Many organizations are realizing that effective communications and integrated processes, driven by collaboration with suppliers, will drive supply chain effectiveness and competitive advantage. Rationalizing the supply base to include the strongest, best performing, and most collaborative upstream partners and then building integrated teams to design and implement programs that enable visibility throughout the supply chain are usually the core to this strategy. Supplier relationship management (SRM) programs that drive effective collaboration and supply chain synchronization with suppliers are critical success factors in serving customers and meeting strategic goals.
Without an effective supplier relationship management strategy, organizations may encounter:
- the inability to compete in a global economy,
- high sourcing costs,
- high material pricing,
- inconsistencies in quality,
- inconsistencies in supply,
- a constant adversarial and unproductive battle between supply chain partners,
- inability to retain good suppliers, and
- dissatisfied customers.
Drawing on input from the study advisers, study sponsors, and secondary research literature, the study team identified four key areas for research. These areas guided the design of the data collection instruments and were the basis upon which the study findings have been developed. The study focused on:
1. designing a supplier relationship methodology to establish value-added upstream partnerships;
2. establishing a collaborative environment and synchronizing the supply chain;
3. using processes, tools, and technology as an enabler of a collaborative environment and synchronized supply chain; and
4. measuring the success of the supplier relationship methodology and providing for continuous improvement.
The organizations selected for deep, detailed study through structured data collection and site visits (aka “partners”) demonstrate innovative performance in one or more of the study focus areas. The goal of the project was to examine organizations that excel in one or more aspects of the scope and build the best practices from all the organizations studied. To achieve this goal, excellence and a history of success in the scope areas above were used by the study team to select potential best practice partners for study. Project sponsors then selected from the candidates to determine the final list of partners.
Executive Summary 7
Study Findings 15
Chapter 1 Supplier Relationship Methodology 17
Chapter 2 Collaboration and Synchronization
of the Supply Chain 25
Chapter 3 Technology and Processes as Enablers 35
Chapter 4 Measurement, Results, and Continuous Improvement 39
Partner Organization Case Studies 45
Cessna Aircraft Company
H.J. Heinz Company
Tennessee Valley Authority
Internal structure and change management issues can also hinder an effective supplier relationship initiative. The reluctance to change behaviors, personal control issues, and measurement systems generate individual or departmental goals that cause silos and activities that conflict with or hinder synchronized efforts.
To overcome these complexities and conflicting internal goals, organizations must first come to the realization that developing supplier relationships to integrate processes, share information and best practices, and thus optimize the entire supply chain will establish the common goals to enable all stakeholders’ initiatives. By understanding stakeholder needs and objectives and gaining stakeholder endorsement, the organization develops trust throughout supply chain relationships and establishes a collaborative environment.
This study strives to identify organizations with success in recognizing, designing, and establishing win-win relationships with their upstream partners as well as the leaders who embrace such best practices as fundamental to their organization’s success. The study’s best-practice partners include organizations that lead their markets like the Cessna Aircraft Company, H.J. Heinz Company, and Anheuser-Busch. These are large, well-known organizations with long traditions of category leadership resulting from recognizing opportunities for improvement and adopting well-defined processes and enabling technologies into their business models. A less-familiar organization, Stryker Instruments, but certainly a leader in the worldwide orthopedic market and one of the world’s largest medical device companies, demonstrates how the concepts of talent teams and simplicity can create a trusting and collaborative cross-organizational culture between the organization and its entire supply base.
The Stryker methodology proves that fundamental concepts can be applied across categories regardless of organizational size, product range, or geographic reach. In addition, the Vectren Corporation, in the utilities industry, demonstrates how a highly successful strategic sourcing strategy powered by a supplier relationship approach can be applied across industries.
The study’s best-practice participants have incorporated their supplier relationship methodologies in both their business strategies and cultures by embracing it from the senior management team to the individual process performers, implementing the concepts cross-functionally and driving them home in the reward and recognition systems. Each participant adds its own unique enhancements to processes, infrastructure, support tools, and a collaborative culture to make its strategic efforts relevant to its stakeholders. However, regardless of industry, organization size, or geography, best practices roll up to common themes. This research group, consisting of our sponsors and best-practice partners, represents a broad sampling of industries and organization size. Their size in terms of revenue and number of employees covers a complete spectrum. All parties recognize the significant benefits that can be gained from looking for answers outside of one’s own industry and all recognize that best practices of one organization are replicable and scalable to other organizations.
Hence, the critical success factors identified in the key findings are universal: They apply equally to $50-billion and $50-million organizations, whether in discrete manufacturing or the process industry sector, retail and distribution or in service organizations. Our best-practice partners, regardless of size or industry, demonstrate the power of a well-executed, effective supplier relationship management approach. These strategies are implemented by aligned organizations and frequently supported by an extensive network of external partners, including suppliers and customers. All of our best-practice partners share a passion for applying the concepts of talent and teamwork and embedding a well defined strategy in their culture to support all stakeholders’ interests.