Although companies have been affected by pandemic-related supply chain disruptions, many operational challenges during the past 18 months were not caused by the pandemic and reflect a deeper issue regarding how companies’ relationships with their products and component suppliers are structured, according to Harvard Business Review.
It is important manufacturers establish new ways to work with suppliers that ensure full transparency regarding the sources, availability and life cycles of their products and components. It is key to apply a disciplined process that requires suppliers to make crucial product and supply chain information available so manufacturers can plan for rather than simply react to negative events.
Following are some lessons to help establish a transparent relationship with suppliers.
- Be sure your suppliers understand supply chain risk management is a priority. Your company relies on them for critical information, and you need to establish a formal system based on transparency and accountability. Some companies have regularly scheduled calls with suppliers.
- Consult with suppliers at the product design and specification stages to build in supply chain resiliency. Request a detailed checklist of risk factors and related responsibilities from suppliers with every quote they submit. This gives your company the option to assume, share, reject or modify those risks.
- Providing details regarding supply chain risks takes effort, and some suppliers may push back because of the additional administrative burden and potential legal liabilities. When negotiating, show a willingness to establish long-term relationships with suppliers in exchange for true risk-management partnerships.
- If necessary, you should be prepared to award business based on a supplier’s cooperation. A supplier’s ability to consistently deliver accurate supply-chain-risk data should be weighted as heavily as on-time delivery and cost control.
- Information from suppliers—including risk factors for specific components, end-of-life notifications and details about potential supply chain disruptions—must reach your company’s product and engineering teams in a timely manner in case they need to adapt.
- Your company cannot rely solely on supplier transparency to minimize risk; potential for information gaps and unanticipated supply chain events will remain. Companies should establish a data-driven internal process for evaluating supply chain risks and a risk mitigation protocol endorsed and closely monitored by senior management.
