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Five ways to foster efficient supply chain relationships

Posted: 31 Oct 2014 ?? ?Print Version ?Bookmark and Share

Keywords:supply chain? cloud? OEM?

Tip No. 3: Reduce Your Supplier Base

Particularly in electronics, parts suppliers are particularly suited for automatic replenishment systems such as Vendor Managed Inventory and/or Kanban, said Rick Pay, principal of the operations and supply chain consultancy R. Pay Company. Top suppliers should be able to help develop innovative approaches to supply chain management, resulting in higher inventory turns and lower overall cost. 'To start getting the most from your supplier relationships, start by rationalising the supplier base,' he said. 'Reduce the number of suppliers to the few key suppliers that can truly help you reduce lead times, improve quality, and reduce costs. Doing business with a broad supplier base actually increases costs and complexity in the supply chain.'

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Tip No. 4: Communicate

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Supply chains generally run into problems when relationships falter, and that's often due to lack of communicationor of doing a poor job of it. Billie Blair, an organisational psychologist and the president/CEO of the international management consulting firm Change Strategists, recalled that when companies such as Caterpillar decided to mend their supply chain problems, the remediation centred on two areas: "first, hiring knowledgeable and 'participatory' people to head up those efforts, and second, making the effort for regular, preemptive contacts, sorting out issues in advance of problems surfacing."

Rick Pay, known to clients as the Sherlock Holmes of Operations and Supply Chain, also stressed the importance of developing strong communications with key suppliers. "Provide regular forecasts and planning information to help suppliers be more efficient in providing you with parts on time and in the quantity needed," he said. "Long-term purchase orders such as blanket POs can provide planning information without necessarily representing long commitments. In addition, regular meetings with top suppliers can help strengthen the relationship while sharing information on quality, demand changes, design updates and future plans." In addition, develop executive contacts with your top suppliers, such as your CFO with their CFOs. There is no better way to get through any crisis that requires executive involvement than to leverage a positive, previously established relationship. Having those relationships in place can result in quick resolution of any problems and a continuously flowing supply chain.

Tip No. 5: Pay On Time

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And lastly, here's a common-sense recommendation from Christian Lang, CEO of Tradeshift: Pay your supplier in a timely manner. 'When your suppliers aren't paid on time, it affects their business, and they cannot supply you with your product as quickly or effectively,' Lang said. 'Some suppliers will even offer you a discount if you pay them early.' Abiding by that suggestion not only is a win-win for both parties, but it also allows you to live by another of Lang's tenets: Don't be a jerk. 'Save yourself the frustration of losing suppliers by treating them with respect in regards to their business needs and livelihood. It is a relationship and needs to be treated like one.'

- Jennifer Bosavage

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