We are always looking for best value when arranging deals with suppliers, but now, as consumers’ purse strings tighten, the temptation is to default to the flawed notion that pushing for the lowest cost delivers the best value.
Taking a long-term view, when competition is tough and margins are under pressure, is far from easy. However, key to delivering the best value to customers and shareholders alike is to work collaboratively with suppliers, and that can only be achieved through a long-term relationship built upon trust that has been earned over a reasonable time period.
Along with trust, a collaborative relationship with a supplier requires stability and an understanding of mutual benefit. This offers confidence to share data and to look for ways of reducing cost by understanding each partner’s business needs. Seeking the lowest cost option may work on a widely sourced commodity item, but where the item forms a key element of your product offering, then cost should be considered only as one element of the value proposition.
As sustainability issues continue to be high on the corporate agenda, attention will fall on delivering results, and core to achieving these results, will be good collaborative arrangements with suppliers. A new report from Oracle highlights the point that companies recognise the need for collaboration to achieve sustainable supply chains but only seven per cent of respondents want to consider advanced forms of collaboration with partners, distributors and competitors.
Just how deep a collaboration you enter into is a difficult question to answer and no doubt depends on the value that is derived from the relationship. But Oracle points to limitations in current systems as a possible root cause for the reluctance to embrace deep collaboration. Almost half of respondents (45 per cent) said they only receive data from parts of the supply chain they own. Another 15 per cent complained that they are unable to make real-time changes, as the information they receive is out of date and varies according to its source, while 11 per cent said the reporting mechanisms they use are fragmentary and do not offer the coherent picture they require. Hopefully, despite the harsh trading environment, companies will continue to see the benefits of working closely together with suppliers to deliver value.