The term "relationships" covers a lot of ground in supply chain management. There are strategic relationships, tactical relationships, transactional relationships, internal relationships and more. There are also relationships among members of the supply chain community. Let's tackle those first.
Our supply chain universe can be seen as clustered around three "estates," roughly comparable to the social divisions in pre-revolutionary France. We might, without stretching too far, term them the First Estate—the academic community (or the "clergy"); the Second Estate—the consultants and software developers (or the "nobility"); and the Third Estate—working practitioners (or the "commoners").
For the moment, it's important to realize that relationships among the supply chain estates must be maintained for balance. Too much power and influence in any one camp and you risk derailing the Supply Chain Express.
The principal means for getting the estates together and leveraging their individual talents and contributions lies, we think, in our community's professional organizations, mainly the Council of Supply Chain Management Professionals (CSCMP) and the Warehousing Education and Research Council (WERC). Those and the personal networks built among leaders in the three estates—and sometimes the Fourth Estate (in this case, the trade press)—continue to harness the synergistic potential of their collaborative strengths.
A second sort of relationship is that between government and business. Federal, state and local legislatures and regulatory bodies can provide businesses with restrictions and incentives, regulation and freedom, and roadblocks and opportunities. They also provide venues for teaching and research. And they help create the environments that incubate consultancies and technology development.
Programs and actions at all levels of government heavily influence where supply chain operations locate, how successful they are, and how committed they become to maintaining a physical presence and investing in localities, regions and countries. Their actions (or failures to act) also can help to explain "brain drain," relocations, some sourcing decisions, and continuing economic malaise in countries that should, by all rights, be prospering.
At the level where most of us work every day, there are vital relationships to build and nurture: between key suppliers and the company; between the company and its customers; and among functional entities in all three. That's where the individual can have the most influence, and where we'll devote the rest of our attention here.
Within the supply chain
Disclosure here: We're going to talk about close working relationships with suppliers and customers, and people are going to get all sweaty about the challenge of multiple partnerships. The partnership notion has been much abused over the years, and we're simply not going to go there. Calling business relationships "partnerships" doesn't make them so. And there is a limit to how many partnerships any company can effectively maintain. Certainly, you can't have partnerships with everyone in your supply chain, unless the chain consists of only you and two others.
But it is important to have high-trust, high-communication, mutually beneficial relationships with key suppliers and customers. Yes, there are some very successful mega-merchants that are able to dictate prices, terms and processes to their suppliers. But the fact is, very few of us are in the position of being able to tell our suppliers, "My way, or the highway." For the rest of us, creating and developing strong positive relationships is a key to supply chain success.
What does this mean? For openers, it is largely about communication: communicating to suppliers about demand events and the direction of strategic plans. Linking information systems and jointly leveraging the potential for Internet and other electronic communications. Working together to reduce costs and improve quality. Understanding capacities and capabilities.
On the customer side, it means many of the same things, only working in another direction. You need to know about their strategies, their event plans and their needs for flexibility and resilience. Your customers need to know about your capacities and capabilities. And it's your responsibility to educate them about how you can help them succeed in their markets.
In an ideal supply chain relationship, both customers and suppliers would be hooked up with information, demand data and the visibility of status. Wherever you are situated in the supply chain, you can improve your positioning by understanding both the upstream and downstream business issues—and what the ultimate user or consumer wants and needs.
All of this takes fundamental talent, a positive attitude and an overall culture of strong relationships. And it's got to be for real. Someone once observed, "You can only fake sincerity for so long." That's true in the supply chain world for sure.
Within the company
Before a company attempts to build good external relationships, it must put its own house in order. You can't really achieve open communication with others if your organization is seriously stove-piped.
So, within the friendly confines of your own (virtual) four walls, procurement, manufacturing and distribution need to do more than communicate; they need to be in lock-step. And they all need to be plugged into what's going on—and planned—in sales and marketing. Senior management must include the supply chain organization in the strategic information loop, while the supply chain organization must let the C-level officers know what can be done to support strategies.
This means joint planning and joint problem solving. It means cross-functional teams with a purpose other than political correctness. It means that everyone has, if not a voice, at least a hearing, in product development and SKU extension discussions. If all that's fairly scary, you're not ready for a prime-time appearance on the stage of external relationships. They can't possibly succeed until your company is master of its own domain.
3PLs, consultants and more
Once you have satisfactorily addressed issues within the company and the greater supply chain, it's time to turn your attention to your relationships with service providers. This need is particularly acute when it comes to logistics service providers (LSPs)—otherwise known as 3PLs, 4PLs, etc.
Relationships with LSPs require open and full communication from the very outset—beginning with the evaluation and selection process. From there, multilevel working relationships throughout both organizations are key to making processes work and to solving the problems that inevitably crop up.
And the work doesn't stop there. LSP relationships, like marriages, require constant effort and continued attention. The LSP also needs to know about upcoming events, changes in strategy, and new products and customers—things that were, in the old days, "secret."
The arms-length, transaction-based, traditional relationship may get the job done—at a low price—in the short haul, but it does nothing to build a foundation for the future. And you and the LSP need to maintain an ongoing dialogue about where and how it can add value to what you're doing.
It is certainly difficult for a relationship with a consultant to extend across functional areas or across managerial generations. But the quality of relationships with consultants can have a profound effect on the quality and extent of outcomes. For best results, mutual trust and open communication are required. The more your consultants know about what's really going on and the more you can tell them, the better their chances of devising on-target solutions.
As for software providers, the stereotype is one of an upscale used-car salesperson, without scruple or inhibition. That's unfair. Part of your job in evaluating vendors is to look for and assess the qualities that can make for a positive mutual relationship, all the way through a successful implementation.
As with other aspects of the supply chain, this is about more than simply making a purchase. It is about building a sustainable relationship with someone who could play a key role in your long-term supply chain success.