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Covid-19, Force Majeure and Impact to Global Supply Chains

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On a previous supply chain minute I focused on a topic I’ve discussed on the show before which is force majeure as a direct impact of Covid-19. This is something I highlighted earlier in February on the show, as I believe it will have long lasting effects across industries so let’s dive deeper into what it means and what’s happening globally with force majeure declarations.

Force majeure- what is this? The general contracting language for this clause reads something like this: Neither party shall be liable to the other for failure or delay in the performance of its obligations under this Contract to the extent that this is caused by matters beyond the reasonable control of the party affected, which in short means if either party cannot meet their contractual responsibilities due to extenuating circumstances force majeure can be declared without any penalties.

Force majeure is a clause that generally protects the organizations in case they cannot conduct business according to the pre-agreed terms due to an unforeseen event out of their control. What this means for individuals is that if we purchased a service, such as an airline tickets or hotel stay, and due to any situation covered by force majeure the business could not provide the service, consumers cannot hold the business legally responsible if this is invoked. In this situation, consumers may have other options like taking a credit for later use, and hope this is an isolated, one-time event. For international businesses, however, the situation is different.

force picThis brings to mind an earlier instance when force majeure declarations were widespread, during the 2014-2015 International Longshore and Warehouse Union (ILWU) strikes affecting 29 US ports and impacting global trade. The negotiations between ILWU and the Pacific Maritime Association lasted many months leading to port closures, chassis shortages, container ships stranded at distant anchorages, and racking up tens of thousands of dollars a day in contractual demurrage and detention charges. After months of turmoil global organizations impacted resorted to invoking the force majeure clauses within their contracts.

At the time I was working with a global manufacturer and distributor of home textiles with printed licensed graphics such as NBA, NFL, NHL and Disney. Some may recall, the port strike did not conclude until after the holiday retail season in the spring of 2015, and once things got “back to normal” our company was stuck with hundreds of containers full of holiday merchandise, as many other retail distributors. In our case the product was Frozen themed home textiles stuck in shipping containers at ports across the West Coast. This inventory was slated for holiday sets in large retail stores, but given the port delays the good were released months later. Raw material suppliers, manufacturers, carriers, and freight partners had declared force majeure so there was nowhere to turn as holding costs for obsolete inventory continued to grow. During that time the situation was somewhat isolated, now we are looking at a far greater number of organizations who may resort to force majeure declarations.

When organizations declare force majeure, ripples are felt throughout the entire supply chain. The current pandemic has pushed global organizations to invoke force majeure clauses- let’s see what’s impacting global supply chains?

  1. DHL Global Forwarding– has declared force majeure first for it’s Europe- Asia trade routes, however later in March this was extended globally. With this declaration DHL has reserved the right to make changes to all or a part of its air and ocean services.
  2. Ceva Logistics has put forth a declaration stating that under current circumstances any previously agreed rates and charges can change, and additional surcharges can be applied through invoking their force majeure clause.
  3. Royal Enfield one of the oldest motorcycle manufacturers globally has been impacted, announcing that their force majeure clause may extend beyond the 21 day lockdown that India has declared.
  4. The Chinese government issues force majeure certificates to over 1,600 organizations with specific focus in the gas and oil, textile, mining and machinery industries. Below is a breakdown of the allocated certificates by sector.

China

  1. India has become the center for force majeure declarations after the country announced a 14 day quarantine on all goods coming from China or any other impacted nation; these delays are specifically impacting the energy sector and the country’s imports of liquid natural gas.
  2. Sports- will a force majeure clause determine if the NBA is required to pay the players for a season that has not been played and the current decision to postpone.
  3. Global trends show force majeure are more prevalent in emerging markets and with significant impact to the energy sector– this can have long lasting effects on local supply chains and bottom of value chain contributors.
  4. The mining sector has seen a high number of organizations declare force majeure impacting mining operations as well as suppliers who are unable to make deliveries of product already ordered.

 

Some force majeure clauses specifically exclude pandemics and global health crises, others will explicitly include these- when was the last time you checked this contract clause? Will this lead us to think differently when negotiating supplier and vendor contracts in the future?

