Disruption in the supply chain is all around us – always has been, and always will be.
Agility is the ability to respond to disruption quickly and effectively. It’s a source of competitive advantage.
But an ounce of prevention is worth a pound of cure.
What are you doing to limit disruption?
Problems are a certainty when managing a supply chain. They represent the Four Horsemen of the Supply Chain Apocalypse whose single aim is to make a mess of your best efforts. They represent ‘uncontrollable’ or ‘unpredictable’ problems. At best, you can work on minimising these to improve your supply chain’s resilience. That leaves the ‘controllable’ or ‘predictable’ problems. You can work on removing these potential sources of disruption. Do you have the bandwidth to deal with both?
A common source of fixable supply chain problems lies in Supplier Relationships. You enter a supplier relationship because it’s mutually beneficial to do so. From that point, collaboration and efficiency are key to its success. But it requires work. Problems arise in any relationship. Unless one party acts in a way to sever the relationship, problems are fixable.
Through strategic collaboration with your suppliers, you can transform your supply chain. You can both mitigate the source and impact of avoidable external problems. It’s critical to seize the opportunity today. Tackling sources of avoidable problems today means we’re in the best position to deal with the inevitable, unavoidable problems of tomorrow. Tomorrow’s return of the Four Horsemen of the Supply Chain Apocalypse is certain.
Here are 5 typical problems and collaborative strategies can serve as the solution to those problems. You can start fixing these known problems today, so they don’t compound the unknown problems of tomorrow.
If you’re not communicating, you don’t have a relationship. Poor communication channels, misunderstandings, and delays can wreak havoc on your supply chain. Lack of transparency leads to missed opportunities and increased costs.
Solution: Transparency and Communication
Set up clear lines of communication with your suppliers. Share regular insights, forecasts, and updates. Transparent communication builds trust. It enables proactive problem-solving, ensuring smoother operations for everyone involved. And when you do set up clear lines of communication with your suppliers, remember to listen more than you speak. As Peter Drucker said, “The most important thing in communication is to hear what isn’t being said.”
An everyday example: The outcome of a Root Cause Analysis session into deepening customer service problems found delays in deliveries were derailing production schedules. It was a familiar tale of miscommunication with suppliers, leading to frustration and increased costs. Recognising the urgency of the situation, the Supply Chain Manager took the following steps.
This commitment to transparent communication not only resolved the immediate challenges but also strengthened relationships, paving the way for smoother operations and happier customers in the future.
Poor forecasts drive poor production planning and poor inventory outcomes. Either you have excess raw material inventory or are out-of-stock. In turn, the outcomes are increased carrying costs or missed sales opportunities. The effect on suppliers is greater as the impact amplifies the further upstream you go. They suffer the same problem in trying to serve you. Their plans don’t align with the actual demand. While the supplier struggles to react, limited collaboration with suppliers exacerbates the issue.
Solution: Joint Planning and Forecasting
Collaborate with suppliers on joint planning and forecasting initiatives. Share demand forecasts and market insights. Align production schedules with actual demand, optimise inventory levels, and reduce lead times. Forecasting may still be an issue, but you are reducing the risks associated with the poor planning it drives.
An everyday example: … A food manufacturer produced a range of frozen pizzas. They suffered from inaccurate forecasting that drove poor production planning. The result was inventory management problems for their pizza toppings. One day they overestimated demand, causing inventory to expire. The next day they underestimated demand, leading to out-of-stocks and missed orders. These inefficiencies resulted in increased food waste, carrying costs, and lost sales opportunities.
To address the problem, the food manufacturer implemented a joint planning and forecasting initiative with their key suppliers of pizza toppings.
They shared:
The food manufacturer shared information on:
They co-created production schedules that aligned with the anticipated demand for each topping. These plans accounted for lead times, capacities, and storage constraints.
They then implemented a system to manage the details. With regular communication, they monitored inventory levels, tracked sales, and adjusted production plans.
Through joint planning and forecasting with their suppliers, the food manufacturer synchronized their production schedule with actual demand, thus reducing the risk of excess raw inventory or stockouts. This collaborative approach enabled them to optimize inventory management, minimise food waste, and enhance supply chain efficiency while ensuring timely delivery to meet customer demand.
Unreliable suppliers can disrupt your supply chain. This drives delays, quality issues, and customer dissatisfaction. Without clear performance metrics, it’s challenging to hold suppliers accountable for their actions.
Solution: Performance Metrics and Incentives
Define and mutually agree on a set of clear performance metrics and KPIs to measure supplier performance. Recognize and reward suppliers that meet or exceed performance targets. Foster a culture of accountability and continuous improvement.
