How supplier management optimizes your supply chain.
One of the nuances of supplier relationship management (SRM) involves implementing a 360-degree view of the overall SRM process. As supply chain managers, we sometimes think that our inherent leverage is that we are SUPPLY CHAIN MANAGERS, for crying out loud – so why isn’t my supplier doing what I want?
But if we can take a step back and look at the relationship from the supplier’s point of view, well, you’ll see that your supplier is practicing customer relationship management (CRM) as a counterpoint to your SRM.
I.e. your supplier is trying to get you to do what your supplier wants!
So… what can you do about that? You’re a SUPPLY CHAIN MANAGER, for crying out loud. Make your supplier do what you want!
Okay, first question. Does your supplier actually know what you want?
Yes, you send the purchase orders. And, maybe, you give them forecasts that sometime mirror those purchase orders you end up sending them. But is your supplier aligned with you strategically?
Granted, there are some suppliers that you don’t think of as strategic partners - like your office supplies supplier, janitorial services supplier and landscapers. But it benefits both you and even these suppliers to give them a long view of your needs. If you can give your landscaper a view of your hedge-trimming needs over the next six months, they can plan their manpower and other equipment/resources.
A strategic relationship with even your indirect and services suppliers allows them the opportunity to optimize their performance - and perhaps lower their costs.
And even more perhaps - pass those savings on to you.
And if your relationship with your indirect and services suppliers can benefit from a strategic collaboration, just imagine what you can accomplish with a strategic alliance with your direct and more mission critical suppliers.
So, yes, you want your suppliers to do what you want and so you want to create strategic communication with your suppliers.
How do you do that?
One of the critical aspects to creating a strategic alliance is to align yours and your supplier’s understanding of lead times. How many lead times do you have? How long does it take you to receive, inspect and put away your supplier's deliveries to you? How long does it take you to convert those receipts into a sell-able item (do you repackage it, is it a component in something you manufacture, etc.)?
You probably know those lead times off the top of your head. But those aren't your only lead times.
There's the delivery lead time from your supplier to you. You actually some influence over this lead time. There's the standard delivery time - and then the compressed lead time if you expedite, express, courier or same day the delivery. Who pays for those expedites is subject to negotiation between you and your supplier.
But the further you look up your supply chain, the more lead times you'll find. How long does it take your supplier to make your product? How long does it take them to procure the raw materials in order to make your product? Are they expediting or expressing deliveries from their raw material suppliers?
Understanding your suppliers lead times is one of the most important factors in creating a strategic relationship with them.
You can't expect your suppliers to react to your needs if you haven't communicated those needs within their lead times.
If your suppliers aren't doing what you want them to, maybe you need to your understand them better.
Having an optimized supply chain means that you're delivering what your suppliers want, when they want it - and spending as little money as possible getting that done. If you don't have a working, transparent relationship with your suppliers, you probably don't have an optimized supply chain.