Do not forget the suppliers
Often I see that companies are mainly focused on improving their delivery performance to customers and that the performance of the suppliers remains underexposed. An image that is easy to understand, because the service to customers and their satisfaction determine the commercial success of a company. This one-sided approach to the supply chain may, however, jeopardize the market position of companies.
In order to keep up with the competition, companies now invest a lot in the performance to the customers. More and more, they are getting used to having a mega assortment in their online purchases, where the same or the next day can be delivered. At the same time, the life cycles of articles are becoming shorter and shorter.
It requires a lot of companies to meet these customer expectations. Not only will they have to expand their assortments and improve the search functionalities of their website. But they will also have to make tight agreements with their transport organizations and invest in systems that support a fast delivery process.
First I know how much time and effort all these efforts require. It seems unfeasible - while all this happens - to also take on the cooperation with the suppliers. Nevertheless, it is precisely here that the key to sustainable success lies. Controlling the delivery performance of suppliers is not a luxury, but a necessary condition to meet the high expectations of the customers.
The most tangible is the impact of suppliers when articles due to delivery problems are not available to customers. The articles are then marked as 'sold out' on the website. The unavailability of the articles is a big annoyance of customers and lowers their loyalty. With a few mouse clicks they can easily order the same item from a competitor.
Often retailers and producers compensate the low delivery reliability of the suppliers by building higher safety stocks themselves. A high service to the customer can be guaranteed with this, but there is also a high price paid for. Not only do these additional stocks demand a high capital requirement, but also space in the warehouses that is no longer available to add new assortments. In addition, the high stocks entail great risks. For example because these articles reach the end of their lifespan.
In this way, insufficient attention for the suppliers will lead to limited availability or higher costs which directly affect the service to the customers. It is therefore recommended that the customer and supplier side be approached equally when designing the supply chain.
The great thing about adapting supplier management is that relatively few investments quickly lead to good results. Extensive support systems and hardware are often unnecessary. Especially the right focus and the ability to collaborate between the logistic and commercial functions determine the success.
In short, supplier management means that companies make clear agreements with the suppliers about the minimum expectations and follow them structurally. With a focused approach in which the expectations to suppliers are clearly defined in advance, the operational problems will quickly decrease afterwards. In addition, structural discussions with suppliers often lead to a better relationship with an open approach, resulting in new commercial and logistical opportunities.
A relatively limited investment is quickly recouped and the market position is strengthened.
Erik-Jan Smit is a Managing Consultant at Supply Value
06 55 27 11 42 or firstname.lastname@example.org