An everyday example: … An electronics manufacturer relied on suppliers for key components. However, several of the suppliers regularly made late deliveries, resulting in production delays and missed deadlines. Additionally, component quality was inconsistent. This led to product defects and customer complaints. Despite repeated discussions with these suppliers, the issues persisted. The manufacturer struggled to hold them accountable for their poor performance. Without clear performance metrics, the manufacturer could not address the situation. They couldn’t ensure the reliability of their supply chain.
To address the poor supplier performance, the manufacturer implemented performance metrics and incentives. They defined clear Key Performance Indicators (KPIs) to measure supplier performance. The KPI’s included on-time delivery, product quality, and responsiveness to issues. By establishing agreed, quantifiable targets, the manufacturer was able to hold the suppliers accountable.
The manufacturer also introduced an incentive. Suppliers that met or exceeded KPI targets received priority in future contracts. This drove a culture of accountability and continuous improvement.
The implementation of KPI’s and incentives enabled the manufacturer to monitor supplier performance. It identified areas for improvement, and incentivised positive behaviour. This proactive approach not only helped mitigate the risk of disruptions and quality issues but also strengthened supplier relationships and enhanced supply chain efficiency.
Manual processes and outdated systems slow down operations, increasing the risk of errors. Without real-time visibility into orders and inventory levels, it’s challenging to respond to changes in demand or supply.
Solution: Collaborative Technology Platforms
Implement collaborative technology platforms or supplier portals to streamline communication and transactional processes. These digital tools enable real-time visibility into orders, shipments, and inventory levels. This improves efficiency and agility in supplier interactions.
Suggestions? There are tailor-made SAAS options from the big-end of ERP-town, and at the other end of town, Google Workspace, MS Teams, Trello, Asana are free! But talk to your IT department first.
An everyday example: … A manufacturer of grease products relied on plastic packaging. It faced procurement challenges due to manual processes and outdated systems. The company managed procurement through paper-based purchase orders. This resulted in delays, inventory stockouts, and overstocking.
To address these challenges, the manufacturer implemented a free simple option of collaborative technology streamlining communication and transactional processes with plastic packaging suppliers. This improved supply chain efficiency and agility.
By leveraging collaborative technology platform, the manufacturer automated the procurement process for plastic packaging materials. This reduced manual processing, errors, and accelerated order fulfillment.
They gained real-time visibility into packaging inventory levels and order statuses. This enabled proactive inventory management, preventing stockouts or overstocking, and optimised production schedules.
Collaborative technology facilitated close to seamless communication and collaboration between the manufacturer and packaging suppliers. This enabled informed decisions and prompt responses to changes in demand or disruptions.
The quick implementation of a free collaborative technology platform streamlined their operations, enhanced agility, and improved efficiency, accuracy, and responsiveness in procurement processes. This in turn drove cost savings and operational excellence in their supply chain.
Based on the benefits, the focus is on a more robust SAAS option.
Pressure and regulation are growing to minimise our environmental footprint along the supply chain. To ignore this reality is to cause reputational damage and regulatory non-compliance. Both will push you into rectifying the problem at a cost and to a timeline that you won’t like.
Solution: Collaborative Sustainability Initiatives
Work with suppliers to reduce the impact of your relationship on the environment. As part of your regular collaborative meetings, include discussion to identify areas for improvement. If you haven’t done this before, there will be plenty of low-hanging fruit. Options include waste reduction, energy conservation, switching to sustainable packaging or reducing the use of packaging. Shared goals lend themselves to shared metrics to track your progress. Not only does this reduce the environmental impact of your relationship, it also creates value through cost savings and enhanced brand reputation. Remember, people are watching you both.
An everyday example: … A fashion retailer found itself under mounting pressure to display their environmental and social credentials to its customers. It undertook a collaborative journey with its textile suppliers to make a demonstrable change.
Along with its suppliers, the retailer began by reducing waste and ensuring that their suppliers upheld fair trade practices with their labour.
A collaborative output was a new line of clothing based on organics and recycled materials. The environmental benefit of this new line made it a marketer’s dream to promote, strengthening the brand reputation and creating a stronger supplier relationship.
Through simple collaborative strategies, you can overcome these common challenges. Stronger supplier relationships reduce the potential for problems. This creates a more resilient and agile supply chain – for both you and your suppliers.
Today’s the day to tackle the controllable problems you have with your suppliers. One day soon the Four Horsemen of the Supply Chain Apocalypse will ride back into town to make their regular delivery of chaos – in full and on time. And when they do, you’ll be grateful you have one less problem to deal with.
Struggling to get everyone’s engagement in your S&OP process? Use this as an example of…
Is ExxonMobil on the verge of becoming the next Kodak, clinging to outdated models while…
Is your supply chain hiding a dark secret? Modern slavery impacts millions globally. This article…
A story of two gardeners, Thomas and Stanley, who illustrate the differences between tactical and…
By actively engaging with Scope 3 reporting, a supply chain department can increase brand reputation…
Discover five powerful strategies for thriving in the FMCG market. Learn how to optimise your…