Why Supplier Collaboration is Essential to Business Growth
Among the top lessons from the current global health crisis is the central importance of close connections with suppliers and the need for solid, near real-time visibility into your transactions with them. This isn’t a new idea, but the pandemic’s impact on global supply chains has created a spotlight that companies would be remiss to ignore. For some, single-supplier reliance has created delays and stock shortages which can only be solved through diversification. For others, skyrocketing eCommerce demand has made it difficult to accurately track inventory movements, while historically based forecasting has been rendered all but useless by unpredictable demand shifts.
Despite rising consumer demands and trends in digitalization, many retailers and manufacturers don’t yet have a formal supplier collaboration strategy in place, but that is changing fast. According to data from McKinsey, companies engaging in supplier collaboration are already outpacing the competition by a significant margin. And even before COVID-19’s impacts, research from APQC showed that 53% of businesses have made supplier relationship improvements a top priority for 2020.
But what is supplier collaboration, and how can it help your business excel moving forward? In this article, we’ll take a close look at how supplier collaboration works, the obstacles companies face in implementing collaborative programs, and how technology can help bridge the gap.
What is Supplier Collaboration?
Supplier collaboration refers to the practice of using technology to better connect with your supplier community, no matter their size or technological maturity. Automation streamlines the exchange of critical documents like invoices, POs, Advance Shipment Notifications (ASNs), etc. between suppliers’ business systems and your business system. This, in turn, can expedite shipping, procurement and other processes.
Most supplier collaboration efforts focus on cost savings and dependable delivery for the buyer. But the best supplier collaboration programs invite suppliers to join retailers and buyers in achieving mutual business objectives, such as joint value creation. The difference is, instead of requiring all their suppliers to achieve a certain level of technological abilities, or use a single portal for trading, these buyers give their suppliers a range of communication options that can fit suppliers at all levels. These electronic communication methods, in turn, can make both organizations more competitive by improving the speed and accuracy of transactions end-to end.
Two fundamental components of supplier collaboration can also help businesses overcome supply chain disruptions and market changes, like those we’ve seen in recent months. Increasing supply chain visibility and eliminating unknowns can enhance your operational resilience and make your supply chain more stable. The more you know about your orders, the quicker you can adjust to disruptions like supplier plant slowdowns or raw materials shortages.
Diversifying your supplier base protects against the risk of disruption or shortages by improving sourcing flexibility and reducing dependence on sole suppliers. Yes, managing more suppliers can complicate your supply chain processes. But if you’re able to leverage technology to collaborate efficiently with any given supplier, a more diverse supplier base mitigates risk with minimal downside.
The Challenge of Technical Maturity
The ability to collaborate seamlessly with suppliers has long been recognized as key to omni-channel retailing because it helps accelerate product delivery and optimize the customer experience. Not to mention eliminating manual tasks, reducing administrative and overall supply chain costs, streamlining the procure-to-pay cycle, extending the value of IT investments, and more.
Conversely, a lack of visibility into supplier activities means the inventory and shipping data you share with consumers often isn’t accurate. Drop-ship programs falter, warehouses have stock outs and because of it, the brand image suffers.
Yet despite all we know about its benefits and importance, progress toward supplier collaboration has been slow for one simple reason: getting it right is hard. Whether through a third-party software provider or in-house solutions, the supply chain connectivity needed for collaboration often requires a lot of time, money, management effort and IT complexity.
The big challenge is that the average buyer’s supplier base varies widely in its business process maturity and technical sophistication. Your highest-volume suppliers may want to exchange documents using EDI or XML. At the other extreme, you may have suppliers who are still using email, PDF and even faxed paper documents, and aren’t ready to transition to more automated, electronic options. Trying to balance both can create a burdensome array of labor-intensive processes for buyers around entering data, chasing approvals, addressing errors/omissions and answering phone calls/emails.
Drivers for Successful Supplier Collaboration
So, how can you escape the manual pandemonium of communicating with suppliers? How do you onboard and then manage compliance with dozens or even thousands of suppliers, each with its unique IT environment?
Any supplier collaboration strategy must start with an integrated platform that supports diverse ERP, shipping and other supply chain systems. Besides EDI, the solution should support a wide range of formats, including XML, CSV, PDF and numerous application-specific formats.
The next step is onboarding existing suppliers, including training them on their connectivity option of choice. This process needs to be consistent, repeatable and scalable across the supplier base. Key to achieving high adoption levels is communicating mutual goals and understanding each supplier’s unique requirements and capabilities, so their integration has minimal impact on their current business processes.
Besides streamlining the exchange of invoices and POs, a supplier enablement solution needs to seamlessly report benchmarks, scorecards and other analytics so you and your suppliers can improve performance, make customers happy and collectively be more successful.
Completing the picture is managed services expertise to minimize the IT and administrative pains that are in your way today. A true managed service solution takes care of the day-to-day support issues (connection problems, error messages) that would otherwise fall on your IT staff.
Simplify Supplier Collaboration with TrueCommerce
TrueCommerce OneTime, our managed service supplier enablement solution, provides everything businesses need to connect, onboard and support suppliers cost-effectively and at scale.
To help maximize adoption, our solution lets suppliers choose between fully integrated EDI, a feature-rich web portal (web EDI), or other electronic file formats, including PDF integration. All these convert data to EDI on your end so you can have a consistent process across suppliers regardless of how they connect in.
While many service scenarios are “break-fix” in response to problems, our managed service model proactively monitors and validates the flow of messages between you and your suppliers to address issues before they disrupt business.
Finally, the OneTime platform offers real-time access to a wealth of industry-standard supplier metrics like compliance performance, on-time fulfillment performance and more. Moreover, you can extend the built-in analytics to gather the operational insights you need most.
If you struggle to answer questions like “What’s the status of that order?” or “Where are those items and when will they arrive?” supplier collaboration can help your business get the visibility it needs to move forward. And, with the right technology, you can create an interconnected supply chain without the burden of endless emails and phone calls.
For more information, get in touch with a TrueCommerce expert to see about how we can make your supply chain operations easier, while saving you money and reducing risk at the same time.
About the Author: Brian Lindner is the Director of Field Marketing at TrueCommerce. He has spent the last 15 years in B2B project management and marketing. His focus is on Vendor Managed Inventory and related eCommerce solutions that help companies save time through automation. Brian enjoys spending time with his wife and 2 kids and in his spare time brews delicious craft beer with his friends.