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People Will Keep The Lights On- Warehouse Management of Tomorrow

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Robots, algorithms, automated answering machines, self driving cars and unmanned drones….Are organizations moving closer to the lights out supply chain? Not. Most organizations have learned that keeping a close pulse on their customer’s market trends and utilizing this valuable information to make supply chain decisions can improve the brand growth and ROI. There are certainly technology solutions aiming for a lights out outcome, and market leaders, like Amazon, increasingly investing in automation and testing new solutions; however even from Amazon the prospect of a lights out fulfillment network in decades away.

Supply chain is the new competitive weapon of the business. As consumer closely scrutinize every business decision of their favorite brands, the supply chain ability to be accurate, timely and deliver goods as promised has become more important than ever. Progressive organizations are leveraging their supply chain and creating competitive advantage by building stronger partnerships with their main suppliers, diving deep into last mile delivery solutions, and incorporating the voice of the customer in forecasting and supply planning.

1.      Build Strong Partnerships with Key Suppliers

Companies cannot guarantee the integrity of their supply chain or quality of their product being far removed from sourcing and manufacturing processes. The growing expectation of accountability from consumers is pushing companies to become more engaged within their supply chain, build closer relationships with original equipment manufacturers and raw materials providers. Millennials prefer to make procurement deals directly with manufacturers- cutting out distributors. This process helps ensure tight quality controls, improve direct from factory cost savings; it also impacts margins and health of distributors who have thrived in this space. A research study conducted by UPS shows that millennials prefer researching companies online using tech channels that may be less familiar to older buyers. This trend has seen a 20% increase in the past two years and is expected to continue growing over the next 3-5 years, potentially eliminating a percentage of middle market distributors.

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As companies shape stronger partnerships in their supply chain and become more informed about their provider’s operations, new opportunities for data sharing, process improvement and collective costs savings will emerge. Currently, supply chain professionals struggle with the types and integrity of data available within and outside of the enterprise. Lack of accurate data sharing and collaborative analysis causes demand forecasting, supply and inventory bullwhip problems.  Accurately predicting and communicating demand trends across the entire supply chain will help businesses negotiate year-over-year price reductions in the order of 3%-5%. These are a direct result of setting shared goals with suppliers’ brands trust over time.

Successful organizations need to be connected to their partners to ensure real time sensing of risk, changes in demand, or updates to orders. In supply chain, as in business at large, success is 100% dependent on strong partnerships, the sustained consolidation of the marine shipping industry over the past five years is a clear indication that together we are stronger.  Will we start to notice more vertical integration of organizations across varying industries?

2.      Dive Deep into The Last Mile

This is the #1 opportunity for the supply chain to interact with the customer, and oftentimes one of the most impactful times in the customer delight process of any purchase. The last mile offers unique opportunities for optimization, and cost savings with a focus on guaranteeing customer happiness and brand loyalty. Many traditional, and online only retailers focus on improving the last mile service with real time order updates, which include reverse logistics, and sometimes even. Consumers expect products to arrive on time and not damaged, with continuous visibility into the delivery status. Some organizations, such as Amazon have gone so far as to ensure the package is pleasant for the consumer to open, while maintaining packaging costs low with their SIOC (ship in own container) program.

Over the past few years, as ecommerce growth has increased, leading companies invested pointedly into research and development for autonomous vehicles to help last mile delivery processes. Other service providers are expanding partnerships outside of the traditional shipping industry to continue improving services and transit times to consumes. For example, FedEx is increasing its partnership with Dollar General (8,000 locations) and Walmart (500 locations); the company is also investing in additional store fronts to continue servicing their most important customer sector, ecommerce SMBs. According to FedEx CMO “the FedEx Office retail locations bring in some of our most profitable small and medium business because [of] the experience they get when they are shipping…and they want the peace of mind of proper packaging.” This illustrates an understanding FedEx of just how important success in the last mile is for all involved.

Last mile delivery is most impactful for the food industry, there are numerous opportunities to learn from innovations in this space. Whether prepared or online grocery, organizations providing these services to consumers must be even more vigilant of last mile services.

