The Importance of Strengthening Your Supplier Relationships

The complexity and intertwined structure of today's supply chains makes them more vulnerable to disruptions, ranging from trivial occurrences like shipping or weather delays to more major disruptions like pandemics, cyberattacks, or natural disasters.

Supply chain resilience has become a priority for businesses as a result of such interruptions. Supply chains must be able to withstand disruptions without collapsing, built using processes and modern supply chain technologies that allow companies to forecast, anticipate, and respond rapidly to multiple risks, disruptions or future opportunities.

A truly resilient supply chain means more than simply surviving operational disruption, it uses ingenuity and creativity in dealing with challenges and then uses these issues to innovate and strengthen business operations.

Organisations with advanced procurement functions understand that in terms of value, focusing on time or services provided can be extremely limiting and instead, know that when buyers and suppliers are willing and able to cooperate, they often find ways to unlock significant new sources of value, beneficial to both.

Business partners that are better able to harmonize quality production and ethical working standards across their supply chains after spending enough time collaborating and understanding each other, reap the rewards – often discovering that by having better working relationships with your colleagues and buyers, you can optimize production, save time, money, and effort.

Russia’s war on Ukraine is hurting the global supply chain

It's difficult to quantify the extent to which Russia's war in Ukraine has interrupted the global supply of parts and raw materials required to manufacture a wide range of products, from automobiles to computer chips.

Russia contributes less than 2% of world GDP, whereas Ukraine contributes only 0.14%. As a result, except in a few key sectors, they have a minimal direct impact on global supply chains.

Let's look at the most obvious one: Energy. Nearly 40% of Europe's natural gas comes from Russia, while 65% of Germany's comes from Russia. It is the world's third-largest oil exporter, accounting for 7% of all crude oil and petroleum products imported into the US.

The price of petroleum reached $130 per barrel for the first time in 13 years after the Biden administration announced it would cease importing Russian oil, and consumers in some parts of the United States have seen average gasoline prices soar past $5 per gallon.

Friedman (Political Analyst) now admits that the world is on the verge of a new form of supply chain, with Russia and its allies on one side and the West on the other. Businesses will no longer be able to distinguish between business and geopolitics.

Mondelēz International (MDLZ) faced a similar two-pronged challenge: Boost growth and keep your lead while bringing operations up to speed.

Despite a region-based structure, fragmented controls, and uneven processes across finance, procurement, and the supply chain, the leadership team was committed to acting on strategic priorities with speed and agility.

It needed to modernize its back-office services, including finance, and roll out worldwide processes to nurture new businesses, fulfil customer expectations, and make the correct targeted investments.

Genpact, a global leader in digital transformation services started with rigorous analysis to help MDLZ identify what to centralize and what to decentralize within the three-year time frame. Genpact provided service-level agreements (SLAs) and metrics to the processes that were to be standardized, based on process taxonomies.

As a result, MDLZ combined almost 40 migration activities from over 75 nations into six centres in less than a year, with the purpose of transitioning roughly 70 processes.

Key Benefits of Supply Chain Collaboration

1. Supply Chain Resilience

A supply chain that can respond to changes in demand and to more effectively anticipate and respond to problems is better able to reduce or prevent disruption effects.

2. Reduced Costs Over Long-Term

By maintaining a supplier in your supply chain for the long haul, organisations gain collaborative experience and streamline communication while avoiding the time and costs of learning a new supplier's operation, standards, and habits repeatedly.

3. Stronger Relationships and Better Talent Retention

Today's businesses recognise the importance of customer retention as well as the fierce rivalry for brand loyalty. The same goes for talent. Long-term collaboration with the greatest players must be maintained.

4. Improved Ability To Drive Business Growth

Supply chain teams can better understand requirements and objectives by collaborating with internal departments such as sales, marketing, and finance to collaborate and accelerate the creation of new products.

5. Improved Quality and Safety Standards

Providing safe, high-quality products is key to customer satisfaction and therefore something all brands and retailers strive for. Working with a supply chain partner gives you more perspective on the raw materials, regulatory requirements new to chemistry, or more.

Challenges In Implementing Supply Chain Collaboration

As more businesses see the value of collaboration, a new culture is emerging. Therefore the term "collaboration" has grown so popular in the supply chain sector. True collaboration, on the other hand, is a difficult situation to achieve. Mistrust must be broken down and opposing objectives must be changed into aligned objectives in some way.

The issue is that, in many circumstances, the buyer-seller interaction is adversarial, or at the very least conducted at arm's length, rather than collaborative. Each partner has its own transaction, process, and uncertainty costs, which frequently result in higher-than-necessary inventory levels, inconsistent product codes, and incompatible administrative arrangements.

Successful partnerships focus on the shared opportunities and strengths of the partners that come from consistently delivering ecosystem-specific values. This can include a high level of customer service, product quality, and prompt delivery and processing of returned goods.

Supply Chain Collaboration – The Right Way

1. Focus On Your Strengths

Collaboration is frequently used by businesses to cover holes in their own skills. In practice, the most effective cooperation capitalises on strengths rather than compensating for flaws. Understand your category like never before to maximize the value of its supplier investments while delivering consistent, high-quality products

2. Share Benefits with Your Partners

Some partnerships promise a win-win situation for both parties. If a manufacturer and a store collaborate to improve product mix, for example, both can expect to benefit from the increased sales. In other circumstances, though, the collaboration may provide equal overall value, but the benefit may accrue to one partner at the expense of the other.

3. Choose Partners Based on Strategic Goals and Value Offerings

For a successful collaboration, a method that evaluates current consumers or suppliers across three important dimensions is preferable.

Ask Yourself:

1. Is there enough future value in working with this partner to justify the time and effort?

2. Do both parties have enough strategic interests in common to warrant collaboration?

3. Does the collaborative partner have the necessary infrastructure and processes in place?

Conclusion

With the complexity brought on by rapidly expanding supply chain networks, expanding global markets for finished products, and facilities all over the world supporting those growing markets, it has become critical for supply chains that all parties involved are fully committed to opportunities presented by frictionless supply chain collaboration.

Some of these opportunities are simple to implement, such as more proactive management of cross-functional teams working on cooperation projects or the implementation of formal governance structures to manage those initiatives.

A more active and engaged working relationship with suppliers is required to excel in supplier collaboration. It also encourages both buyers and suppliers to commit to the long-term pursuit of value from their collaborative relationships