October 18, 2020

Supplier Relationships: The Foundational Ingredient of Supply Chain Resilience

BY Alan Witthuhn
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Unanticipated events continue to make one thing clear for businesses – only a strong understanding of risks ensures that the right business continuity plans are in place for times of uncertainties and change. Supply chains are the essential veins of the global economy.

The human chain or skilled supply chain labor is responsible for continuously delivering goods and services to all sectors. In a world that is not as vertically integrated, businesses are leaning on suppliers and vendors for execution. Managing global supply chains is, therefore, a complex and pressure-filled task during ordinary situations.

The current global business situation is additional evidence that we need more resilient supply chains. The unintended consequence of the current lockdown is a shockwave of international supply-chain disruptions, suspension of operations, depleted inventories, and diminished revenues. What can we learn from this unprecedented situation?

Your relationships with suppliers impact your resiliency

The business world learned painful lessons in the aftermath of the Fukushima disaster a couple of years ago. The impact on the local suppliers blindsided direct suppliers. It resulted in considerable job and revenue losses for manufacturers supplying goods to the affected regions.

Interestingly, those enterprises that had built transparency and trust in their supply chain relationships were able to recover quicker from the event.

Harmonizing the supplier-buyer relationship is critical to ensure safe, scalable, intelligent, and sustainable execution. For this, established digital tools play a vital role in safeguarding operational viability. Technology that focused on ever-evolving risks has changed the landscape in creating multi-tier transparency, prioritizing a list of critical components, determining the origin of supply, and identifying alternative sources as needed.

Yet, under the unexpected situations of crisis, these tools can be ineffective, especially if the supplier relationships are suffering. An important aspect to understand is that regardless of the technology used, supplier-vendor relationships play the most vital role in your supply chain resilience.

It makes business sense to visualize unexpected scenarios and estimate their potential impact. As a manufacturer looking to find the inherent weakness of the supply chain, you may ask the following three key questions to identify opportunities to improve your collaborative relationships across the entire value chain.

  • In the context of trust and transparency, has my supplier relationships impacted my ability to sustain or continue operations through the crisis?
  • How will the health of my supplier relationship impact the prioritization of recovery capacity?
  • Is the resilience of my supply chain impaired by a failing supplier relationship?

Navigating to the ‘new normal’ with human connections

There are plenty of industry reports on the current situation and recommended methods on how to navigate recovery. Mckinsey’s latest report outlines the impact on supply chains during the COVID crisis explains how a manufacturing enterprise can focus on recovery. However, amongst the current articles and recommendations published, there continues to be little emphasis on how your supplier relationships, trust, transparency, and communication levels impact your ability to manage the complexities in a time of crisis.

Plante Moran has developed a Supplier Benefit IndexTM and, in their 2019 report, compared that to the trust and communication scores. There is evidence to suggest that there are strong ties between supplier performance and the level of trust and transparency.

Source: Plante & Moran – Auto supplier working relations study shows uphill road for OEMs (2019)

As the economy and manufacturing facilities come back online, it will be vital to understand how these relationship metrics will impact the ability to ramp back to normal operating levels.

Perhaps it is time to bring this focus back into perspective – a successful partnership requires human connections, regardless of the technical strategies, tools, or technologies that your business relies on. These human connections and supplier relationships are challenging to maintain but are essential in times of crisis to ensure a mutually beneficial relationship.

As part of our Operational Excellence practice, our industry experts can help evaluate where your business operations could be getting impacted by the level of your supplier engagement. We have a proven methodology to quickly identify and implement improvements that can help you re-establish continuity of supply, improve your communication channels, and bring your teams closer and make them move forward with trust and transparency.

Would you like to know more about supply chain resiliency and ways to improve supply chain performance?
We have the details available here.


Alan Witthuhn

Senior Supply Chain Manager, C5MI