Lead suppliers to win with you – The importance of supplier development

Every company’s business model should be to win by delivering valued, quality products, services and solutions to customers that provide the lowest total owning and operating life cycle costs. This business model begins and ends with the customer. To execute this business model, it is important to develop and sustain a supply base that is an integral part of the extended supply chain, and that can provide the right part, to the right place, at the right time, at the right quantity, at the right quality every single time.

Today’s business environment is characterized by:

  • Increased supply chain complexity
  • Need for integrated supplier relationships
  • Limited internal resources, need for flexibility
  • Increasing competition and need for innovation
  • KPI driven and siloed working environment
  • Ever more demanding market

For businesses to reinvigorate their customer focus and transition from a finite business player mindset to an infinite business player mindset they need to embrace integrally their supplier base. The suppliers-customer relationships constitute a system that will optimize its performance when all involved work for maximizing the performance of it, sharing resources, trusting one another, and truly collaborating to always be there for the end customer.

All is much easier said than done, and never happens over night!

Businesses have been deploying supplier development programs for decades, as well as deploying lean initiatives, trying hard to truly embrace continuous improvement, but have constantly been failing. The reason is that all these initiatives were developed in a silo either within the four walls of the business itself, or just within one of its function/departments, involving only marginally at any given point the supplier base. Another reason for failure is that such initiatives would all be centered around selected KPIs, driven by one symbol “$”, causing conflicts when definition of such KPIs or their targets is not in alignment with other business performance indicators in the business or at any supplier.

Without truly addressing the cultural implication of creating real partnerships, without having visionary leadership that grasps the long-term implications, without formulating a strategy that targets a true change in the way supplier-customer relationships are thought, developed, and measured anyone of the initiatives will continue to fail.

Supplier price concession contribution (shortest bar) is only a fraction of the total supplier contribution to OEM profits. When added to the supplier non-price contribution (third bar from left) the total exceeds the OEM's managerial contribution (fourth bar) to OEM profits. (PRNewsFoto/Planning Perspectives, Inc.)

Supplier Monozukuri is a new way to approach supplier development, converting it to a supplier integration and cross functional effort that extends the benefits captured optimizing the supply chain end to end.

​Supplier Monozukuri is created by using 3 pillars:

Nine Monozukuri Levers

A Robust Process

Change Management

The above Monozukuri Pillars do not sustain themselves, and require 3 Supplier Monozukuri enabling factors:

  1. ​Validated tools & techniques
  2. Aligned KPIs, targets, and objectives
  3. Company Culture

Communicating properly the Supplier Monozukuri vision across the supply chain creates the momentum required to establish the Supplier Monozukuri enabling factors, and deploy the three pillars across the supply chain. Businesses should not underestimate the time and effort required to define and communicate the Supplier Monozukuri vision statement, this with in all effect trigger the transition from finite to infinite business mindset.

To then sustain Supplier Monozukuri a business does not require as many resources as those needed to establish it. Once the Supplier Monozukuri engine is oiled and running a perpetual collection of benefits is captured by the system, truly accomplishing continuous improvement within the end to end supply chain, and extending ultimately to the end customer.

​The outcomes of Supplier Monozukuri are not to be measured by the success or shortfalls of this or that KPI at any given time, but by the way the system reacts to any shortfall, understanding the true long-term impact to the end customer, and working as true partners.

Whichever challenge you may be facing, facing it together with your business partners (strategic suppliers) will give the competitive advantage you need, and will provide a role model for change management that each element of the system will look up to, driving a deeper cultural change, and perpetuating benefits for each company involved!