Spend any amount of time working with supply chains, and one thing becomes clear: The traditional environment of the supply chain is mostly one of competition. That’s because, in an effort to earn a customer’s business and meet their demands, suppliers are often pitted one against the other to offer the lowest cost possible. But when it comes to overall success of the supplier/client relationship, this short-term competitive approach leaves untapped opportunities in terms of improved quality, cost and lead time, as each along the chain pursues what’s best for themselves as opposed to what’s best for the whole.
What’s the alternative? Foster a cooperative relationship between supplier and customer that allows for greater efficiency and innovation across the board, and makes the need for trade-offs between quality, cost and lead time a thing of the past.
While at first glance this may seem like a monumental undertaking, the fact is that the seeds to your success can be found right under your feet. After all, your supply chain relationships might span the globe, but in order to nurture cooperative working relationships with each member of that chain, it’s easiest to begin at home.
Here, the name of the game is efficiencies. Achieve the three types of efficiencies outlined below, and you’ll be well on your way to meeting the needs of your customers as you enjoy a more cooperative, mutually rewarding working relationship.
Make It Your Goal to Achieve Total Efficiencies instead of Individual Efficiencies
As the term implies, individual efficiencies seek to satisfy the efficiencies of individual assets. In a marketplace that chases ROI, this is the approach that informs (and infects) the decision-making process. For this reason, it’s also one that misses the mark because all too often, maximizing ROI of individual assets isn’t what's needed for the success of the whole. Here’s where working to achieve total efficiencies serves the interests of the entire supply chain.
To get there, begin by seeking to understand your customers’ needs and wants and then designing assets and developing organizational know-how that offers the flexibility to quickly adapt to changes in volume, specification and variety. Even during high growth and economic expansion, avoid falling into the trap of acquiring expensive mass production equipment that forces individual asset ROI based on economy of scale (i.e., equipment that forces large-batch manufacturing regardless of customer demand). Armed with this understanding, you’ll be ready to pursue a customer-driven mindset and establish a spirit of cooperation in your supply chain.
Pursue True Efficiencies
Once you’ve taken the first steps toward total efficiencies, your next goal will be to pursue true (as opposed to apparent) efficiencies. The beauty of true efficiency is that it supports a customer-driven production mindset and total efficiency. This approach reflects a radical shift in what happens on most shop floors, where traditionally, in order to achieve greater efficiency of assets, an operation will turn out more products than needed. What results is overproduction—the greatest waste of all—and, of course, only the appearance of efficiency.
In contrast, making the required number of products with less assets works because you as the supplier don’t decide how many to produce; the customer decides. But, as a supplier, what you can control is cost, and this approach puts you well on your way to doing just that as it brings you closer to your customer and benefits the entire supply chain. The result? Less waste, a natural reduction in costs and improved efficiencies across the board.
Reduce Waste—Don’t Force Work
Another supply chain pitfall that comes with chasing a purely competitive relationship has to do with forced work, in which lower costs are achieved by demanding more work without reducing waste. The goal, however, is not to do more by working harder, but by working smarter—that is, developing suppliers with the know-how to increase the portion of value added in every job by reducing waste. Here, the objective is to favor suppliers who have an innovative, inspired and empowered workforce, as opposed to class warfare.
How do you achieve such a workforce? Begin by redefining the role of your managers, in which they see themselves as teachers whose job it is to spot, and in some cases, develop supplier talent that will, in turn, become allies who partner to further reduce risk throughout the supply chain. Acknowledge managers with this kind of approach and reward suppliers who thrive under such guidance, and watch the improvements within your operation that follow.
From Exclusively Competitive to a More Nurturing (and Rewarding) Spirit of Cooperation
In order to manage and maintain a successful supply chain, your goal should be to shift from short-term relationships that are exclusively competitive in nature toward ones that foster greater cooperation. This is done by focusing on the customer even as you work towards achieving total and true efficiencies while eliminating waste. This can only be mastered through accumulated practice and, therefore, through a necessarily longer-term relationship that must be maintained via mutual benefits rather than pure competition.
Begin at home and go from there, and you’ll soon see how, in fostering closer, more mutually rewarding relationships across the board, you’ll reap the rewards of improved quality, cost and lead time as a result.
Olivier Larue has 20 years of experience in the hands-on implementation of lean/TPS (Toyota Production System). He joined the Toyota Supplier Support Center (TSSC Inc.) following a successful consulting career in California’s Silicon Valley. Eventually, he decided to fuse his style of shop floor-based teaching with his proficiency in TPS to create Ydatum Operations Management Engineering Inc. He is a guest lecturer at the University of California at Berkeley School of Engineering and has been a presenter for SME. His expertise also includes Six-Sigma, Hoshin Kanri and an ability to help companies achieve sustainable, system-wide improvements and customer satisfaction.