3.      Listen to the Voice of the Customer

Traditional supply chain solutions were designed to solve problems within the walls of the organization. Globalization forces all businesses, including SMLBs to think globally. Most realize that success with continued growth fully depends on outside factors, some out of our immediate control but some which can be influenced. Analyzing existing or historical data only teams do not get full visibility of their customer trends. This approach delivers sub-optimal supply and demand forecasting models and leads to making decisions on based fragmented information.

Supply chain teams require real time point of sale data, consumer online sentiment, alongside partner driven forecast to assemble the monthly demand and supply planning. To successfully utilize the information organizations must diagnose customer behavior to prescribe the right market segmentation. Customers are getting closer to the supply chain- this is especially noticeable for higher end brands and items, where customers have immediate and direct impact on the well being of the organization, but this is increasingly truer even in highly commoditized consumer goods organizations.

Tracking the brand, the consumers who interact with it, and translating this data into intelligent information that can help drive precise winning decisions. Supply chain needs to work with the data and truly know the customer. Who drives the business? E-commerce companies such as Amazon have huge amounts of customer data that can be used to target specific people and convince them to buy certain things. With mobile apps and loyalty programs, chains such as McDonald’s, Burger King, and Starbucks are attempting to similarly track customers, adjusting options to convince them to spend more. Supply chain teams need to be in the know of all these push/ pull strategies and collaborate cross-functionally to truly understand consumer trends.

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So, are we heading towards an era of lights-out supply chain management? No! Supply chains, as most consumer dependent businesses, rely on people to run them successfully. People to build the right supplier partnerships, people who can strengthen the connection between a brand and customer when the product is delivered, and people who can reach into the hearts of consumers and understand what drives them.  Lights Out? People in the Supply Chain of Tomorrow.

This article first appeared on https://www.letstalksupplychain.com/blog/- make sure to visit Let’s Talk Supply Chain website for the latest #supplychain discussions, videos, articles and podcasts.

business intelligence, collaboration, Leadership, Logistics, Supply chain, Supply chain collaboration, Supply chain data, supply chain intelligence, Supply chain solutions, supplychain, Uncategorized

The SC – Supply Chain TV

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I joined Sarah Barnes-Humphrey, Audrey Ross and Leah Goold-Haws to debate the hot topics in supply chain including but not limited to telnet acquisition, the “New NAFTA”, tariffs at large and how these impact the consumers. Check out the episode at the link below and leave your comments on the YouTube Channel.
#dataanalytics, business intelligence, Supply chain, Uncategorized

Webinar: Automated Order Processing For Proactive Inventory Management

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Webinar sponsored by Esker on Supply Chain Brief:

Organizations need to focus on demand driven supply planning, utilizing real time information on customer orders from all marketplaces (e-commence, Amazon – or other online retailers, and point of sale data from brick and mortar).

Focusing on this information once per month during the S&OP meeting is too late for all business units to align. Companies should have seamless integration between order entry, inventory management, forecasting and supply planning models and purchase order status to sense risk, pull levers to mitigate potential risk, and communicate within and outside the organization. This is especially important for new product releases, in store programs or promotions (sales, end caps, PDQ. etc) or online promotions (company run or 3rd party). Depending on total supply chain lead time, not having real time visibility and analysis of this information can significantly affect sales and the bottom line.

Automated Order Processing for Proactive Inventory Planning_Irina Rosca

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ePlanning: Leverage the Logistics Network for Competitive Advantage in eCommerce

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IMG_0704Check out my presentation at the SCOPE Supply Chain Summit: SCOPE Atlanta 2019_ ePlanning Presentation Slides

 

 

 

 

Takeaways:

Key Actions for an Optimal Distribution Network:
1. Design an Agile Network with Optimal Inventory Distribution
2. Create End-to-End Visibility Connectivity
3. Pivot to Demand Driven Forecasting and Planning

Supply Chain Leading Strategic Opportunities for Continuous Growth:
• eCommerce Evolution
• Price Control
• Drop Ship Opportunities- Retail Strategic Partner
• Own the Amazon Marketplace- Seller Fulfilled Prime
• International Growth
• Forecast & Revenue Security
• Robust Reverse Logistics
• Best Customer Service
• Offer Innovative Solutions

 

When a customer has opted into the brand, there’s no mystery
about what they want- retention is key!

