Some of the hidden cost drivers in the supply chain are relatively easy to uncover, measure and address by adopting classic lean approaches. These approaches may include value stream mapping the processes between customers and suppliers. It is important to keep in mind that many supply chain problems begin and end with the customer-supplier relationship. The extent to which critical issues, wastes and cost drivers can be identified and mutually addressed depends heavily on the strength of the customer-supplier relationship. Customer-supplier relationship quality can drive success.

Developing good business relationships with key and critical suppliers can help in areas that are often weak, for example by:

• Developing common and simple communications
• Developing a common understanding of each others’ needs
• Sharing business strategies in order to develop in the same direction
• Understanding and overcoming differences in quality systems and IT systems
• Mutual involvement in innovation and product design
• Uncovering areas of risk through better knowledge of suppliers’ businesses

Many firms are realizing the importance of actively addressing these relationships and find that they do not have the internal organization and sometimes the talent to readily manage and develop suppliers. Supply management is often addressed from the sourcing and buying standpoint. Once the deal is done and suppliers are on board, developing relationships is not a priority. This may be due to resource issues (such as human and IT) or simply different approaches to supplier management that do not emphasize the customer-supplier relationship. Sometimes it’s a cost vs. value issue. Purchasing organizations may focus on reducing product or service cost without recognizing the value component and may neglect to address the value that their suppliers can add. Instead of taking a proactive approach, many firms use triage and may ignore suppliers until there is a problem. Addressing critical supplier problems under duress, particularly without the benefit of a preexisting and reasonably developed relationship, is a challenge to avoid.

Sherry R. Gordon