Strategic Supplier Alignment: How to Blend Supply Chain with Strategy
One of the key aspects of a business that ensures its smooth operation is the relationship that its buyers and suppliers share.
Loyalty and reliability in the network can help create better value and make supply chains more resilient to changes and unforeseen circumstances.
But supplier alignment can be tough – read on to learn how to align your supply chain with your overall strategy with strategic supplier examples.
What is supplier alignment and why is it important?
The basics of supplier alignment
Supply chain strategy refers to the framework by which a company can operate within its supply chain such that its environment and influencing factors help meet the goals of the business and ensure overall growth and customer satisfaction
The benefits of supplier alignment
One key benefit of supplier alignment is that it can help to speed up the process of transformation of a material to a sellable product, ultimately increasing efficiency.
In addition, supplier alignment can ensure that suppliers, consumers, and sellers are on the same page about objectives and customer satisfaction – whether these relate to quality, sustainability, timeframes, or more.
Typically, supplier alignment can help suppliers see why they are important to the business and its operations, and also act as motivators for suppliers to optimize their processes and ultimately benefit the entire chain.
Additionally, a clear supplier alignment helps clarify all responsibilities and duties of each supplier and keep communication clear, while also creating a clear framework of values and expectations within which supplier relationships should be managed.
What does strategic supplier alignment look like?
Communication and trust
Communication and trust can be crucial to business relationships, and those within the supply chain are no different.
Timely communication regarding deliverables and their associated deadlines, in addition to clear requirements for tools, sustainability-related goals, and material quality, can be extremely useful to establish as a standard early on.
Equally, prioritizing clear communication and mutual trust may help to provide a space in which problems or delays can be quickly voiced and addressed, preventing costly delays.
While building trusting supplier relationships can take time, mutual respect and shared values can play a significant role in increasing the overall efficiency of a supply chain.
Cross-functional engagement – in which respective departments or organizations can quickly and clearly communicate – can go a long way to ensuring things run smoothly.
Optimizing cross-functional engagement often starts with leadership – providing well-defined roles and responsibilities for each person within the team can be a great way to ensure that each person knows who is responsible for what, and who they ought to communicate with.
Ensuring that each person is aware of, and working towards, a common goal can be another way to facilitate effective cross-functional engagement.
Create shared value through aligned goal-setting
Shared goal-setting across the organization and wider supply chain can not only strengthen strategic supplier alignment but also serve as a motivator – particularly where results are visible across the chain.
Cost transparency can be essential to aligned goal-setting, and many businesses have found clean sheet cost modeling to be a helpful and clear way to center discussions and decisions on facts.
With this in mind, it can also be wise to ensure your goals are reflective of an up-to-date understanding of the market in which you function. While it might be necessary to have a 24-hour turnaround for shipping one product, a longer time frame might be more suitable in another industry. Keeping on top of industry standards – and keeping an eye on your competition – can ensure that your goals are focused on the areas which will have maximum impact.
Steps for blending supplier alignment and corporate strategy
With the above benefits in mind, let’s establish some concrete ways in which to strengthen strategic supplier alignment.
Define and communicate a clear corporate strategy
The first step to supplier alignment is to establish a clear corporate strategy. Then, after identifying which elements of this strategy relate to your suppliers, communicate this strategy and the related expectations and goals with your supply chain.
Providing your suppliers with adequate information, data, and the means to study that data critically can be crucial to enabling an understanding of their overall role and the means by which they can achieve what is expected of them.
This information grants them the knowledge of market requirements, company data, as well as customer demands, and helps them be on the same page as their buyer to ensure maximum efficiency. Corporate strategy in turn helps to establish value-aligned goal setting, as mentioned earlier.
Align supply chain performance metrics with the corporate strategy
Rather than rely on somewhat universal metrics to gauge the performance of your supply chain, creating personalized metrics can be one way to clearly communicate – and enforce – your corporate strategy.
Whether your priority is the speed of delivery, quality, cost-efficiency, or sustainable methods, be sure to communicate these goals with your suppliers, and to incentivize performance in these areas.
One way to do this is to align incentives across all departments and links in the chain – this can ensure that a burst in sales activity, for example, doesn’t result in an unexpected demand that suppliers are unprepared for. Having clear expectations around supply can set suppliers up to meet their performance metrics and ultimately align with corporate strategy.
Structure your supply chain to optimize the strategic goals
This can be a crucial step as it encompasses almost all elements of a supply chain, including networks, locations, plants, suppliers, departments, business heads, inventory management, organizational structure, and more.
Crucially, alignment can occur both externally and internally to your organization. Interdepartmental alignment can sometimes somewhat counterintuitively prove more challenging, as it can lack the contractual relationships and rules that govern your external supply chain relationships.
As you consider the structure of your external and internal supply chain, it can be important to remember that your structure ought to ideally mirror your strategic goals. For example, a supply chain that is optimized for financial sustainability may look very different from one that is optimized for environmental sustainability. Increased flexibility, speed, cost-efficiency, agility, and resilience can all be strategic goals that you can reflect within your supply chain structure.
The increased visibility that can come from utilizing supply chain management software can allow you to optimally structure your supply chain to meet your strategic goals. Whether it’s through the identification and removal of duplicated processes or materials, to real-time demand signaling, supply chain management software can be an incredible tool to help you achieve your supply chain’s strategic goals.
Keep refreshing the strategy and alignment process
As the market involves, suppliers come and go, and even products and services change dramatically, it can be crucial to continually revisit and update your strategy and alignment process. Just like you update payrolls, contracts, and copyrights, make sure the supplier alignment strategy is also on your list of things to be updated within a time span of one to three years.
Ready to align your supply chain strategy?
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