 

#dataanalytics, collaboration, globalbusiness, Leadership, Logistics, Supply chain, Supply chain collaboration, supply chain intelligence, Supply chain solutions, Uncategorized

Let’s Talk Supply Chain

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I was recently interviewed on Let’s Talk Supply Chain as part of their Women Leaders in Supply Chain Series. This was an absolute honor considering the other amazing group of women who comprised the speaker lineup and a pleasure to share my experiences with others. Thank you to the podcast host Sarah Barnes-Humphrey,CITP, CCI. Sarah and I will be speaking together on a panel at the Footwear Distributors and Retailers of America in Los Angeles at the end of October- stand by for insights!

Listen to the episode here: “>Let’s Talk Supply Chain- Women Leaders in Supply Chain- Irina Rosca

For more awesome episodes follow Sarah’s popular podcast:

  1. Let’s Talk Supply Chain Website
  2. LinkedIn
  3. Twitter 
  4. Instagram: @letstalksupplychain
#dataanalytics, agile, Bigdata, Business, business intelligence, data analytics, Leadership, learning organization, Logistics, Supply chain, Supply chain collaboration, Supply chain data, supplychain, tech

Logistics and Supply Chain E-Planning: Last Mile Delivery Strategy

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Last mile delivery services can mean different things to organizations depending on the key revenue driving marketplaces. In some organizations last mile can be US domestic only, for some it could expand across all of Americas and others it can cover a global marketplace. This article focuses on steps organizations can take to resolve last mile delivery challenges in North America with current service providers constantly competing and changing their service levels.

  1. How To Manage Conflicting Priorities For Different Business Units?

 Business units within organizations have metrics tied to either cost or revenue, while all teams are working towards the company’s common goal. Generally, for most retailers, and consumer goods companies these common goals revolve around providing customers with the best service, while growing the company’s market share at the lowest cost. As such, when e-commerce expansion the impact of last mile delivery costs become significant in strategic decisions such as: inventory optimization at different location and site optimization through a well-developed distribution and logistics network. Supply chain leaders must really understand where their inventory is located and how this empowers the business to interact better with customers. Offering ground delivery services with 5 business days in transit is not optima- the customer is waiting longer for the product and the company is paying more for ground or expedited delivery.

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These factors can meaningfully impact the costs of last mile delivery and the service levels delivered to end consumers- both of which are important attributes.1. How Do

2. Last Mile Delivery Costs Affect Sales And Growth?

 When a business has a clear consumer- centric strategy around increasing its e-commerce footprint, the first question that needs to be clarified is around shipping costs. Will these be covered by the business or passed on to the customer?

According to leading e-commerce fulfillment service Flexe, shipping fees are the number 1 reason for cart abandonment in the US.

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Some questions to ask prior to forming a strategy include: will free shipping apply to all orders, all zip codes, even international? Is there an order minimum- will this encourage customers to add more items to their cart, or will it cause more cart abandonment? Is the shipping service level the determining factor for consumer shipping costs?

From the UPS “2017 UPS Pulse of the Online Shopper” report:

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  • 74% of consumers said options for free shipping were the most important part of checking out online
  • 94% of shoppers have taken action to qualify for free shipping

 

 

 

3. Supply Chain Factors To Consider For A New Strategy?

There are numerous factors to consider when reviewing the company’s logistics network and last mile delivery, cost should not be the only input. Is the company’s goal to lower the time in transit to the end consumer? If so- then the best solution for the logistics network might be a multi-node location which both optimizes last mile delivery costs and time in transit, however this does not come without challenges on the inbound side. Depending on where the company’s products are manufactures, assembled and where they enter the American market some of the below considerations are of utmost importance:

  1. Production consolidation
  2. Order frequency
  3. Inbound/ Outbound transportation costs
  4. Risk of damage
  5. Number of touches and varying labor costs
  6. Holding costs
  7. Customer service

Improving last mile delivery metrics is a balancing act with competing goals across internal business units. A deep data dive into marketplace information and a stable logistics partner are crucial to successful change. The below diagram was presented by Expeditors Logistics and I have always found it to be a very useful visual for this ongoing balance:

44. Long Term Vision

Understand where the company’s current consumer base and forecast for future growth. Given current market trends and the impact of e-commerce organizations should consider supply chain planning- location and inventory optimization- as e-planning and account for all available and real time inputs such as click, views, product reviews to help predict future demand and trends. Leaders in future markets will be the companies who can see, interpret, and act on data the most efficiently on a global scale.

