Innovations in Supplier Collaboration
A typical enterprise has more than 50% of its operational costs locked up in its supply chain. There are numerous business risks with dependencies on factors beyond entirely their control, including price conflicts, currency fluctuations, labour disputes, and many other issues.
Henry Ford once said, “If everyone is moving forward together, then success takes care of itself.” Instead of a cost centre that must be efficiently managed, organizations should look to strategically collaborate with suppliers and take a more holistic management approach to be successful. Enterprises have increasingly started to recognize that they have unexplored opportunities for short-term and long-term benefits via better collaboration with their suppliers. This article explores the key challenges, but importantly details the whitespaces which when filled, could significantly accelerate the pace to seeing continual reduction in cost coupled with better quality delivery to stakeholders.
Supplier collaboration has become increasingly complex and enterprises face a lot of challenges while managing hundreds or thousands of mission-critical suppliers.
Pain Points in Supplier Collaboration
The more common pain points in supplier collaboration are poor data management, the slow turnaround time to dispute resolution, lack of compliance with supplier contract terms, late delivery, late payments, etc. These could be classified under two broad categories – inefficient processes and cost savings.
Supplier information and relationship management methodologies are manual in several enterprises. Many interactions are often repeated, resulting in wasting company time and resources. When enterprises receive too many routine inquiries and become overloaded, responding to suppliers becomes a time-consuming task and response times could get very slow. On the other hand, some processes which need to be followed could get missed out due to a high workload for the procurement team, thereby putting the enterprise to risks that may not even be fully known. These challenges, in turn, have a significant negative impact on supplier relationships.
Several supplier processes are typically manually executed. Lack of full visibility into processes means that enterprises are not able to predict risks such as say better contract negotiations as a result of analyzing patterns such as percentage of defects/delays/returns etc. This is results in poor negotiation and lost savings.
According to an Oxford Economics survey, 65% of procurement practitioners say procurement at their company is gradually becoming more collaborative with suppliers. This is because the pace of the business has increased exponentially, and businesses must be able to respond to new market demands with innovation and agility. Therefore, buyers are now reliant on suppliers more than ever before. Suppliers are no longer just the providers of materials and goods, instead they act as strategic partners that can help organizations create products that prove to be competitive differentiators.