It’s a popular notion that we fix our operations before we think about collaborating with our partners, i.e., vendors, service providers, & customers. We, after all, would like to show a position of productive strength when we negotiate with our partners as we try to convince them to enrol into whatever agenda we have (e.g., higher discounts on purchases, shorter terms of payment from customers).
I would, however, advise the opposite. We should negotiate and collaborate with our partners before we invest in improvements.
Supply chains are composed of not only operating relationships between departments within an enterprise but also those between our enterprises and our partners. Supply chains don’t stop with the vendors or our customers we directly deal with but continue with connections with upstream enterprises who sell to our vendors and with the downstream individuals who buy from our trade customers. Supply chains commonly have multiple sources than single ones as various components, parts, & ingredients would make up the merchandise that flow through them. And likewise supply chains would have multiple final end-users for the different items & services that stem from their links.
In short, our enterprises aren’t the centres of the supply chain world. Supply chain productivity is dependent on how well we as linked organisations work together. It is therefore logical that we prioritise negotiating and collaborating with our partners.
We don’t have to be in positions of strength to negotiate with vendors & customers. Rather, we must have strong clarity regarding our values & principles.
And we should listen and be flexible as well to the insights our partners may convey about their values & principles.
We hear about large corporations flexing their muscles and arm-twisting suppliers to adapt to their rules, standards, & terms of payments. Some large corporations ‘invite’ vendors and tell them they are lucky to be chosen. But if the vendors don’t comply with the conditions the corporations set, the corporations would expel them immediately, without hesitation.
Some multinationals would also even dictate to customers on how much to buy and how much & when to pay. Some consumer goods companies, for example, would choose a few customers to be exclusive dealers, and punish those who encroach and sell in another customer’s ‘territory.’
These influential enterprises see this kind of domination as advantageous as they believe it expands their market share and provides a means for revenue growth.
But a domineering style has its limits. Newcomers (who some firms would call disruptors) would find creative ways to work around and compete with the established behemoths. Individual online traders, for example, would sell directly to consumers, bypassing the middlemen and exclusive dealers.
Vendors also won’t sit still for long under what they would consider oppressive relationships. Some would study the standards of their large customers, learning their ways of management, and develop more superior products & services. We had seen this happen among former semiconductor vendors who introduced their own product lines against the likes of Apple, Intel, and Motorola.
Supply chain improvement doesn’t take place without at least some basic collaboration with partners. A big successful business enterprise may at the onset commandeer the supply chain of its products & services for some time, but eventually, it would be to its benefit to work with partners, no matter how much smaller they are.
Of course, we as entrepreneurs or managers should be always aiming to expand our spheres of influence. But to do so requires empathy, synergy, and a win-win philosophy. It would be a laborious path, certainly, but the rewards would be long-term.
Supply chain improvement begins with working with partners, not without them.
Ellery's Essays 