Suppliers are essential to the success of large companies in every industry, and many of the world’s most successful companies collaborate intensively with their suppliers. Some examples:
- Unilever partners with enzyme suppliers Novozymes and TerraVia to develop more environmentally friendly detergents;
- Ford’s Aligned Business Framework prioritizes suppliers who commit to fair labor practices and other ESG standards;
- And semiconductor manufacturing equipment maker ASML rewards suppliers for sharing new technology and reducing costs, according to this July 2020 McKinsey article: Taking supplier collaboration to the next level.
Resilinc enables such collaboration between customers and their suppliers when it comes to mitigating supply chain disruptions, fast.
One way – in particular – is via supplier risk assessments. Here’s how it works: once a customer’s supplier network is mapped on Resilinc’s platform, risk surveys are launched to individual suppliers; supply chain weaknesses are flagged; strategies and playbooks to reduce risks are offered; and collaboration to actively mitigate risk is facilitated (side note: this is all done via the customer’s risk management dashboard).
While sometimes identified risks are too extreme or costly to mitigate (leaving a customer to seek a new supplier option); in most cases, the best option is to collaborate with suppliers to reduce unacceptable risks. As our VP of Operations, Ranna Rose, recently said: “Shifting to another supplier isn’t easy. You often have to go through engineering and quality approvals; there may be proprietary tooling involved. Usually, the best strategy is to be proactive.”
For example, we’ve seen a customer pay a supplier to install sprinklers at a factory for fire suppression and another fund a retrofit for hurricane preparedness. Some customers have even created standards for suppliers in hurricane zones and agreed to pay more for their raw materials if those suppliers invest in resilience.
Of course, there’s risk in every link of a supply chain, and every delay or disruption will have widely varying impacts on a company’s revenues and bottom line. To effectively analyze the potential impacts of disruptions, it’s wise to focus on parts and materials that are critical to the company’s highest-revenue products. Then, initiatives to collaborate with suppliers on risk mitigation can focus on those suppliers which add the most value, or the loss of which would harm the company the most severely.
Collaborating in Crisis
While proactively collaborating to reduce risks in advance of any disruptions is the best practice, fast-moving emergencies often call for fast collaboration. During the COVID-19 pandemic, several Resilinc customers learned that their suppliers in other countries had been forced to close because they weren’t considered essential. By quickly writing letters to local authorities, the customers were able to help their suppliers stay open—which avoided supply disruptions and enhanced the customers’ relations with these suppliers.
As detailed in this Harvard Business Review article by Resilinc CEO Bindiya Vakil and supply chain expert Tom Linton, many companies have placed advance orders, paid upfront or even lent money to suppliers placed in financial peril by the pandemic.
The authors in this McKinsey article point out that collaboration between buyers and suppliers often requires a change in mindset from the “transactional or even adversarial relationships” that characterize buyer-supplier relationships. And the highest-value collaborations require “cross-functional involvement from both sides” and in some cases a “paradigm shift” to embrace a “value-based way of thinking.”
What’s more, according to joint research by McKinsey and Michigan State University, companies that regularly collaborate with suppliers “demonstrated higher growth, lower operating costs, and greater profitability than their industry peers.”
Resilinc echoes this view: collaboration can align the goals of customers and their suppliers. In risk management, both sides can win, so there are tremendous opportunities and incentives to collaborate.
Ready for a more collaborative, resilient supply chain? Contact us today.