Every company depends on suppliers. And with today’s rapid technology advances and innovation, no company can afford to go it alone. Whether providing raw materials, components, or key services or technology, your business is in trouble if your supplier let you down.
The research is pretty clear: while there are challenges to closer collaboration, the benefits that can be achieved by partnering with your suppliers — and suppliers with their customers — are enormous. Closer collaboration and communication improves efficiency and not only spurs innovation, but causes it to happen more rapidly. Other benefits include faster time to market, improved quality, reduced risk, and enhanced employee satisfaction.
How do you achieve those benefits?
Step #1: Focus on the Cultural Fit.
Make sure you partner with the right suppliers, and that both of you are crystal clear about why you are partnering. To help ensure a good partnership fit, look first to cultural fit. Recent research indicates that 50% of all company execs admit that their company’s culture — either too much pride in ownership, or a “not invented here” syndrome — hinders supplier collaboration.
This may require changes in leadership style, company change management, and even redesigning company incentives. Leaders must espouse and actively promote the value of partnering, as well as encourage skill development and other resources to facilitate active partnering.
Step #2: Hone Your Supplier Awareness.
This piece involves a 2-pronged approach. First, you must identify your key suppliers, and focus your energies on them. All too many companies treat all their suppliers the same, but all are not equally critical to meeting your company’s objectives. For your strategic suppliers, develop metrics and protocols, devise early warning systems to prevent supplier failures. Be rigorous not only in applying metrics, but also in honestly evaluating the relationship: what is working, and what is not? And make sure both companies are devoting sufficient resources to making the partnership work.
The second part involves making sure you clearly understand what motivates and drives those key suppliers. Find ways to “walk a mile” in each others’ shoes. Make sure open and honest dialogue is encouraged and exchanged frequently. How do we each feel about the partnership and what we’re getting from it?
Step #3: Address IP Issues.
Companies usually focus on how to protect their own intellectual property when working closely with suppliers, and rightfully so. What they often pay less attention to is how to identify and address IP that is jointly developed with their key partner suppliers. 54% of respondents in recent research expressed concern over collaboratively developed IP. The more closely two companies work together — particularly when innovation is encouraged — the more likely they will create shared new IP in the process. So it’s important to develop standards around ownership, valuation, and mutual protection of the newly-created value.
In today’s environment, companies need to ask themselves if they can really thrive and develop new paradigms all on their own. Partnering with suppliers creates enormous potential competitive advantages, if done well.