Supplier Collaboration in a Time of Chaos

As the COVID-19 crisis continues to disrupt global supply chains, not to mention geopolitical events such as Brexit and other global trade-related issues, the need for innovative thinking when it comes to procurement has rarely been more keenly felt during peacetime.

The apparently simple business of moving products from one place to another has become considerably more complicated in this unfamiliar environment and the adage "no man is an island" has never been more applicable than right now. This means procurement officers need to work with others to ensure a steady flow of goods to where they need to be.

The concept of supplier collaboration has been around for a while now, but in the last two years it has transformed from a buzzword to an essential component of the modern procurement business. Those brands which fail to collaborate are likely to find themselves fighting an uphill battle moving forwards.

Supplier Collaboration

When suppliers work together it creates a stream of benefits which resonate up and down the entire supply chain, making procurement more effective and efficient.

Research published in the International Journal of Physical Distribution & Logistics Management, studied the effects of supplier collaboration on 135 Swiss buyer-supplier relationships and used structured equation modelling as well as multi-group comparison to test for quasi-moderation effects. The results of the study confirmed that "supplier collaboration has a positive effect on buyer performance both in terms of innovative capability and financial results," and that trust and co-dependency both play important roles in these collaborative supplier relationships.

"For Sanofi the value lies in the wealth of knowledge of our suppliers," said Chief Procurement Officer at Sanofi, Stephen Cobham. "Bringing the outside in, which requires businesses to be more open and humbler to recognize that they can, and should, outsource ideation (idea creation). We need to be able to have much more robust dialog where we can use their power, their knowledge. This paves the way for more meaningful relationships with suppliers, unlocking innovation potential that will ultimately drive growth."

Stronger Together

The benefits of supplier collaboration are clear. Companies which collaborate closely with suppliers outperform their competitors on almost every metric. Whether it's growth, operating costs, or profitability, collaboration leads to significant gains. For example, companies with close collaboration with suppliers can see cost savings of between 5-10%, and revenue gains of between 7-10%.

But what does supplier collaboration actually mean in real terms and how can a company best facilitate it? After all, procurement is just one link in a chain and can only wield a certain amount of influence.

Well, it takes someone to display the leadership necessary to step up and be an ambassador for collaboration. If your brand can effectively communicate the benefits of supplier collaboration and put forward a plan for its implementation, half the battle is won already.

Data is a vital component of supplier collaboration, and this should be the focus of your plans. The traditional method sees each link in the supply chain working in silos and rarely communicating outside of their own business, except when it comes to sales or customer service.

However, when data is shared between collaborators - ideally using a collaborative digital platform - the whole value chain becomes infinitely more agile and able to respond to changes in the market. Manufacturing can be scaled up and down in line with demand, and ordering can be made just in time - reducing the need to hold large stock levels at every step in the process, thereby reducing waste and resource expenditure.

"We have replaced many tools and processes with [a digital data sharing platform] which has streamlined how we collaborate and engage with our key suppliers," said Vodafone's Europe Network Engineering Director, Nadia Benabdallah. "It's also scalable, which is important as we have a global supply chain. Because the platform consolidates all of our data in one place, it takes the team just seconds to learn what previously took hours or days. It gives us a level of visibility which we never had before."

Final Thoughts

Supplier collaboration is the future of procurement. The science is settled on the benefits of collaborating and all that remains is for a brand to make the first move and start the process in earnest. Yes, it requires effort and investment to achieve, but the effect it will have on every link in your value chain is more than worth it.

Supplier collaboration is set to be a hot topic at ProcureCon Indirect West 2022, taking place in April, at the Sheraton Grand at Wild Horse Pass, Phoenix, AZ.

Download the agenda for more information and insights.