5 Best Practices for Successful Supply Chain Partnerships
Brian Hoey - October 22, 2019
Whether you're creating a more synergistic relationship with a supplier of raw materials as an auto manufacturer or developing special relationships with retailers to improve the performance of your packaged consumer goods, collaborative supply chain partnerships often feel like the holy grails of the modern value stream. This is with good reason: a strong partnership in which information, risk, and benefits are shared equitably can add real value on both sides of the relationship in the form of reduced costs, smarter forecasting, or any number of other benefits. It's easy to see why people are willing to devote time and mental energy to it.
At the same time, strong supply chain partnerships don’t grow on trees. In fact, some estimates suggest that anywhere between 50 and 80% of all supply chain partnerships ultimately fail. Why is the failure rate so high? Maybe because businesses often fail to grasp the challenges that come with trying to build inter-organizational synergy.
This all begs the question: what can you do to ensure that your supply chain partnerships prove profitable and efficient for all involved?
1. Address Your Own IT Issues First
One of the reasons that partnerships fail is that communication based on shared information is often hard to accomplish. Think about how easy it is for information and decision making silos to arise even within fairly healthy organizations—and then picture how much more easily they can crop up when there are multiple businesses (with different people, IT infrastructures, communication styles, goals, etc.) involved. This is why it’s crucial to go into any new collaborative endeavor having done everything in your power to address silos and other IT infrastructure gaps within your own operations first. Think about it: for your partnership to be a success, you’ll have to freely and easily exchange data with people outside your organization—which means that you first have to consistently collect data and store it in an accessible way. This is an area where a Postmodern ERP mindset can be particularly value-additive, because it gives you the flexibility create data-transparency across a diverse, integrated IT ecosystem.
2. Choose Complementary Partners
Maybe this one goes without saying, but the success or failure of a given partnership is largely dependent on your choice of partner. Oftentimes, manufacturers will try to partner with the largest or best established of their suppliers or retailers to collaborate with—on the assumption that that’s where the biggest upside must be; in point of fact, however, the largest possible partners are also the most likely to be engaged in other, similar relationships, meaning they’re less likely to devote a lot of time and resources to your business in particular. This isn’t to say that you should never partner with a larger company than your own. Rather, we mean to suggest that the ideal partner is one whose goals and strengths are most compatible with your own. If you’re hoping to diversify your product portfolio to reflect changing consumer demands and one of your retailers is trying to collaborate on more in-house products, you might be a good fit for one another—provided you have the advanced analytics capabilities to analyze the data they send your way. Conversely, if you’re working to build more customization into your product lifecycles and your logistics partner is hoping to bundle orders more efficiently, the basis of your collaboration might be shakier. Obviously, trust is critical here—your current working relationship with a given company will tell you a lot about how they’d be as supply chain partners.
3. Recognize Likely Challenges
This best practice has been somewhat of an undercurrent throughout this post so far, but let’s make it a little more explicit: supply chain partnerships are rarely easy, and the businesses that recognize this fact are the ones that are most likely to succeed. No matter how robust your reporting software is, for instance, there will still inevitably be disconnect about KPIs and benchmarks, and it’s your willingness and ability to work through that disconnect that will determine success or failure. Keeping everyone on the same page, maintaining stakeholder buy-in across both organizations, developing and pursuing shared goals, and devoting adequate resources: these are all potential challenges that partners will commonly face. If you’re aware of these hurdles ahead of time, you can take internal and inter-operational steps to mitigate them.
4. Share Dedicated Infrastructure
Speaking of mitigating those hurdles: one of the best ways to create the transparency and visibility that help partnerships thrive is to adopt some sort of shared technology. Again, if you have a Postmodern ERP mindset, you should be able to connect this shared infrastructure to the rest of your software environment fairly easily. If, for instance, you’re working with a supplier to leverage backhauls and reduce LTLs (less-than-full truckloads) within your logistics network (to improve efficiency and reduce costs for both partners), a shared transport routing solution would help planners and stakeholders on both sides to gain a shared understanding of how the relevant value streams operate. In this way, they can make joint decisions on equal footing towards a clearly-defined goal (lower fuel costs, for instance, which would be conveniently tracked within your shared software). From there, shared transport routing data would be fed back into your central supply chain control tower so that new plans could be integrated more effectively with whatever tactics are being applied elsewhere in the supply chain.
5. Empower The Right People
So far, we’ve given a lot of advice at the level of operations and IT, but at the end of the day a successful supply chain partnership is all about people. To make a partnership a success, you need to find the right individuals within your organization to create a strong vision and make it a reality—if the partnership comes as a top-down initiative from the C-suite, there’s no guarantee that there will be enough enthusiasm on the ground to sustain it. Once you have the right people in place, you need to make sure they have the tools to succeed. These needs will change and evolve over the course of the partnership, but the best way to figure out what they are is usually just to the ask the people themselves. They might need particular software, they might need more person-power for a particular project, or they might simply need executive buy-in to make big, value-additive decisions. Support these people, and they'll support you just as strongly.
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