A matter of trust
From the April 2021 print edition
COVID-19 has made partnerships more important than ever. With the pandemic yet to loosen its grip, collaboration with suppliers is paramount in fostering innovation, develop products, mitigate risk and keep goods flowing.
To increase that collaboration, supply chain leaders must move away from transactional exchanges with suppliers towards partnerships focused on value creation, says Jon Rosemberg, senior vice-president, merchant operations & program enablement for Indigo Books & Music.
While some exchanges must remain transactional, Rosemberg stresses that in times of crisis, relationships that resemble partnerships are most likely to create that value for all parties. Developing these links starts with both communication and building trust to understand each organization’s true interests, says Rosemberg. Open dialogue involves acknowledging tough times and resolving to support key clients through them.
“When you build that trust and have an open conversation, in my experience you tend to see that, many times, the interests of each of the parties can be complementary as opposed to being a zero-sum game,” he says. “You need to be able to have those conversations, which you won’t do if you’re only focused on margins and trying to extract every dollar from each other.”
Rosemberg recommends revisiting vendor scorecards to understand who’s at the top of the list, ranking those vendors by spend, business growth or other metrics, while assessing where the most value lies. As well, with supply chains upended by the pandemic and facing other issues like shipping container costs, open dialogue with suppliers is more important than ever.
“The amount of stress that COVID has added to operations and the amount of reactiveness that an organization needs in order to survive in this environment is forcing us to have a lot more conversations and to make sure that those conversations are about ideation,” Rosemberg says. “They need to be solution oriented because finger-pointing really doesn’t work.”
A collaborative focus may also help to attract and retain talent. Younger supply chain and procurement professionals value partnership, Rosemberg adds. While haggling with suppliers may sometimes be necessary, younger professionals don’t want to do the job that way.
“People want to build engagement and interact and not see it as a rivalry, but as a collaboration,” he says. “Ultimately, it’s people dealing with people.”
On the whole, collaborative people make for better recruitment candidates, says Neil Drew, director at recruitment company Winchesters. Communication skills are key, and collaboration with stakeholders rates high in desirable skills. Yet how important a knack for supplier collaboration is depends on the role, Drew adds. It’s definitely important for vendor-management roles. Yet a sourcing role may call for less-developed supplier collaboration skills.
“Maybe you don’t want to be fully collaborative, especially during tough times and you’ve got tough targets,” he says. “You’ve got to turn the screw a little.”
The special sauce
Kathy Cheng, president of apparel manufacturer WS & Co. and founder of Redwood Apparel, echoes the importance of human connection in fostering collaboration with suppliers. Cheng has two perspectives: as a businessperson dealing with her own suppliers and as a supplier herself.
The company has manufactured garments in Canada for over 30 years, Cheng says.
The closest relationships with both suppliers and clients (which Cheng refers to as brand partners) are the ones spanning 10, 15 or even 20 years. The key to maintaining and deepening those relationships is to forge those collaborative, strategic ties, she says. Cheng refers to deep-rather-than-wide relationships as a “special sauce” that has allowed the company to thrive.
That collaborative approach also means that Cheng’s company acts similar to an extension of its brand partners’ product development and production teams.
“We’re focused on what we’re great at and it allows our brand partners to focus on what they’re great at – be it distribution, marketing, sales and branding and all that other stuff,” she says. “Instead of just, ‘I’m buying from you,’ it’s ‘we’re a part of you. We’re a part of your team.’”
Like any relationship, success lies in open communication, Cheng adds. For example, the company employs an embellishing coordinator who is responsible for visiting its embellishing decorators daily to see how production is going. Brand partners also share information so that the company can support and service them as well as possible.
“We’re very close with our partners, so much so that we also recognize that we’re a significant part of their business as well,” she says. “It’s not like we own them by any means, but it’s all these years with mutual respect and really being transparent.”
