Global Logistics and Supply Chain Strategies - October 2008 - (Page 66)

Supplier Collaboration Initiatives Can Save Companies Millions BY ASHOK SANTHANAM Ashok Santhanam is the CEO of Bristlecone, a supply chain consulting firm. Visit www.bcone.com. T he relationship between organizations and their suppliers is continuously evolving. Today organizations expect their suppliers to continually reduce component costs, improve replenishment lead time and become more responsive to their business changes. Not surprisingly such demands can create a strained relationship, becoming confrontational rather than cooperative. Those relationships are further exacerbated by limited visibility of end-customer requirements, increased variability and delays as demand information works its way through the supply network. These factors typically cause issues such as • Whiplash effect, where any changes in demand are amplified as it makes its way through the supply chain, causing increased inventory • Supply variability, where suppliers are not able to respond to customer demand within the time frames requested, causing missed shipment dates and increased expediting costs • Supplier proliferation, where customers begin to work with multiple suppliers in order to secure component supply in a timely manner, causing reduced leverage with suppliers and increased procurement costs A streamlined supplier collaboration process can help address these issues on both sides of the equation, leading to more productive and profitable relationships between organizations and their suppliers. Improved Supplier Collaboration A concerted effort to improve the relationship between an organization and its suppliers by focusing on increased collaboration can benefit both parties in a variety of ways, including: reduced inventory, shortened lead times, lower component costs and minimized risk of stock outages. In addition, tighter collaboration ensures that each stakeholder in the supply chain can meet its service agreements, resulting in a more responsive supply chain. Such a tight collaboration, even for traditional purchase order based (PObased) relationships, can provide savings to both parties. To reap these benefits, one of the key requirements is that traditional linear supply chains and their sequential processes must be transformed into adaptive supply chain networks. Such a network will allow all participants (customers, suppliers, logistics providers and so on) to sense changes in demand and supply conditions as they occur and share the critical knowledge required to respond appropriately. Stakeholders within the supply chain will be able to simultaneously eliminate inefficiencies in their supply chains by synchronizing the information flow with their suppliers or customers. Supplier collaboration is one of the key enablers of an adaptive supply chain network and is increasingly being adapted by leading companies around the world. Companies that have implemented supplier collaboration enjoy both quantitative benefits (such as lower inventory costs, reduced lead times, lower component costs, higher on-time delivery, etc) but also see significant qualitative benefits (such as relationship with suppliers becoming more strategic, supplier rationalization and increased responsiveness). Lets us examine supplier collaboration in more detail. Types of Supplier Collaboration There are several different methods of supplier collaboration, based on the relationship between the manufacturer and supplier for a certain part or component. Examples of these relationships include purchase order (PO), PO release, vendor-managed inventory or kanban. A manufacturer may have a PO-based relationship with a supplier for a highvalue part, but a VMI relationship with the same supplier for a low-value, high-use part. As a result, a 66 OCTOBER 2008 http://www.bcone.com

Table of Contents Feed for the Digital Edition of Global Logistics and Supply Chain Strategies - October 2008

Global Logistics and Supply Chain Strategies - October 2008 Contents Editorial GL&SCS Exclusive Fastforward Up Front The Top Story In the Driver's Seat Think Inside the Box Recipe for Success NITL Preview Opinion Industry Voices

Global Logistics and Supply Chain Strategies - October 2008

For optimal viewing of this digital publication, please enable JavaScript and then refresh the page. If you would like to try to load the digital publication without using Flash Player detection, please click here.