Supply Chain Profitability - Collaboration to Improve Customer Service and Reduce Costs
Companies can gain a significant competitive edge over their opposition via
Supply Chain collaboration with key customers, suppliers and service providers.
Typically, collaboration can result in improved service, reduced costs and a
favorable status with customers and key resources. Benefits are magnified when
there is an unanticipated problem, key materials are in short supply, there are
disruptions in one’s supply chain, or when being treated in a priority way can
make the difference between success and failure.
Collaboration is more important than ever with increased complex global logistics
issues, increased demand volatility, short supply of products in high demand,
lack of visibility over domestic and global supply chains, increased demand for
service, and cost fluctuations for raw materials and fuel. Additionally, there are
more multiple tiers within a Supply Chain throughout a product’s life-cycle and for
services provided than ever before.
Key methods of collaborating include working with suppliers and customers to:
> Work together with your suppliers to forecast future inventory and service
requirements over various possible scenarios and then plan together for
normal business, heightened business, and to overcome potential obstacles.
> Establish simultaneous to/from communication in all key locations and for
multiple organizational levels for production, sales, purchasing, inventory,
warehousing, and transportation and share immediate urgent communications
with suppliers and/or customers.
> Collaborate on improved technology for required internal and external visibility
as well as exception alerts through all tiers and geographical locations in the
common supply chain. If you can provide tighter feedback loops with improved speed, your collaboration partners can react timely and immediately to problems which will reduce their costs and ultimately yours as well.
> Optimize your internal speed and accuracy. If your customers know you will provide whatever they need in a timely fashion with 100% accuracy they will reward you with more business. When your suppliers take note of this growth you will become a favorite customer and be serviced first, especially when resources are low.
> Improve your inventory management and let internal resources and key customers and suppliers have visibility into your inventory. Customers will then know how to order properly and suppliers knowing your inventory in conjunction with theirs can alert you to purchase to prevent a near future outage of key products or materials. You can alert your key customers as well.
> Determine individual and combined cost benefits for various scenarios including inventory costs, transportation costs, storage costs, and total costs.
Additionally, one can use the following methods to gain additional advantage by getting better service at lower costs:
> Collaborate with customers: Our goal is to make it as easy as possible for customers to do business with us and in a most profitable way. If one’s best customers get preferential treatment in a formal relationship, they will be loyal and come to you first for your products or services. Additional ways to make it easy for your customers to do business with you include: studying their purchasing habits and recommend changes to reduce their costs of doing business; warning them of potential future shortages; contacting them on a predetermined schedule; offering quantity based specials that meet their needs; allowing them to place stock orders and always fill them on time.
> Collaborate with suppliers: Make it as easy as possible for them to do business with your company. Pay all bills on time, place stock orders, provide forecasts, participate in suppliers’ promotions, and praise your direct contacts at the supplier whenever possible.
> Collaborate with key service providers, e.g. truckers, packaging suppliers, etc.: To get favorable treatment in your common effort one can gain advantage and make it easier for them to provide better service to you by reliably letting them know of your future needs. My client was able to get extremely favorable trucking rates (much better than the competition) from both short haul and over the road trucking companies by showing how much business was done the past 3 years overall and with each of them, and then projecting growth and therefore future potential revenue. Best rates were achieved by committing a majority of the trucking business to them as long as established service levels were maintained.