Supply chain and operations changes are costly, risky and take a long time to implement. Organizations must understand and have a clear vision for future marketplace development prior to adjusting for last mile delivery improvements and supply chain flexibility.

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Using current sales data and partnering with a leading service provider who can assist in conducting a thorough supply chain gravity analysis can help ensure that the company’s long term operational strategy will support the organization’s growth and expansion goals.

5. Immediate actions

Key drivers of success are data and technology. Organizations might supply a different product to consumers but at the core of success lies the ability to gather all pertinent data and translate the story it is telling. First and foremost, organizations should invest in the right technology to get as close to the information generated by end consumers as possible, then consider the above outlined goals.

 

 

#dataanalytics, #ERP, agile, analytics, Bigdata, Business, business intelligence, collaboration, data, data analytics, globalbusiness, Logistics, software, Supply chain, Supply chain collaboration, Supply chain data, Uncategorized

Supply Chain Dynamics: What if… We Could Think Differently

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Supply chain innovation means taking full advantage of best of breed technology and data algorithms that empower intelligent decision-making. The exchange of information, from inside and outside the organization, must be real time, autonomous and continuous.

Previously, I shared an article with insights into the integration of advanced data analytics in supply chain planning. Last week I had the opportunity to participate in a discussion on this topic at the 13th Annual Supply Chain and Logistics Summit. I also attended presentations from Kellogg, Johnson & Johnson and Colgate Palmolive; companies recognized as leaders in supply chain innovation and part of this year’s Gartner Supply Chain Top 25 report. Each speaker mentioned the importance of real time data integration and end-to-end visibility, and gave examples of how this is currently achieved in their respective organizations.

For more than 98% of global companies, implementing a data strategy and using advanced analytics, especially within the supply chain, is a challenge. Not all companies have the talent or financial resources to undertake this type of project. Investments in data structures, analytics and employee training are costly. Knowledge gains from this information are still fragmented between functional silos and across supply chain networks, creating a lack of value and low ROI.

What if we think differently about supply chain data, network collaboration and knowledge sharing?

1. What if we brought everyone to the planning table?

The Sales and Operations planning process (S&OP) has taken a leading role in supply chain design. S&OP is a great way to connect previously detached processes and prepare a better forecast. This process often falls short because we do invite all departments involved to the planning discussion.

In the consumer-packaged goods industry the cost of logistics accounts on average for 7% of revenues. Logistics partners and internal stakeholders are not part of the S&OP process. This creates a discrepancy in understanding the total cost to serve, and can lead to major challenges in meeting demand and preventing stock-outs at retail stores. Unforeseen trouble in the transportation and logistics network can also hurt brand image. When we involve all actors in the planning process and use data from all nodes within the network we are able to prepare more accurate forecasting models.

Speed and agility are the most important drivers in meeting customer demand. As supply chain executives we must take full advantage of all the knowledge available in the data and capitalize on our partner’s core competencies. This is the model of future intelligent supply chains.

2. What if we removed longstanding communication barriers?

Functional, siloed organizational structures are standard. A chain of command exists in every organization, each department has specific KPIs, and actors in a supply network have individual vested interests. The ultimate goal is to drive down costs, extend payables periods to release working capital and increase gross margin, all without regard for how this affects the overall system.

This is a direct result of the lack of communication and visibility within organizational departments, and throughout the entire supply chain.

What if we used data knowledge to create an unprecedented alignment of all stakeholders, with common KPIs across the entire network?

If we did this, we could create truly agile supply chains with increased flexibility and visibility. This network could offer better response to omni-channel customer demands. We could lower overall costs and risk by incentivizing shared inventory, shared operations and gain complete chain visibility.

Ultimately, we would create real time automated information sharing networks and continuous supply chain optimization. Participating in such a system creates value for all actors; it promotes proactive policies for risk prevention and creates cognitive systems that learn over time.

