#Lessonsfromthebest : Supplier collaboration

Author’s Note: Over the last few weeks, I have been using this space to write about the lessons I learn from organizations with respect to their supply chain management, but not limited to it. I have also been attempting to convey my learnings as a narrative, and a story of sorts. So, if you want to learn something informative whilst having some entertainment, go ahead and read away! Also, if interested, make sure you catch-up on my remaining blogposts as well. Click here! 😊

Shanmugeshwari, MBA

Amrita School of Business, Coimbatore

IMPORTANCE OF SUPPLIER COLLABORATION

COVID-19 has amplified the importance of supplier collaboration. Companies have long-viewed collaboration with suppliers as the key to value creation in the supply chain. This has been considered more critical than having a global procurement network that helps with scale or spend analysis that helps reduce costs.

Greater collaboration between suppliers helps both the Top-Line revenue contribution and the Bottom-Line cost control.

Top-Line growth comes from,

• Access to new technology
• Insights about the market
• Access to supplier's business network and logistic infrastructure.

How does this help the Top-Line?

• Faster New product development
• Help and assistance in entering newer geographies sustainably.
• Getting access to the supplier's capacity during disruption or capacity shortfall.

Similarly, the Bottom-Line is affected by shared capital expenditure and jointly manages customer demand. These can be done by:

1. Most favored customer pricing

2. Having visibility of the upstream supply chain

3. Jointly reducing redundant SCM activities

4. Jointly securing low-cost manufacturing.

Along that line, when P&G and Kimberly Clark had their earnings call this April, both finished strong and with some realistic supply chain lessons for us.

Toilet paper comes in two varieties, consumer and commercial - the raw material, quality, packaging, and suppliers for both these varieties are different. Due to a shift in consumption during the quarantine, the household consumption of toilet paper rose by 40%, which is a huge leap for a product whose demand is primarily a  constant one.

It took time for the information to move up and manufacturers to respond to the real demand spike.

For a bulky low-value product, retailers relied on continuous replenishment and did not store inventory. Shifting commercial toilet paper to household consumption would need new retail relationships, contracts between suppliers, distributors and stores, change in packaging  and labeling and new truck transport routes.

Companies responded by running production 24*7, reducing assortments, simplifying packing, re-routing vehicles, directly shipping to retail and making innovations in the product as below!

Thus, supplier collaboration can help companies always deliver sustainable growth ranging from recessionary phases to periods of successive boom.