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Author's profile photo Former Member

Keep Your Suppliers Close – And Their Suppliers Closer

Managing supply risk is getting more complicated by the day. It used to be that you only had to monitor your own suppliers. But as supply chains have become longer and more global, you now need to keep tabs on their suppliers as well. Need proof?

Just scan the headlines of late. Chinese authorities recently accused the China subsidiary of U.S.-based meat supplier OSI Group of intentionally selling meat beyond its shelf life to restaurant companies. This caused key customers to flee and more to review their partnerships and potentially follow suit. 

In early August, an explosion at a metal products factory in China killed 75 workers and injured at least 185 others. The supplier was a supplier to another supplier who provided wheels to a major automotive manufacturer. Although the company was several steps removed, its brand was associated with, and therefore not immune to damage from the event.

The road is littered with the remnants of companies that have failed because they didn’t anticipate and take steps to mitigate the risks inherent in today’s multi-tier supply chains. But anticipating risk is only half the battle. To effectively manage complex supply networks requires three things:

  1. The ability to predict the future with accuracy – leveraging input from real-time market dynamics and historical
    market trends from a network of partners and peers.
  2. The competency to assess a myriad of potential actions and identify those with the highest propensity for success – based on analyzing the actions and results of other enterprises or individuals that were exposed to similar conditions in the past.
  3. The flexibility to quickly act to capitalize on these predictions – by rapidly adapting businesses processes to
    execute the optimal action in advance of market changes or the competition.

Traditional technologies can’t enable this. But a new breed of solutions can. Such solutions combine the strengths of several trends:

  • The convenience and agility of the Cloud
  • The connectivity and insight of social and business networks
    – Just as consumers tap into personal networks to learn, share and shop better,
    companies are harnessing the ‘knowledge of crowds’ and insights from business
    networks to detect risks and market changes and chart recommended courses of
    action that have tested and proven by others in the community.
  • The power and speed of in-memory database and analytics
    – With business moving at light speed, companies need to capture, analyze and
    act on information faster than ever before. By combining both transaction
    processing and analytics on a single platform, in-memory technology
    the delays and inefficiencies inherent in parallel operational and business
    intelligence systems, and enables companies to aggregate, correlate, and assess
    countless bits of information and scenarios to determine the best course of
    action with unprecedented speed.

And they enable companies to execute a new approach to risk management through which they can pinpoint potential risks that may be hidden deep in their supply network and head off trouble before it happens. Procurement, for instance can be alerted to potential future risks in the sub-tier supply chain by triangulating a myriad of real-time supplier performance inputs (e.g., change in payment status, loss of a key customer, change in leadership, commodity price or supply fluctuations) crossed-referenced historical results when such patterns exist. These alerts can be supplemented with recommended responses or alternative suppliers based on community-generated ratings and buying

patterns of other like-buyers on a business network.

As the saying goes, “What you can’t see, can hurt you.” Armed with the right technology, intelligence and insights and connected to the right networks, companies can not only see the future, but seize it to mitigate risk and create competitive advantage.

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      Author's profile photo Former Member
      Former Member

      Good post, but I feel you're missing one critical element when it comes to working with suppliers and that is the power of relationships.    Yes, technology can help you identify risk, etc, but the first step is to really get out of the mindset of treating your suppliers as vendors and start treating them as partners. 

      Allow me to share a recent story....I was recently at a workshop with a customer who is highly regarded as a very successful and innovative company.   As our team arrived at their offices, we were greeted very warmly, given a small bag with swag and a letter in a nice envelope.   In the envelope was a letter inviting our team to a dinner at one of the best steakhouses in town.    I was blown away as it's usually completely the other way around where you're expected to treat your customers to dinner.   At the dinner, I couldn't help it but to ask the question "Do you treat all your vendors this way?"  I quickly found out that treating their vendors as partners was one of their core beliefs.   They know their suppliers are key to their success and it strategically helps them compete and ensures that they can get the best products to their customers. 

      After receiving such treatment, as a supplier, you can't help it but jump through hoops for your customer.    Ensuring that the relationship is built on trust and mutual benefits are key.

      Author's profile photo Richard Howells
      Richard Howells

      Great read. Very interesting how the Network effect can have an impact on a business.

      Author's profile photo Nathan Love
      Nathan Love

      Great title, as is the article itself. I agree with Reuven, but believe that the post is more about the practical, which then allows the personal (Reuvan's example). We may not get to develop the relationship if we can't understand and mitigate the complexities surrounding it.  Love the emotive language!