Good Relationships Are The Key To Effective Supply Chain Integration
May 5, 2017
OEMs and suppliers are steering away from aggressive negotiations because they no longer compete in the market as individualistic companies. Supply chain integration is changing the manufacturing landscape.
An integrated supply chain is made up of manufacturers, customers and suppliers that work together to create, sell and support a product. To improve supply chain integration, all participants must cooperate for the success of the whole.
As such, it makes sense that supply chain integration is dependent on good relationships between OEMs and suppliers. Learn more about how building relationships improves your supply chain health and profitability.
Objectives Of Supply Chain Integration
According to the book “Surviving Supply Chain Integration: Strategies For Small Manufacturers,” a supply chain is like a large, vertically integrated corporation where individual companies are connected only by trust, mutual goals and voluntary contracts.
While all supply chains are at least partially integrated, many OEMs try to improve integration with some key objectives in mind, such as working toward higher profits and reduced supply chain risks.
The following worldwide trends are also driving companies toward better supply chain integration:
- Increased cost competitiveness
- Shorter product life cycles
- Quicker product development cycles
- More global and customized products
- Improved overall quality
Supply chain integration only works when OEMs, customers and suppliers prioritize their relationships and keep tabs on each other’s key supply chain activities. For example, coordinating all supply chain participants’ resources improves supply chain performance.
Improving Relationships On Both Sides
To begin with, good relationships have a few obvious benefits. Getting business done is easier when you work together. Your suppliers will be more willing to implement your technologies and systems, bridging the gap between the two of you, if you’re both cooperative.
Suppliers should make your life easier, even if your demands are difficult to meet. At these times, a good working relationship is essential. Having common ground instills trust in your supplier when it must extend beyond its core processes to meet your supply chain needs.
The more trust you and your suppliers share, the more quickly you can ramp up business together and reach your revenue goals.
The best relationships are characterized by the ability to step back and analyze problems together. Both sides need to figure out what’s causing an issue and work through it. If a supplier and OEM both take the same path, they can prevent a problem from escalating.
Sometimes, a give-and-take mindset is required. You or your supplier may have to go out of your way to serve one another.
For example, if your supplier misses one of your components in a shipment and your customers are waiting, your supplier may use a courier to send an individual part that same day regardless of how much shipping costs.
At the same time, you may decide to work with your supplier if it makes a billing error. These types of courtesies are the marks of highly successful relationships.
Reaching A Common End Game
As you work to improve the effectiveness of your OEM supply chain, think about how you can be of service in your relationships. For example, consider what steps can you take to improve trust.
Both you and your supplier have to be engaged in a relationship and actively working toward common goals. You can help your supplier ensure sustainability, while your supplier can help you reach your profitability goals.