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Leveraging Your Supply Chain

Your supply chain is part of your team. In a certain way, of course. It definitely matters if it’s a small company that we are talking about or a big one, but the way you use your supply chain will give you a competitive advantage or not. It matters if you choose your suppliers correctly and if you understand and serve properly your customers.

Supply chain management – a team effort

supply chain is a network of companies that work together to provide goods or services for the end-use market, users of the products and services, at a profit. Supply chain management is managing the network of suppliers and customers to achieve the greatest possible effectiveness for your organization. This is where we start.

What’s important beyond a proper definition is to understand that supply chain management is a team sport and a supply chain orientation starts with the desire to leverage capabilities and resource advantages offered by outside partners, suppliers or customers. An example of a supplier that gives a competitive advantage can be Cargil, the company that produces the sweetener, for Coca-Cola.

Leveraging partnerships – a supply chain management strategy

Procter&Gamble uses customers to innovate and even has a method called  connect-and-develop which helps to realize the goal of more than 50% of the innovation to come from outside the company. This way they leverage the value from the supply chain, good ideas and more. It’s all about extending your business interest and cooperating with your suppliers and customers beyond the simple act of commerce.

But how to leverage your supply chain? First understand its network structure, who do you buy and who do you sell? It matters who your immediate supplier or customer is and who are on tier 2, the suppliers of your suppliers and the customers of your customers. Than you need to carefully map this supply chain to understand the nature and the specifics of relationships.

Identify the most important customers and suppliers

Next you should downstream customer relations trying to answer to these questions: 1) Are some customers more important to your business than others? 2) What share of your business goes to these customers? 3) Are there customers on whom you feel overly dependent? And, finally, are there opportunities left on the table with others?

Try to have these answers and then don’t forget to evaluate the dependencies and who has power over who and in what conditions in this specific supply chain management. It is essential for a company to know its cost of doing business, therefore stepping back and evaluating the power balance might give some great cues.

Gaining power with suppliers and customers

Power and dependence info in customer relations is equally important in working with suppliers, and research shows that the best businesses have a great level of co-dependence. So, assign a team of professionals to work closely with most valuable customers and suppliers, dedicate a special service line to these customers or suppliers and devise unique service agreements if needed.

But, be careful. There never enough resources to invest lots of resources in marginal relationships. Loyalty programs and analytics help to produce low-cost personal attention in “mass-customized” relationships. When assessing the value of a customer or supplier relationship take extra care not to overlook the next star. It happened to the young Starbucks when it was rejected by SoloCup because its size was simply to small.