Why Strategic Partnerships are Important to Your Supply Chain
Proper supply chain management doesn’t mean handling four angry stakeholders and putting out three supply chain fires before you get to drink your morning cup of coffee. Supply chains have evolved over the years from an antagonistic, competitive bid system based only on specifications and pricing into a more collaborative system. Advanced supply chain relationships have further evolved into strategic partnerships—close relationships between customers and suppliers that benefit both parties.
Strategic partnerships involve more than just efforts to drive down costs for all. They promote a greater understanding between the parties, which results in a more efficient and effective supply chain. Let’s look at a few areas where the benefits are heightened.
Design and Specifications: Collaboration Provides Insight
In a traditional competitive-bid relationship, specifications are created by customers and sent to suppliers without any insight in either direction. The customer has no way to know that a trivial specification in their eyes may cause disproportionate difficulty or cost to the supplier. Conversely, a supplier may be able to meet a much narrower specification or be able to improve quality or lower cost with a simple specification change. Without the communication levels of a strategic partnership, opportunities for quality improvement and cost savings are lost.
A strategic supply chain partnership can be extended to a shared or collaborative design phase. When a supplier has complementary expertise to a customer, a partnership can allow customers to focus on their core competencies and avoid inefficient use of their own time and resources. With proper non-disclosure agreements, proprietary information can be kept secure while information critical to both parties is shared.
By combining the supplier’s knowledge of component and subsystems manufacturing with the customer’s vision for the end product, mutually beneficial deals are possible and the entire development process is accelerated. Shorter development times result in your products reaching the market first and gaining a critical foothold. If revisions or changes are necessary, the same efficient cycle and design cooperation can be used to incorporate the revisions as quickly as possible.
Strategic partners tend to have smoother operations throughout the entire process from forecasting all the way through to delivery. The increased levels of understanding help both parties to be proactive instead of reactive. Potential problems on either side of the relationship can be relayed and managed before they become a crisis.
Change and disruption are inevitable, whether it’s the positive kind from rapid sales and expansion or the negative kind from a sudden disruption in raw materials or loss of a sales contract. Strategic partnerships allow both parties to optimize their inventory and distribution systems to minimize the impact of disruptions.
The relationship moves beyond simple interactions between traditional purchasing agents and sales representatives who in turn relay their concerns within their respective companies. Systems may or may not be directly integrated—that depends on the scale of the business between the two parties—but communications on multiple levels keep things running smoothly.
When change needs to be implemented from within, such as with continuous improvement processes, a strategic partnership makes changes easier to implement. Within an efficient partnership, expectations are outlined throughout different levels of each organization. Generally, one person or a small team within each organization is in charge of making sure the changes are understood and implemented in their facilities, and both will work together to track the effects of the change.
In essence, a strategic supply chain partnership increases the ability to not only correct logistical problems, but also to anticipate potential problems and prevent them from occurring in the first place.
Baseline quality specifications are important, but they are only part of the quality picture. Strategic supply chain partners can help customers establish the proper specification by collectively understanding how the supplier’s process variables can affect the customer’s downstream processes. A supplier’s insight can help customers track important variables that they hadn’t previously considered important.
Once specifications are agreed upon and a standard process is implemented, customers need suppliers to maintain process consistency in certain areas and embark on continuous improvement programs in others. Both require good cooperation and communication between suppliers and customers to be successful—the hallmarks of a strategic partnership.
That same cooperation and communication between partners allows both quality systems to work seamlessly. Customers can be confident that quality will be tracked and that traceability will be maintained per their wishes. Any quality information that customers need will be readily available per agreed-upon parameters.
Value is the Key
All of these benefits can be lumped into the same category: providing value to customers through improved communication and understanding. Quality is a necessity and price is important, but value is critical.
Partnering with suppliers takes valuable time and resources, so customers must screen and choose their supply partners wisely. Just as a good choice of partner can elevate both companies, a poor choice can harm both companies. Evaluate suppliers on the points that are most important to your industry, and then convert this into some form of value metric. Who provides a strong enough value for you to invest your resources and form a strategic partnership?
Smartrend Manufacturing Group: A Value-Added Choice
At SMG, we welcome strategic partnerships to help customers solve supply chain problems, enhance their quality, save money, and grow their businesses. SMG offers design and prototyping capabilities, an international network of qualified factories, local direct supply programs, and an unrelenting focus on quality. We offer strategic partnerships on whatever level works for your organization.
Consider SMG to be your strategic partner in solving your supply chain problems and helping you prevent new ones from occurring. With SMG’s help, you can truly put away the supply chain fire hose and enjoy your morning cup of coffee.