Why do some manufacturers now prefer to buy from Dutch suppliers? It’s because sustainable competitive advantage is no longer just about the lowest possible purchase price, but about ‘lean co-operation’ throughout the supply chain. Outsourcing to the low-wage countries is becoming a thing of the past. Faster time-to-market and more flexibility to move with demand – that’s now the primary focus.
And that’s not something that can be rapidly copied from others to achieve quick wins. It’s an approach that requires investment in sustainable supply chain co-operation. Well, it sounds like a nice story, but how do you actually get successful supply chain integration off the ground?
(1) A clear vision. The commitment, usually from the chain director, that intensive co-operation with suppliers will be based on trust, responsibility and value.
(2) Commitment from senior management. A no-brainer, but too many MTs allow supply chain integration to be pushed toward the back burner. It requires adjustments to the way you work with your suppliers, and demands that your own operation needs to be properly organized. Take your foot off the gas, and you’ll be hauled in from all directions by your competitors.
(3) Urgency for change. Internationally exporting machine manufacturers are often the front runners when it comes to supply chain integration. They feel the continual price pressure from the low wage countries, and commit to creating their differentiation through higher quality and shorter lead times.
(4) (Dare to) share transparent information. The responsibility at a larger supplier begins with the sharing of information. Sharing a weekly materials usage forecast allows suppliers to manage their own production capacity more effectively. And incorrect deliveries can also be minimalized.
(5) ‘Distribution of benefit’. The benefits need to be felt by all supply chain partners, not just by the chain director (manufacturer). That means they’re responsible for sharing information and providing a transparent overview of supplier performance. That then allows for higher delivery reliability throughout the chain as a whole to be rewarded with the faster payment of invoices.
(6) Start simple. Choose a couple of big suppliers and the rest will follow. Which 20% of your suppliers generate 80% of the purchasing volume? Share material requirements throughout, make them responsible for JIT delivery through VMI and reduce your buffer inventory. Last-minute surprises through unclear order communications cost pots of money on both sides.
(7) Rise of the cloud. Producers are more and more often using supply chain software ‘as a service’ in the cloud. They can then easily invite suppliers to work with them in an online environment where communication over purchase and sales processes can happen easily, and valuable data can be efficiently exchanged that currently sits hidden in e-mail inboxes, excel sheets and closed ERP systems. Chain partners look at a real-time overview of the process together, enabling them to react to events quicker and shorten lead times.
Discuss these 7 pillars in your organization. Understand that sustainable supply chain co-operation is no longer a choice. Sooner or later, you’re going to need to get involved.