How do you improve your value chain partners and suppliers?

Embrace a continuous improvement mindset in optimizing your value chain. Regularly reassess your value chain components, exploring emerging technologies, and the like.

When it comes to assessing your value chain, it's essential to adopt a holistic approach. Take Porter's value chain analysis, for instance, which McDonald's has used effectively. They meticulously examined each step, from sourcing ingredients to delivering meals, optimizing efficiency and quality throughout. In parallel, employing SWOT analysis can uncover critical insights. Amazon's strategic prowess is a testament to this. They identified strengths like logistics expertise and customer-centricity while addressing weaknesses in physical retail. Additionally, stakeholder mapping, as seen with Tesla, helps visualize key partners like battery suppliers.

Analysis of your value chain and key partners/suppliers or the ecosystem has to be done in concert with the wider rethinking of business model, unique capabilities of your business and value proposition to your customers. For established organisations, the plethora of niche providers, global specialists and growth of business ecosystems and platforms mean that the 'Inhouse vs Outsource' question has to be revisited and considered with the value chain assessment. "We've always done it this way" is a dangerous orthodoxy which can imperil the competitiveness of a business.

First understand where you want play in the value chain. Are you owning the entire chain and do you claim to deliver value across its entirety? The reason I bring this up is that unless you are very clear on what you do and you don’t do then it becomes very difficult to partner well. If you are not clear on your value, you will be competing with your partners and ultimately less value is created as you are ‘tripping’ over each other. Once you understand your place, then look at the gaps in the chain and assess the partners who can add the most value in those gaps.

A long way to go... 1. Strategy formulation. 2. Understand what's in mind and what's in move of stakeholders along the value chain. 2. Align the minds and moves, rowing in the same direction. 3. With digitalization, big data and AI technology, make sure the walking-the-talk...

Look beyond surface-level compatibility and dig deeper into alignment. Seek partners and suppliers that share your long-term vision and commitment to sustainability, ethics, and social responsibility.

To improve your value chain partners and suppliers, you can follow 1. Collaborate with suppliers to develop innovative new products, boosting revenues and profits for both parties. 2. Take an integrated approach to supply-chain optimization, redesigning processes together to reduce waste and redundant effort, or jointly purchasing raw materials. 3. Collaborate in forecasting, planning, and capacity management—thereby improving service levels, mitigating risks, and strengthening the combined supply chain.

Traditional high cost of integration/collaboration with suppliers and partners had meant that companies which sought agility and higher quality built their own capabilities or built a geographical ecosystem of suppliers near their main location (e.g. auto manufacturers in Detroit). Today, with digital technologies and platform which help with discovery and easier integration/collaboration with geographically wide-spread partners the ideal partner definition has changed considerably. The value of agility and trustworthy relationship has gone up significantly changing the way suppliers are treated.

In selecting ideal partners and suppliers, aligning their capabilities with your strategic vision is paramount. An example from the tech industry is Apple's collaboration with suppliers like TSMC. TSMC's cutting-edge semiconductor manufacturing capabilities have allowed Apple to innovate and maintain a competitive edge in the smartphone market. Compatibility is also crucial, as demonstrated by Nike's partnership with Flex, a contract manufacturer. Their shared commitment to sustainable and innovative manufacturing practices has strengthened both brands. Effective communication and collaboration, exemplified by the relationship between Procter & Gamble and its suppliers, ensure agility in responding to market shifts.

Elevate your due diligence process by integrating modern tools and data analytics. Leverage your digital savvy to delve into online reviews, social media interactions, etc.

To effectively find and select partners and suppliers, diversify your search through referrals, online platforms, and industry events. A structured approach, as employed by Amazon, is crucial. Use scoring, ranking, or bidding to compare options systematically. Assess the clarity and realism of proposals, akin to Google's vendor selection process. Gauge their understanding of your needs, responsiveness to inquiries, and willingness to tailor terms, mirroring Microsoft's approach. Lastly, validate credibility through references and certifications, aligning with Apple's rigorous supplier screening. By following this methodical and transparent process, you can identify partners and suppliers best suited to your requirements and objectives.

Please strive for transparency with your partners. And look for that same transparency from them as well. Make it clear as to what you will bring to the table and what you expect from them. Level-setting on a common understanding of roles and engagement model is important. Are your expectations and goals a match? Are they committed to your same values, goals and objectives? And yes of course, references, testimonials, etc.

The value of trustworthy and mutually beneficial supplier relationship cannot be overemphasized. The ability to quickly incorporate innovations from your ecosystem of partners/suppliers into your product or service can be a true differentiator and source of competitive advantage. Forward thinking organisations bring their suppliers into the product design very early thus gaining the advantage of broader thinking and agility.

Regular meetings and reviews help nurture good supplier relations. Work together to help improve each others businesses and see what common ground you have. Ask for targets with rebate so you can be incentivised to support your chosen partners.

The biggest advancements I have experienced with supplier and vendor relationships has occurred when they are viewed and treated as stakeholders in the business. With a stakeholder mindset, suppliers and vendors are not merely organizations necessary for contractual services. Instead, they become valued partners that join the business in seeking win-win outcomes while also operating with an eye on the common good and a higher purpose. Not every organization is ready for this elevated view of suppliers and vendors, but the ones who can make this shift experience breakthrough results.

Don’t forget to establish open lines of communication with a proper cadence at different levels of both organizations. And a well-understood escalation mechanism.

To optimize partner and supplier relationships, constant evaluation and improvement are key. Monitoring performance through metrics like quality, cost, and service, similar to Walmart's supplier scorecards, is vital. Collect and analyze feedback from all stakeholders, as practiced by Amazon, to gain holistic insights. Regularly review and amend agreements, resolving issues through root cause analysis and corrective actions, following General Electric's approach. Celebrate successes like IBM, using case studies and awards to showcase achievements. Lastly, if necessary, terminate underperforming partners objectively and respectfully.

I've seen best performing organisations giving more weightage to collaboration, agility and quality and going beyond just cost and ontime KPIs. It is essential to base evaluations of your partners on what is important to drive your busienss strategy and customer outcomes rather than pure procurement heavy measures.