Supply Chain Management

Don’t get caught in the “no transparency trap”​

mSE Solutions

“No way, we can’t give all that information to our customer. Then they’ll have complete insight into how we work and see where our weak points are. And what if they take the information straight to the competition?“

Heard that before? You probably have, and your initial reaction was probably similar. Why should your customer be able to see your detailed quality procedures and protocols or purchasing routines? Why should they be a part of your vendor qualification? Why in the world are they interested in the stock levels of minor product parts? This doesn’t automatically mean that your customer is preparing to defect to the competition. It could just as well mean that they want more transparency so they are equipped to react if something goes wrong. In fact, the chances of your customer walking away and going to the competition are higher if you don’t share the supply chain information you have.

And yes, this collaboration is a two-way street. Effective end-to-end supply chain management starts with demands from the customer side. We have probably all seen huge sales forecasts being entered directly into the system, triggering large purchasing orders and stocks of parts or even finished goods being filled up. If mistakes are made and the forecast suddenly drops, then it’s time for some serious discussions. Why didn’t customer purchasing and your sales team communicate early in the process? Were numbers thoroughly verified? Lack of transparency and open communication between the parties can wipe out profits in a heartbeat and drive companies out of business. Sole concentration on volumes and prices – as is often the case in discussions between sales and purchasing – just does’nt cut it.

When optimizing your supply chain, it is absolutely vital that you include your customer in the process. The analysis ideally starts with a collaboration outlining a mutually agreed-upon business plan. Based on your customer’s market and distribution strategy, future product demands need to be evaluated, forecast and translated into demands for parts and production capacities. Go the extra mile and analyze your customer´s customer demands. Know where the trends are, and discuss your observations with your business partner.

You need to understand the market and sales development nearly as well as your customer, and they, on the other hand, need to understand production requirements and standard delivery times for parts. Constant and transparent dialogue between all parties involved, including parts suppliers and logistics partners, is essential and needs to be institutionalized.

Efficient supply chain management concepts that can contribute to improved implementation of your company’s service commitments are always developed by analyzing processes end to end. Transparency and mutual understanding are as important as the commitment from both sides to share information, and sharing should not be limited to information about capacities and procedures. Involving customers in vendor qualifications and quality procedures, like incoming components inspections for instance, boosts mutual confidence and strengthens the business relationship.

Collaboration between business partners needs to be mutually agreed on by both parties. Willingness to share information for the sake of optimizing the supply chain is a must. But the real challenge in most cases is the implementation of procedures that ensure smooth daily workflows.

Assign the task to a competent team and get a professional partner who can support you all the way from concept to implementation. Talk to us, that’s what we’re expert at.