How Manufacturers Can Improve Collaboration With Their Suppliers

Niki Khokale is the CEO at Fountain9 - a Y-Combinator-backed predictive demand and inventory planning SaaS company.

As manufacturers enter new markets with newer product portfolios, resilience and agility in the supply chain become crucial pivot points. This becomes even more important in the face of the current global supply chain crisis. In a survey conducted by McKinsey of more than 100 large organizations in multiple sectors, companies that regularly collaborated with suppliers demonstrated higher growth, lower operating costs and greater profitability than their industry peers.

The ability of internal teams and external supply-chain partners to collaborate on product development and raw material fulfillment ensures the manufacturability and serviceability of products in the larger market. In this article, I will look at three ways through which manufacturers can improve collaboration with their suppliers.

Select partners based on capability, strategic goals and value potential.

In order to build strong relationships, manufacturers should assess suppliers based on three key pillars.

1. Does the potential value of collaboration merit the effort?

2. Does the supplier possess a common strategic interest to support the collaboration?

3. Does the supplier have the correct infrastructure to support collaboration?

The manufacturer and supplier should be sure of the value their engagement will deliver to each other. Collaboration to improve demand planning is likely to yield sub-par results if there is a mismatch in processes and systems.

Likewise, manufacturers should conduct due diligence on their supplier’s culture. A party whose company culture is resistant to change or does not work in cross-functional ways can hinder collaboration. Collaboration thrives between cross-functional teams where both parties work proactively together to achieve common goals.

Develop strong communication and transparency with partners.

Manufacturers should also communicate their goals, performance expectations and policies to their suppliers clearly. A clear standard operating procedure for handling operations and grievances should be deployed.

Manufacturers should emphasize real-time or near-time shared visibility into the entire supply chain with the help of data accessibility and general awareness of each other’s strengths and weaknesses. Such levels of transparency and accountability will enable informed decision-making and adaptability.

Embrace digital transformation.

A key way to enhance collaboration involves bringing data, people and business processes together. Advanced digital technologies like cloud-enabled, real-time supply chain collaboration can provide both internal and external teams with a shared platform to exchange product information. By eliminating process silos and communication gaps, cloud technology can be instrumental in improving the flow of information to identify and resolve issues.

Along the same lines, other advanced technologies, such as artificial intelligence (AI) and machine learning (ML), can play an important role in modern supply planning. These technologies can help demand planners automatically build purchase plans by factoring in current inventory levels, supplier lead times, supplier fill rates, product shelf life, open orders and safety stock levels. Moreover, AI and ML can also help in supplier selection based on data by constantly monitoring costs, lead time and fill rates of the supplier.

Conclusion

Closer manufacturers and supplier collaboration can be instrumental in making the global supply chain resilient and agile. Although historically a transactional, or even an adversarial relationship, the manufacturer and the supplier should work together to build newer systems and processes that help them unlock significant new sources of value for each other.

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