Why Multi-Tier Supplier Collaboration is Gaining Importance

Posted by Gary M. Barraco

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supplier relationship managementIt’s obvious to many that global trade enforcement is topping the list of “To Do” tasks for the new U.S. administration. However, many do not realize that this is widespread all around the world and feels a lot like a protectionist measures. President Trump is no longer just talking about aggressive action- his budget plans, formation of new task forces, and cabinet picks all echo his vow to crack down on unfair trade practices by prioritizing trade enforcement functions. In Europe, the 2017 elections could yield more of the same attitude.

Ultimately, these actions ripple back through the entire supply chain, landing squarely on the shoulders of the suppliers. In order to lift some of the weight from the lower rungs, companies need to establish solid working relationships with every layer of the supplier base to facilitate collaboration, communication, and clear visibility.

Multi-tier supply chain visibility is now fully achievable with many obstacles being broken down. Once sparse in many regions where sourcing was prevalent, internet access is widely available to factories that need to provide on-hand raw material levels, detailed production milestone events, and shipment readiness.  With cloud-based platforms in place and all of the parties in the supply chain accessing them, real-time visibility is no longer just a pipedream. Market leaders in every industry segment have visibility not just into their important tier 1 suppliers, but at least a limited cross-section of their tier 2 and tier 3 suppliers as well.

But why not just connect with the first tier of your supply base and then let them manage their suppliers? Here are five key reasons why manufacturers need multi-tier connectivity:

  1. A well-coordinated product launch: New product launch, which occurs seasonally or more frequently for apparel and footwear, is a critical area of focus for certain industries. In industries such as high technology where products have short lifecycles, most profits are made in the early weeks of the product launch before competition moves in. Coordination within the supply base is critical for ensuring that the production ramp-up goes smoothly (and is cost effective) in preparation for a product launch. Multi-tier supplier connectivity provides the foundation for close coordination with suppliers (regardless of tier) and successfully begin production.
  2. Improved daily coordination of activities: During on-going production, manufacturers need visibility into availability of key components to ensure smooth production. Some of these components may be in short supply (such as flash chips or automotive components from suppliers in areas affected by a natural disaster), or may be under allocation-so visibility is often very critical. Multi-tier visibility provides transparency into raw material availability and ordering to proactively ensure downstream activities will occur as planned.
  3. Faster reaction to demand and capacity changes: Organizations conducting global trade in today’s environment need to respond quickly to shifts in consumer buying habits that affect their supply chain. Aberdeen Research estimates that up to 85% of the data a company needs to gain control over its multi-partner, multi-tier supply chain relies on frequent data sharing among partners.
  4. Share demand forecasts and commitments with suppliers: By creating two-way collaboration with your suppliers, they can be more responsive when meeting demand requirements.  By leveraging the cloud for a high level of communications, companies can improve on-time delivery rates to customers and adapt to rapidly changing demand without adding to inventory.
  5. Real-time collaboration on capacity plans, forecasts, and supply schedules: Ensuring capacity and resources will both meet forecasted demand and identify potential problems is an early warning system that helps reduce risk. This includes alerting trading partners to demand changes, tracking actual orders against commitments, and receiving alerts in the event of potential pre-orders, over-consumption, under-utilization, or excess.

Today’s technology can provide unmatched clarity throughout each phase of the supply chain. Every supplier and product can be in focus to ensure the goods flow without friction.

Given the unpredictability in global trade, the best reaction is the one that happens fast, with the instant knowledge to make changes and decisions on the fly. This agility is achievable through a glass pipeline that provides the highest levels of visibility, mitigates risk, and supports the rapid resolution to issues as they arise through strong collaboration tools with every partner in the network. The most agile companies are best stationed to weather the volatility in global trade and commerce that is sure to come. Enterprise-class technology solutions that offer flexibility and visibility at every step are a required part of every agile company’s playbook to stay ahead of the game in 2017 and beyond.

Check out our white paper, Going to the Source: Supplier Relationship Micro Management, for more information on how you can streamline the purchasing and compliance processes and build better relationships with foreign suppliers, leading to shortened cycle times, lower costs, and improved supply chain flexibility.

Supplier Relationship Micro Management

This post was published on April 11, 2017 and updated on August 7, 2017.

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Topics: Global Sourcing, Supplier Management, Production Tracking