Supply Chain Partners

You can review a quick video summary of the below article here

I’m sure we have all heard the saying, “You get more bees with honey than you do with vinegar.” Its a fairly common phrase. I was recently involved in a large project that involved many partners and some ground-breaking technology coupled with a very new business model for the supply chain industry.

It was during this go-live, and in the weeks following it, that this expression popped into my collective conscience and spurred a much larger internal conversation about what is a “partner” in the supply chain / 3PL context. For many of us that have worked on all sides of the supply chain and logistics ecosystem from sales to operational delivery the term “partner” is one that pops up pretty often and is part of the standard vocabulary of deal makers and wanna-bes alike.

In fact, I think the word “partner” is one of those words that is thrown around so loosely and incorrectly that it has lost much of its meaning, similar in the way that an improperly used tool loses its efficacy when not taken care or incorrectly applied.  Throughout my career I’ve played both sides of the table, the vendor side where you’re trying to win the business and you use the partner term to connote how much your “vested” in the relationship and the customer side where you tell your vendor you need a (wink-wink, nudge-nudge) partner. The customer definition of “partner” is often code for bend over. Not to be crass, but seriously, most often the “partner” term when used by your customer is another way of saying I need somebody who is going to deliver a Rolls Royce, with all the benefits, but at a Yugo price. Too many times when a customer uses the term partner they are using it improperly. By definition a partner is one that is united or associated in an activity of common interest. This “common interest” qualifier is the area where the partner term sometimes begins to first break down.

Customers and Vendors by default often times have differing common interests. The customer wants to get the best product at the least cost (typically), conversely, the vendor wants to get the most volume sold at the highest price possible with an acceptable end product to the customer. To try and link these two worlds together in a quasi-kumbaya moment is…well… dumb. I am all for partnerships, but when the term is used the buyer and the seller need to be clear on the definition. The partner definition by design should always be oriented towards “we all win”. Often times in my career I see the partner term used in the beginning of the relationship to only find out later that the customer really meant “I win first”.

I would stipulate that a “True Supply Chain Partnership” is one that is focused on a mutual tenet of winning together. Seldom in today’s global marketplace can any one entity achieve true success in their business endeavors without a motivated collective of teams, companies and people helping to steer towards the common goal. Partnerships in the supply chain context are good when both entities have a healthy mutual dependence on one another and have commitment at the highest levels of their respective organizations. Partnerships that are primarily cost-cutting endeavors for the customer should check the fancy partner language at the door and instead indicate what they are really after at the onset of the relationship.

After careful thoughts here are the key characteristics that a true supply chain partner should exhibit:

1. Deep and comprehensive understanding of the operational & marketplace realities of the environment
2. Strategic thinkers that are problem solvers by design
3. Entrepreneurial mindset
4. Fast movers (*no room for bureaucratic group-think in a high performing partnership)
5. “We Win” orientation

Here are some additional characteristics of an engagement that will help foster the partnership:

1. Measurement & KPI frameworks that are mutually agreed
2. Clear expectations from both parties regarding performance expectations both operationally & financially
3. Quarterly business review meetings that delve into the health of the partnership (Ops, Finance, Marketing, Sales)
4. Open communication
5. Incentives & goals that provide mutual reward to entities involved

In today’s technological environment, the competitive barriers for most companies have dropped precipitously and made “partners” even more of an important concept in business.  This is especially true in the 3PL non-asset world.  An entity with smart, experienced folks can quickly get up to speed and leverage relationships and on-demand models to compete against all but the biggest of providers.  The word “partner” and the partnership approach is something that should be protected and reflected on by each business executive seeking to employ it in their respective pursuits.

In the end, we all know that “You get more bees with honey than you do with vinegar” but …. what we may not all know is this: “The bee stays not in a hive that has no honey.”  I hope that each supply chain executive out there can reflect and begin to understand that partnerships are a two-way street.  Ultimately, a successful relationship depends on empathy, honesty, open communication and a shared commitment or goal.  Supply chain partners should always be mindful of this and seek to create the most high-performing and successful relationships they can to propel their organizations and their partners to the next level.

NOTE: I’ve included an excellent video from Arizona State University’s Carey School of Business regarding Supply Chain Integration.  I thought it was appropriate to include this as supplement to my partnership discussion above.