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Supply Chain Issues: When Suppliers do not Perform like Partners

March 3, 2021 | 4 minute read

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when suppliers to not act as partners
Jennifer Seguin
Written By
Jennifer Seguin

Most operational supply chain issues fall into a few clear categories that, when approached in an orderly way, do not require drastic measures to solve. Our Supply Chain Issues series explores each of these categories and provides hands-on solutions for key decision-makers. To read the entire series please click here.

 

Key Points:

 

Managing an intricate supply chain network requires collaboration with several key external players to achieve a holistic execution strategy. These partnerships can often begin through industry referrals of an individual’s professional reputation as a leader in their field. If suppliers are sought out to strategically improve supply chain performance, so should the supply chain manager contribute to this collaborative effort for both parties to achieve consistent results.

Assess the quality and performance of each relationship to identify whether you are collaborating with a winning partner, or if you are merely sustaining a contact. Moving forward, the following will help you frame a new perspective in cultivating successful relationships.

 

Distinguish a supplier from a partner

There are several factors at play when two parties first engage in building a business relationship. From the outset, the initial steps towards successful growth are established by defining what value each party provides the other. From there, a clear course of action is determined for both parties to reach a shared objective through a service level agreement (SLA). This is the inherent difference between signing with a supplier versus on-boarding a key partner who understands your business needs, goals, and timeframe to achieve results.

Consider your role from the supplier’s perspective.

  • Quantify and qualify what value you provide. To what extent do you serve as a valuable partner who offers high ROI?
  • How many other partners are they currently working with to support their bottom line?
  • In this, where does your business rank in terms of importance? Do they promptly answer your phone call – are you served first or last?
  • Do they connect you with a broader network of professionals who deliver solutions?
  • Within this network of professionals, are they equally recognized as experts in their field?

 

Identify who are your key partners and the reason you initially sought each of their services or expertise.

  • What role do they play?   
  • Do their actions help achieve your goals?
  • Do you have clear communication together?
  • Do they negotiate on your behalf to serve the best interests of your company?
  • Do their actions contribute to a satisfied end customer?

 

Notably, a supplier fulfills your tasks whereas a partner creates solutions. Discern whether you are aligned with a partner who drives your business forward in all scenarios.

 

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How poor performance impacts your business

If a partner does not perform according to a service level agreement, there are three core aspects of the supply chain that are susceptible to setbacks.

 

Time

Delivering a product to a customer within a stated timeframe is not a small feat. Fulfilling on-time performance requires negotiation of many people’s priorities and resources, and within this chain of command, it is challenging to maintain control of so many external factors.

If a supplier acts according to their own self-interest, an individual may design setbacks in the supply chain to create additional costs to charge back to you – their customer. If one’s value to a supplier is perceived only as a line item on an invoice, then there is not a collaborative effort that honors the reason why your partnership was established in the first place.

 

Service Quality

The function of a supply chain’s operations is to ensure that a product maintains its true form as it is carried over several means of transport and people, to finally arrive at its end destination fully intact and in complete functioning order.

Within reason, some factors are outside of a person’s control and one must allow for a certain margin of error. However, if standard safety protocols are not followed, there is a risk to the quality of the product, such as damages during shipment, where these oversights can cause substantial dissatisfaction with the customer.

When a supplier does not treat a product as their own, these recurring oversights can compound over time and result in them relying on shortcuts or placing blame on external factors. The extent of this mismanagement can lead to a termination of services by the customer. In this event, the time it takes to regain trust with your end-customer can result in significant revenue loss over time.

 

Cost

Partners such as freight forwarders and carriers operate within a highly volatile matrix based on changing market demands. Discover ways to incentivize partners to prioritize high ROI shipments to ensure the best return on your annual activities. Mitigate occurrences of billing discrepancies and unseen tariffs by auditing invoices and ask clarifying questions to your partner to demonstrate your position as a highly detail-oriented manager.

 

  The cost of doing business is not solely determined by landed costs, but rather a series of events that lead to strong operating revenue. Foster allyship with a solutions-oriented partner who considers the holistic ecosystem – all moving parts and players within the supply chain – and who sources for activities that result in the best overall value.

 

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Create a path towards compelling partnership performance

Build productive relationships based on strong communication and trust. These constructive partnerships create collaborative solutions and align objectives to achieve a shared result.

  • Understand the requirements of the customer.
  • Assess the performance of each step in your supply chain relating to sourcing, warehousing, transportation, distribution, and fulfillment.
  • Categorize your supplier network based on who serves as a strategic partner or simply as a supplier.
  • Document SLAs for all partners. Decide if there are terms which require renegotiation.
  • Determine what success metrics are required for both parties to achieve the goal. If the goal is not obtained, define what regressive factors remain consistent in the partnership.

 

Equal contributions create a sustainable partnership

Managing a successful relationship with your partner requires hard work, where the bond is often strengthened by overcoming adversity together. This involves an investment of time and resources from both parties. It is important to demonstrate willingness, ability, and perseverance to course correct and create solutions. In this, successful partnerships are founded in a ‘we’ mentality rather than ‘us versus them’.

A relationship advances to the next level by deploying next generation technologies. When the entire partner network gains complete visibility through a digital supply chain platform, they can achieve progressive collaboration and superior performance.

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