Suppliers are the secret protagonists in the supply chain. While, in the eyes of the customers, manufacturers continue to hold the limelight, they are out-sourcing a growing share of production to their sup-pliers. Thus, the interplay within the supply chain has been subject to radical change: the lone wolf gets nowhere; instead, perfectly coordinated teams are coming out on top.
Logistic experts have meanwhile come to realize that manufacturers are only able to reliably supply customers if their suppliers also commit to (and keep) reliable delivery dates. The smoother the communication within the supply chain and the closer the supplier collaboration, the more reliably and quickly customer orders will be fulfilled.
Therefore, the need for supplier collaboration is obvious. Implementation, however, is proving difficult. Just as a strong individual runner is not automatically a good relay runner, cooperation between individual companies must be built up first.
The biggest obstacle in the implementation process is the fact that many companies do not know which steps they have to take to connect their suppliers, nor what kind of technical support is really useful. With the help of the following checklist you can determine your actual situation. At the same time, it will show you what possibilities you have to establish close cooperation with your suppliers, step by step, thus fundamentally enhancing your competitiveness.
How well do you cooperate with your suppliers?
Use this simple guide to compare, and then evaluate, your company’s actual processes with best practices. Basically, there are four different levels on the path to establishing a process of best practices:
- Rudimentary: Communication between sup-pliers and customers is sparse and strenuous. When customer demands strongly fluctuate they can only be satisfied with long delays and high costs, arising from extra actions.
- Simple: There is more communication between the supplier and the customer but it remains irregular. The supplier is only informed of changes with a long delay.
- Advanced: For large and important suppliers, media transfer problems have already been resolved and the processes behind them have been optimized. What now proves difficult are the special processes for suppliers that could not yet be automatically connected.
- Best Practice: All supply chain partners have been integrated and have the same level of information. All of the suppliers are connected via the same process while new technologies help them to recognize potential problems on time so that preventive measures can be taken.
Each level will look at the internal process organization and the performance of your system landscape. For each criterion, please choose the answer that most aptly describes your actual process. Finally, please add up your points for the sections “process organization” and “system landscape” to receive the grand total. The overview on the next page will help you to analyze your current situation as well as your potential.
Checklist: Assess your Cooperation with your Suppliers |
| Process Organization |
System Landscape |
 |
Ordering / calling off – fixing of annual delivery agreements |
1 |
 |
Phone, fax – time-consuming and error-intensive |
1 |
| Supply confirmation is obtained manually from the suppliers |
2 |
Excel, email – time-consuming due to media transfer problem |
2 |
| Demands are communicated in a continuously updated and period-specific form – this way, the supplier has a clearer idea about future demands |
3 |
Large suppliers are automatically connected (e.g. via EDI) |
3 |
| Relevant planning data is made available; the supplier may be made responsible for planning |
5 |
Supplier portal – easy integration by internet, no additional infrastructure necessary, no special processes for small suppliers |
5 |
 |
None (annual quantities only) |
1 |
 |
Low level of automation, many manual processes |
1 |
| Irregular |
2 |
Exception Reporting (Pull)
-Error can be traced with the help of suitable reports |
2 |
| Regular, as the need arises, monthly/weekly |
3 |
Alerting & Escalation (Push)
- When an error occurs, those responsible are informed (email…) |
3 |
| Daily |
5 |
Proactive Exception Management / Pre-Warning (Push) – The system shows a potential future problem and enables the planner to act before the problem really occurs |
5 |
| Sum |
- |
Sum |
- |
Grand Total ___ _ |
| Evaluation: Towards Best Practice in Supplier Collaboration |
 |
Process Organization |
System Landscape |
Collaboration: Ordering / calling off – fixing of annual delivery agreements
Demand forecast: None (annual quantities only)
|
Communication with suppliers: Phone, fax – time-consuming and error-intensive
System support: Low level of automation, many manual processes
|
Conclusion: Your business has much potential for development. Your supplier communication mainly consists of manual processes and is very time-consuming for your staff.
Next step: Increase frequency of communication with supplier, digitalize exchange of information |
 |
Process Organization |
System Landscape |
Collaboration: Supply confirmation is obtained manually from the suppliers
Demand forecast: Irregular |
Communication with suppliers: Excel, email – time consuming due to media transfer problems
System support: Exception Reporting (Pull)
- Error can be traced with the help of suitable reports |
Conclusion: You have taken a step in the right direction. However, the suppliers are still not prepared when demand is fluctuating. They are still in “reaction mode” and are struggling with many stock-outs.
Next step: Standardization and automation of communication |
 |
Process Organization |
System Landscape |
Collaboration: Demands are communicated in a continuously updated and period-specific form – this way, the supplier has a clearer idea about future demands
Demand forecast: Regular |
Communication with suppliers: Large suppliers are automatically connected (e.g. via EDI)
System support: Alerting & Escalation (Push)
- When a problem occurs, those responsible are informed (email…) |
Conclusion: You are on the right track. Your suppliers are now much better able to adapt to your needs. However, you will only retain a real competitive edge if all of the important suppliers are integrated in the collaboration process.
Next step: Instead of reacting to them you need to identify problems early and proactively take preventive measures. |
 |
Process Organization |
System Landscape |
Collaboration: Relevant planning data is made available; the supplier may be made responsible for planning
Demand forecast: Daily |
Communication with suppliers: Supplier portal – easy integration by internet, no additional infrastructure necessary, no special processes for small suppliers System support: Proactive Exception Management / Pre-Warning (Push) – The system shows a potential future problem and enables the planner to act before the problem really occurs |
| Conclusion: Congratulations, you and your suppliers form a strong team. Your processes are highly efficient, even in critical situations. There is currently no need for action. |
Have we raised your interest and aroused your curiosity as to how you can improve your supplier management?
This way, not only large businesses but especially small and medium-sized companies can stream-line old, time-consuming processes and have a direct impact on value-oriented KPIs. Should your processes not be included in the description, we will gladly be of help. A personal consultation will help you to identify the status quo and point out individual opportunities for improvement.
About the author:
Dr.Michael Lepler
Dr. Michael Keppler is CEO of ICON, a role he has shared with co-founder
Kurt Mannchen since ICON's inception in 1992. Michael is also the head of the Software Development and Support function at ICON and is an acknowledged expert in supply chain planning and performance management solutions. He earned a degree in industrial engineering and management at the University of Karlsruhe and a doctorate in engineering from the same institution. For more information about supplier collaboration please visit www.icon-scm.com or contact our expert directly Sebastian.Seidel@icon-scm.com or call +49 721 79008-29.
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