DC Velocity - January 2011

BY ART VAN BODEGRAVEN AND
KENNETH B. ACKERMAN
basictraining

The art of good supply chain
relationships

IT’S TIME TO TALK TURKEY ABOUT THIS “RELATIONSHIPS” thing. We’ve been awash in hot air for quite a while, leaving some with the impression that relationships and relationship management are the purview of the sales and marketing folks, as they try to wring more out of key customers. A corollary view has been that relationships are really all about doing the “right” things, making all parties feel good and, with some luck, realizing a few benefits along the way.

Rubbish.

For openers, 21st century relationships are bigger, bolder, and more powerful than anything we saw under the old customer relationship paradigm. In fact, the world of successful—and superior—supply chains is defined by high-quality relationships throughout the end-to-end chain. Without multidimensional relationships and active relationship management throughout, supply chains can’t work as effectively as they need to in today’s competitive and globalized arena. The game’s new rules say, though, that it’s not enough to hope for the best. It’s vital to use relationship management to plan for the best. In our lexicon, “the best” indicates quantified improvements in the bottom line, and, as appropriate, the top line, as well.

tributor that doubled its top line, at no loss in margin. Its success was based on branding its identity and offering value-added services and solutions to major national and regional accounts. Its competitors, who were all still trying to differentiate themselves by lower price commoditization of products, were caught flat-footed.

ANOTHER SHOE, ANOTHER FOOT

Here’s the moment at which the power of relationships begins to go exponential. Translate what you might be trying to accomplish as an enlightened business partner and supplier at the tail end of the supply chain, and drive the concepts upstream. Enlist your critical suppliers as supply chain relationship partners. Note: That commitment might involve focused supplier rationalization, not simply to reduce the complexity of managing a supply base but also to create high-powered, high-perform-ing supply chain relationships.

Establishing strong supplier relationships can change your position as a competitor and as a downstream business partner. Collaboration with key suppliers can be a potent tactic in creating sustainable cost reduction and continuous improvement—and consistent high quality—in your products and services.

What if? What if you could focus your relationship efforts on a handful, rather than scores, of “key” suppliers? What if you could target—and achieve—documented cost savings year after year? What if you could leverage the talent and creativity of the heart of your supply base to help you get outside the box and get ahead of the game?

The crafting of focused supplier relationships is
more or less a mirror image of the customer rela-
tionship process, with some important differences.
The best example may be the multibillion dollar

THE BABY AND THE BATH WATER

In considering the newer, richer, panoramic view of supply chain management relationships, don’t even think about diminishing efforts in customer relationship management. Do, however, rethink the focus of these relationships. Are they all about you? About your need to drive added revenue and strengthen margins? Or are they about you and your customers collaborating to de-liver superior solutions to their customers?

It’s the latter case that leads to the revenue and margin outcomes you
are after—and makes your customer stronger and more viable in the
process. And that’s a big part of what you want: longevity in a successful
relationship, sustained high performance, and mutual benefits with legs.

What if? What if your customers’ customers began to see you as an integral part of their real-world value proposition? What if you could reposition your relationships toward selling value and away from selling commodities? What if you could increase your share of key customers’ business by 10 percent? By 50 percent? What if your margins could increase by a third? By half? It’s beyond satisfying to put trackable numbers into the feel-good equation.