By Alex Vizueta, Kepner-Tregoe
If you think about supply chain management only from the perspective of the inputs and outputs of your manufacturing plant, you are probably missing a lot of detail. With technology driving deeper specialization and the interoperability of products and services, the traditional notion of fixed supply chains is pretty much gone and is being replaced by a new norm of virtual supplier eco-systems. What this means for supply chain managers is that they need to break out of the mentality of thinking about the direct flow of raw materials into physical factories and controlling the end-to-end value chain vs. considering the continual changing “web” of supplier relationships that enable your company to facilitate the value chain for your products and services.
From control to supply-chain facilitation
Modern supply chain management is no longer a top-down, command and control discipline. Teamwork, collaboration and leveraging complex multi-party relationships are the keys to unlocking value creation for your customers. If you think about how the transformation of raw materials into finished goods and services takes place in your industry, you will probably find many layers of companies each providing narrowly focused (specialized) value-add activities and services.
Rarely will you find one (or a few) companies controlling the vertically integrated end-to-end supply chain. This is a good thing as specialization leads to increased competition, more competitive pricing and higher quality components. It also provides options for companies to adjust resource capacity to meet changing business demands and re-configure supply chains to respond to risks and opportunities in the marketplace.
Managing a supplier ecosystem requires teamwork
For supply chain leaders, managing a virtual supplier ecosystem requires information and it requires relationships. As companies leverage suppliers for supply chain activities, one of the biggest challenges is fragmentation of data and the ability to assemble the big picture perspective of what is going on in the end-to-end supply chain. This makes it difficult to evaluate performance, diagnose problems and optimize cost and capacity. Sharing supply chain information among the different players in the value chain is essential to enabling everyone to see how they are contributing to the end-product provided to the customer.
Visibility of what is going on in your supply chain is great but translating that into operational improvement requires healthy relationships amongst supply chain participants. It can be tempting for companies to rely heavily on contracts, service level agreements and other formal structures as the basis of brokering cross-company interactions. While these are important tools, they are meant to establish a baseline level of expectations, not to limit other forms of collaboration.
Win together, lose together
The best supply chain relationships involve an acknowledgement by all parties of the common mission they share, and the shared impact of failures at any point in the supply chain. If customers don’t receive the end-product or service they expect, they will get it from someplace else, meaning everyone in the supply chain loses the business. Simply stated, you win together, or you lose together. Teamwork is needed for different companies (with different individual goals) to work together to deliver value-add products and services effectively and efficiently. This starts with underpinning contracts but must also extends to the sharing of information and collaborating to solve problems.
Collaboration and team-based problem solving can be tough. Many companies struggle with cross-departmental collaboration and when you layer in the complexities of working across companies, the task becomes even harder. That doesn’t mean it is impossible and because of the nature of modern supply chains, learning how to facilitate problem solving across a supply-chain ecosystem is essential to long term business success. For over 60 years, the problem-solving experts at Kepner Tregoe have been working with clients to develop leadership capabilities, operational processes and employee skills to enable Operations Excellence. To learn about how KT can help your company, visit www.kepner-tregoe.com