Improving supplier collaboration will help you build a durable ecosystem for short- and long-term gains.

Before COVID-19 arrived in March 2020, most people outside the profession lumped “the supply chain” in with other facets of life that were accepted as both real and vital, but also mysterious, complex, and probably not worth too much attention. 

It’s been almost 60 years since Leonard Read wrote “I, Pencil: My Family Tree,” in which he marvels that no single person knows how to make a pencil, but via the power of a global supply network stretching from Sri Lanka to Oregon, millions of people collaborate to bring pencils to market for 10 cents apiece. Nobel laureate Milton Friedman used Read’s story as inspiration for a 1980 TV program called “Free to Choose,” in which he pointed out the importance of “the constant interaction and the interdependence between people, as far as production is concerned.” Regardless, if Read and Friedman managed to thrill the common man with these tales of the power of free-market collaboration, by early 2020 the thrill was gone. 

What Supply Chain Means Today

When the pandemic hit, the world quickly learned more about “the supply chain” than it wanted to. Consider some of the headlines from spring 2020: 

• “Toilet paper demand spikes 845%, leaving shelves empty” 
• “Hunger on the rise, yet hundreds of thousands of hogs are euthanized” 
• “Ventilator shortages: production can’t keep pace with skyrocketing demand” 

The ventilator shortage was a stunning example of the finely tuned intricacy of global supply chains, as noted in The New York Times back in March 2020: “…the machines are complicated, made up of hundreds of smaller parts produced by companies all over the world. There is no simple way to substantially increase the output.” 

“We are in a global supply chain situation, like it or not, so everybody making ventilators here or elsewhere is going to be looking for parts, often coming from the same suppliers,” said Marcus Schabacker, chief executive of ECRI. “There’s a domino effect coming into play.” 

Two years in, consumers have a better understanding of supply inter-dependencies and connecting the dots. For example, Why is it so hard to find a new car? Workers stay home → PC demand soars → PCs require chips, so do cars → Chip demand rises 17% from 2019 to 2021 as inventory drops from 40 days to 5 days → Chip shortage leads to drop in new car production. And that’s why your local Honda dealership has 16 new cars on the lot instead of 350. Q.E.D. 
 
It’s probably fair to say there’s little joy in the public’s new-found knowledge of how global supply chains work. Grudging respect, perhaps. More likely, most consumers are feeling a mix of frustration and fatigue.  

Fostering Trust with Transparency 

At Logility, we’re keenly aware that supply network disruptions large and small are inevitable. The goal isn’t to simply survive from one to the next, but to create a durable, resilient ecosystem that can thrive in the short term and sustain itself in the long term. 

Forbes calls sustainability “the challenge of the 2020s,” and warns that “there’s a gap between sustainable mission statements and the ability to carry them out.” The article cites findings from the Oxford Economics survey as justification for a sobering view of the state of play: 

• 88% of respondents have either created a clear mission statement around sustainability or they’re in the process of writing one 
• However, only 52% have actually reduced their shipping miles 
• Only 21% had complete visibility into their supplier sourcing of sustainable products. 

Sustainability is a multi-faceted journey, and a vital component of sustainability is enabling and improving supplier collaboration. Logility recently joined a group of supply chain experts in a webcast called Enhancing Supplier Collaboration to Drive Sustainability. The panel, which included senior leaders from Anheuser-Busch and Herbalife, unanimously agreed that the value of consistent, thorough supplier collaboration is readily apparent during major disruptions, but that value can run deeper and last longer.  

A useful high-level definition of supplier collaboration is “fostering trust with transparency” because it demands a strategic framework, establishes the importance of measurement and opens the door to many practical applications. For example, collaboration must include a common vocabulary and shared commitment to metrics that matter. This creates the opportunity to scale – small, consistent changes made across many organizations will move the needle. And exactly what that needle is measuring has already been agreed to.

Getting Started 

Consider the following as you think about improving supplier collaboration across your supply chain:

• Program-not-project.  Sustainability is a long-term initiative that belongs in Operations, not Marketing. Supplier collaboration should be viewed as a way to cement relationships, not get stuck containers moving. 
• Enable end-to-end visibility of your entire ecosystem with an integrated platform.  You’ll need this as a prerequisite for launching a comprehensive traceability effort. Why is traceability important? Picture a scenario where 80% of harmful emissions are in your supply chain. Meeting your company’s sustainability goals will require changes in how your suppliers operate, and you’ll need to validate current and future state 
• Pick a few larger suppliers. There are several benefits to this approach.  
• It’s a way to get started quickly 
• Larger suppliers are more likely to have the resources and the desire to implement changes 
• It signals your commitment and allows you to set expectations relative to goals, metrics and potential corrective action 

You are likely to encounter challenges and perhaps resistance along the way. In highly fragmented supply chains, you may discover issues on the ground that make your top-down sustainability goals difficult to implement. Be prepared to invest real money in technology and training, and if your sourcing philosophy is built on switching key suppliers every six months to secure the best price, be ready for some internal resistance. Some “good” suppliers will reject a regimen based on mutual transparency and accountability, and they will place blame further up the supply chain. 

It’s been said that people decide when a pandemic is over, not science. Ongoing effects of COVID notwithstanding, it’s time to embrace supplier collaboration as a key component of building a sustainable supply chain. 

Contact Logility to Discuss Ways to Improve Collaboration Across Your Network 

To implement sustainable best practices, you need visibility into all tiers of your supplier base, and we can provide that to you.   

At Logility, we develop supply chain solutions that help our clients become more sustainable and more competitive. We believe in being stewards of the land, but we also believe in supporting the long-term growth and value of our clients’ organizations. Our solutions make both possible.   

Want help getting started on your sustainability journey? Then, let’s talk. To learn more, contact us today and let us help your organization take the right steps toward sustainability and improving supplier collaboration.