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Founder and CEO of Mercado Labs, with a 25-year history of building tech solutions that improve end-to-end efficiencies in the supply chain.
With the supply chain becoming such a hot topic, the first thing that might come to mind are huge container ships carrying goods across the ocean or “delayed delivery” notifications plastered across websites.
If you ask a supply chain professional, however, they may think more specifically about frustrated importers trying to calculate the risks of underordering or overordering goods or the impact late deliveries will have on quarterly reports.
When it comes to the supply chain, I believe an insufficient amount of time is spent considering the relationship between suppliers and importers.
Products are the lifeblood of any supply chain. Suppliers dictate the successful sourcing, production and manufacturing of these products. Furthermore, how well the supplier does in their role can make or break how well their importers do. Without knowledgeable, experienced suppliers who know how to engage in their side of the supply chain, there would be no products to sell and no profit to be made.
It takes six months on average to complete an order, and suppliers represent four-fifths of the equation. During this period—known as the first mile—a lot can change. Forecasts can shift and products can fall in and out of favor. These factors (and more) create huge challenges for both the supplier and importer. When coupled with a lack of modern technology and connectivity, it can make effective collaboration between both parties incredibly difficult.
For those who follow baseball, it’s always been a pitch-and-catch situation between the suppliers and importers. Just like a catcher, an importer calls “the play” by relaying what products they need for the market. The supplier then “throws the pitch,” meaning delivering the products called for by the importer. While the importer dictates the desired course of action, it’s the supplier who has to deliver.
Historically, the general focus in terms of suppliers was on cost: “How can I get my product manufactured at the lowest price?” In the last five years, this has been made increasingly complex; importers must now also consider factors such as speed to market, environmental, social and governance (ESG) measures and resilience.
Now, the reliance and expectations on suppliers have shifted. When the pandemic began, suppliers and factories around the world were forced to shut down in the best interests of their workforce, which in turn left their importer counterparts scrambling for solutions. Even when the factory workforce started trickling back, importers quickly realized they were among dozens—if not hundreds—of other importers who were waiting for updates on suppliers, products and manufacturing.
Not only that, but suppliers found themselves in a pickle when they found out other suppliers were relying on the same tier two and three suppliers to go into their pre-Covid backlogs and fulfill raw material orders the pandemic disrupted. This has led to the realization by importers that they might rely on suppliers far more than they previously thought.
As the supply chain continues to face challenges, importers should look to relationships with their suppliers to future-proof themselves against unexpected shocks. The importance of fostering a positive and mutually beneficial relationship between importer and supplier cannot be overstated.
But how can it be done? Here are three main areas every importer must focus on:
1. Transparency. Suppliers want to understand the demand for products at all times. An importer who doesn’t keep their supplier in the know of when demand is going to be high or low is going to quickly fall out of favor and risk not having the products they need when they need them.
They will not be a high priority when times get difficult and suppliers are deciding how to prioritize who to assist. But it goes the other way, too. Importers want to know the status of their products at all times as sales hang in the balance, so vague warnings from suppliers relayed through spreadsheets and email won’t cut it. The more transparency both parties can provide, the better.
2. Commitment. Forecasting, long-term commitments and stability are critical to fostering a mutually beneficial relationship to keep costs low and quality high for both parties. If one party is found to be unreliable during times of crisis, trust is diminished and could impact the relationship negatively later on.
3. Digitization. A modern and complex supply chain should have the appropriate technology to cope with the influx of data required to transport $2.8 trillion of goods across the globe. Unreliable and dated software like spreadsheets and email were not built to handle the complex and ever-changing data we see in the supply chain. Instead, companies should be employing dedicated platforms that make communication between importers and suppliers efficient, timely and (most of all) easier.
The Impact Of Improved Supplier Relationships
By taking the steps to improve relationships, companies are sure to see many benefits including:
1. Increased revenue. If products are delivered on time, efficiently and correctly right off the bat, you’ll be able to get to market faster when demand is at its peak.
2. Closer partnerships. Even though suppliers are often thousands of miles away, they’re a crucial aspect of your end-to-end supply chain operations. Building supplier relationships will increase your supplier’s willingness and enthusiasm to keep working with you.
3. A better grasp on the first mile of the supply chain. Improving and standardizing supplier relationships will help improve your supply chain across the board. Currently, many importers are left in the dark with their first mile. Digitizing and bringing suppliers and networks online can help you keep better track, increase visibility into orders and help with transparency into operations and partnerships for improved time.
Communication is key to a great relationship. The more clearly, frequently and accurately a customer can define and share goals and objectives, the better the supplier can respond. Factors to account for when communicating with suppliers include language, culture, distance, experience, tools and prior relationships. These challenges can be tough to overcome, but great importers gain the expertise needed and/or hire professionals who have the proper experience.
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