The pandemic also highlights the need for collaboration, Cheng says, noting the company has set up weekly calls or Zoom meetings with brand partners in an effort to maintain close communication. That helps to bridge some of the physical distance that remote work has injected into business. That virtual connection helps to ensure everyone is aligned and improves efficiency. It has also lowered risk.
“It gives our brand partners visibility of the supply chain,” Cheng says. “It allows us to share, and vice versa, problems and risks so we can address them earlier as opposed to waiting until the end.”
COVID-19 has also made it more difficult to ensure that companies get the information about suppliers they need to collaborate effectively. According to the 2021 Supplier Information Study from Toronto-based supplier data and AI company Tealbook, 72 per cent of procurement leaders are “very concerned” their supplier intelligence has still not improved to crisis-proof their supply chains. Some are also concerned about missing out on innovation (30 per cent), falling behind the competition (25 per cent) and being unable to determine ROI (22 per cent).
Having that supplier intelligence not only fosters collaboration but also helps to limit supply chain risk, a concern pushed into the spotlight during the pandemic. Diversifying that supply base can help to monitor risk better, says Stephany Lapierre, Tealbook’s CEO.
While it makes sense to have suppliers in different countries, there are also opportunities to partner with and support local suppliers, she notes.
“From a risk mitigation perspective, if you’re able to partner and promote those businesses and work with them on scaling them appropriately to handle the type of contract that you’re going to send them, you’re going to promote your economy locally,” she says. “You’re going to be able to reduce the cost
of transportation, to reducing some of the risk of having a global supply chain.”
Technology can also help to foster collaborative relationships with suppliers, Lapierre says. In this, focusing on data is superior to a strictly technology-driven approach. More software can mean a heavier burden on the supplier, as it can be portal-based and rely on the supplier to maintain a lot of information. Synchronizing and enhancing that information across these systems can lead to an efficiency gain and provide a way to get 100 per cent visibility across the supply base, Lapierre says.
“Technology, in a way that is lead by data, is more the future,” she says. “You need software. But the analogy is, back in the day when you lost your phone, you lost your pictures, you lost your contacts, there was a lot of friction. Today, I can change my phone and I’m up and running within 10 seconds, and now I’ve got the latest iPhone. Everything is updated because my data is in the cloud.”
Collaborating for sustainability
Pierre-Francois Thaler, co-founder and co-CEO of EcoVadis, agrees that collaboration is key not only to creating impactful supplier relationships but reducing risk. Effective communication promotes visibility, which can help to spot potential shortages, regulatory considerations, as well as social and human rights concerns.
“When information is communicated accurately and in real-time between you and your suppliers, the guesswork is virtually eliminated in pinpointing problems and potential threats that may lurk – making any issues that arise easier to resolve in a more timely, effective manner,” Thaler says. “This gives you the context and forward-thinking insights to prevent possible future harm.”
Collaboration also promotes sustainability within the supply chain, Thaler notes. It helps to focus on a ‘performance approach,’ rather than having suppliers check off compliance points, he advises. Measure and benchmark best practices while looking at how suppliers can improve, excel and innovate.
Ensure that you’re not making demands when collaborating with suppliers on sustainability, he says. Rather, demonstrate the value of your initiatives. Treating goals as a partnership instead of a command puts organizations in a better position for success.
“They will feel more empowered and see more clearly the role sustainability plays in advancing mutual benefit within the value chain,” Thaler says.
Collaborating with suppliers can help to boost an organization’s reputation, Thaler adds. These improved practices help to reduce the likelihood of brand-damaging events.
Supplier collaboration to advance sustainability also aids recruitment by showing the organization can walk the talk, helps to win over new recruits and retain existing employees.
In some categories, being the customer of choice is a competitive advantage, and many suppliers also set a high sustainability bar for their customers.
“Overall, the benefits of working closely with your suppliers are undeniable,” Thaler says.
“It is a zero-sum game when brands work against rather than with each other – no one wins.
When you join forces, you have the opportunity to improve capabilities across the board.”