8 Key Tactics for Developing World-Class Supply Chain Part I

When building a successful supply chain, there are several items to consider as you prepare to establish a relationship with suppliers. As you develop your supply chain and plan ahead, the following are some tactics to guide your strategy.

1. Set BHAGs (Big Hairy Audacious Goals)

One of the most important steps is to set short-term, Big Hairy Audacious Goals for supplier performance. For example, you might strive for a certain reduction of lead time over the course of a year or a percentage of quality improvement from year to year. Another goal might involve moving to Kanbans, i.e. pull systems, within a year on all parts and materials with suitable demand patterns.

All your BHAGs should be impossible to achieve without making significant changes to existing operations, forcing you to innovate. Each goal will then help inform every aspect of supply chain management.

You should also implement the right strategy when working with suppliers to help you achieve your goals. Specifically, using the 80/20 rule, focus on the suppliers that will help you realize your biggest goals. Also, keep track of your progress to determine how well you're able to meet or exceed your goals, and ensure you and your suppliers are on the same page.

2. Know That You Have Leverage

If you're working with a large supplier, always keep in mind that you have leverage. Even the most successful suppliers with plenty of high-profile clientele don't want to see complaints from any of their customers. They'll want to avoid building a negative reputation and will work to quickly resolve any issues their customers have.

As such, if you have legitimate issues, don't be afraid to bring them up and promise that you'll escalate them or take your business elsewhere without an effective resolution. A good supplier will take your complaints seriously and attempt to reach a mutually beneficial agreement.

3. Define All Costs Up Front

Clearly establish the cost of developing your supply chain. In turn, your supplier should help figure out how to reduce various direct costs on material orders. For instance, you might be able to negotiate a low unit price with a long-term contract, while bulk discounts might also be available in certain cases. Additionally, you might be able to save more with discounts on materials if you pay reliably and on time. 

Defining all costs outright will help you paint a clear financial future for both you and your supplier, helping you avoid any unpleasant surprises down the line. 

4. Start a "Supplier Day"

Another tactic to try is to start a "supplier day" that entails identifying and recognizing the most valuable suppliers with a shared vision of operational excellence. This supplier day could apply to everything from specific service categories to tangible offerings. They could also occur at different times, such as when new spending categories develop or demand shifts dramatically. When setting these days up, ask for assistance from a senior member of the supplier organization.

You can hold supplier days in a couple of ways. For example, you could hold a physical event that brings suppliers to your facilities, where they can learn more about your operations. You may also want to conduct online virtual supplier days that connect with suppliers digitally. In either case, you can use these events to make important announcements and updates, award suppliers with certain rewards, and give both sides a chance to get to know each other better.

These are some of the many tactics you can use to successfully develop your supply chain with the right suppliers. Stay tuned for part 2 where we'll discuss additional steps to take when starting your supply chain.