APICS is the premier professional association for supply chain management.

Playing Nice with Suppliers

by APICS CEO Abe Eshkenazi, CSCP, CPA, CAE |   2014 | 0 | 0

Are suppliers treated as partners in meeting the goal of delivering products and services to customers at the right time and the right price? Or are they just another resource to be squeezed?

Perhaps it’s time to reevaluate your working relationships, because if your company is alienating its supply base, you might be missing out on profits. In a Forbes post, author Joann Muller looks at research firm Planning Perspectives’ latest supplier relations study, released in May of this year. It concludes that US automakers lost out on about $1.4 billion in 2013 due to poor supplier relationships, which includes price-pinching and a general lack of trust.

Muller cites Planning Perspectives CEO John Henke, who says that contrary to popular belief, cutting supplier prices to razor-thin margins don’t actually boost profits. Rather, the data shows that while only about 5 percent of income can be traced to paying less for components, 51 percent of profits are based on automakers’ supplier relationships. The enhancements come in the form of technology and customer support, as well as other “soft” benefits that increase efficiency and lower operating costs.

Beyond prices, Henke points to other ways that cooperative suppliers can support businesses. For example, a supplier might put its best team on a partner’s account, exceed contractual obligations in work efforts, and provide the latest technologies to the partner instead of taking them to better customers.

The end result is businesses that see suppliers as partners instead of antagonists succeed. And those that don’t—such as Chrysler Group, as Muller writes—risk alienation and revenue loss. Which automakers have the strongest supplier relationships and best embody the principles of collaboration? Toyota and Honda, which topped the latest Planning Perspectives list—and have done so consistently.

Working together to excel

It’s clear that collaboration is key to a streamlined supply chain; however, the temptation to cut costs at every link can be difficult to overcome. At APICS 2014, this October 19–21 in New Orleans, several presenters will tackle the topic of building stronger relationships in many different facets of the business. Nick Little, assistant director of executive development programs at Michigan State University, and Liz Alexander, PhD, principal at consultancy Leading Thought, will explore the topic of supply chain relationships in their session, “Achieving Collaboration Through Thought Leadership.” They will address why the skills for achieving true collaboration may be inadequately taught to aspiring supply chain and operations managers, as well as reveal some techniques on how to boost your own professional development in this arena.

In addition, Tim Greiner, managing director of sustainability consulting firm Pure Strategies, will lead a panel discussion on engaging suppliers to achieve better resilience and a longer-lasting enterprise. Topics will include working with suppliers to reduce supply chain risk, evaluate environmental impact, and keep overall costs down.

Does your company collaborate or compete with its suppliers? If you’re looking to improve your company’s profitability, consider attending APICS 2014. Registration is still open for this year’s premier supply chain education and networking event. Visit apicsconference.org for more information.

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