume that the greatest value is to be found there. In many cases, however, this turns out not to be true. Supplier collaboration may be of more interest to a smaller partner, which might invest more time and effort in the business relationship.
- Regularly meet with your suppliers - By getting together with them on a regular basis you can highlight and tackle their concerns and worries as they occur. Make sure they are regularly updated even if it’s just a quick summary email. With suppliers it’s also important to regularly asses how you can improve your relationship from both sides and offer constructive feedback to the supplier as well as asking for it yourself.
- Get supply chain visibility - According to the Deloitte CPO survey, a staggering 65% of respondents said they have limited or no visibility beyond tier 1 suppliers, and only 6% indicated they have full supply chain transparency. In order to activate supplier collaboration, you must have a holistic view across all your suppliers, so you can properly segment and approach them.
- Think long-term supplier collaboration - It may take time and effort to overcome the initial hurdles and make a new collaboration work. Both parties in the supply chain need to recognize this and build an appropriately long-term perspective into their goals and expectations for the supplier collaboration. This means conducting a joint, long-term plan so both trading partners can gain an understanding of each other's long-term objectives.
- Open communication - Information must flow smoothly and quickly through the supply chain. You are trying to create, through near-transparent communication, a network of collaborators to act as an extension of your efforts to get the right product to the right customer in the right market at the exact time they want and need it.
Enable has created a supplier collaboration solution
According to a study from 3M, 70% of suppliers claim that half their customers do not have systems in place for supplier collaboration and they still rely on manual processes. For most companies, supplier collaboration means exchanging countless spreadsheets, emails and phone calls which are not only Inefficient and error-prone, but this supplier chain approach places a huge burden on manufacturers and trading partners alike, making it hard for them to realize the benefits of their trading agreements. However, we have seen that when suppliers and distributors conduct better supplier collaboration, they both have the same understanding of the deal, they reduce the risk of disputes, and they’re more likely to maintain a strong relationship. With Enable's supplier collaboration portal you can easily and securely share your deals with your trading partners, giving you the ability to work together to boost your rebate earnings. We need to stop thinking about trading agreements as contracts to be fulfilled and think of them instead as mutually beneficial relationships to be improved on.