3. What if we built supply chains with end customers in mind?

A recent study from Terra Technology finds that for most companies 10% of items generate 75% of sales, and that the bottom 50% creates a long tail contributing to only 1% of sales. The costs associated with planning, producing, moving, storing, marketing and shelving all of all products affect the overall bottom line.

Only 18% of suppliers receive point of sale data from retail partners. Without SKU level data from downstream partners in the retail sector it is impossible for upstream actors to plan accordingly. Furthermore, the retail sector continues to charge upstream suppliers for these insights. New research from GT Nexus finds that around the world 81% of adults have tried to purchase a product that was out of stock at a brick and mortar store. The study also shows that this leads consumers to become dissatisfied with the brand, 1/3 of shoppers blame the retailer and 65% of them shop for the product online from a competitor.

Unlike excess inventory, we cannot measure the lost sales due to inventory stock outs. We must rethink the design of our supply chains, the sharing of knowledge within organizations and networks to gain visibility and become truly agile. Lack of collaboration is an archaic practice in supply chain management and will serve to further distinguish leaders from laggards.

If we really planned the supply chain with the end customer in mind we could significantly lessen the number of stock outs. E-commerce and click-and-collect models apply new pressures on global supply chains. We can no longer use the same fragmented processes, information and technology to meet demand and enhance customer experience.

The future of competition is no longer business vs. business, but supply chain vs. supply chain. We must empower our supply chains to sense system changes and adapt accordingly, while increasing collaboration within our global networks.  Our ability to think differently about managing supply chain processes will lead to the development of truly intelligent organizations.

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Why Companies Need a Supplier Relationship Management Strategy

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The business landscape is ever changing, numerous innovations have allowed companies to transcend borders and become global entities. While the opportunities are numerous so are the challenges; in this fiercely competitive global marketplace success requires companies to pay closer attention to supplier relations. Global leaders should retain suppliers with vested interest in the long-term success of the company. These partners should be willing to extend more value added services, flexibility and resources. To attain this level of trust with suppliers, companies should approach these relationships with the same care they use when approaching customers. A vigorous supplier relationship management (SRM) strategy can assist organizations in maximizing partnership value, minimize risk, and manage costs through the entire supplier relationship lifecycle.

When formulating a supplier relationship management strategy organizations must consider the following implications to be successful:

1. Become the Customer of Choice

In May, 2014 Raytheon gathered a group of its largest suppliers in Boston, MA to discuss the launch of the company’s Supplier Advisory Council. This advisory board is to serve as the first step towards a more comprehensive supplier policy and the building block for Raytheon’s new SRM strategy. As stated by Michel Shaughnessy, Vice President of Integrated Supply Chain for the company “In order to reach a level of earned preferential treatment, Raytheon has to build stronger bonds and greater trust into supplier relationships.”

By working closely with its suppliers to receive the best sales terms, fluctuating manufacturing capacity when needed and first access to the latest innovations, Raytheon secured its status as a leader in the defense systems market. The company also realized a 10% increase in stock price since the summer of 2014, in a highly competitive and regulated market.

2. Connect your supply chain

Supply chain concepts are generally understood in a linear pattern of consecutive planning in the form of plan-source-make-distribute-return/dispose. What happens when a company plans to bring a product to market and outsources all of the steps in between to suppliers that do not communicate? Take for example lithium batteries, which are intermediate parts destined to be incorporated into finished goods such as laptops, cameras or cell-phones. The transportation of lithium batteries is dangerous, as they overheat, which can cause significant damage. In electronics supply chains, transparency and visibility is key to ensuring that products get to market as promised. To do this, the production and transportation of all component parts must be closely monitored and coordinated.

3. Foster partnerships based on trust

In 2013 B2C e-commerce sales accounted for more than 1.2 trillion US dollars. Omni-channel shopping has given customers a wider selection of goods and a platform for price comparison. Because of this, businesses are finding it challenging to forecast demand and therefore they risk escalating inventory costs or stock outs. Organizations need more flexibility in their supply chains and should seek stronger partnerships with their suppliers, moving away from transactional relationships based on costs and delivery times, and focus more on long-term mutually beneficial relationships.

SRM software, much like a CRM system allows supply chain personnel to keep track of supplier interactions and address concerns early. This type of system can also help organizations understand when their suppliers are undergoing change or hardship, and offer them an opportunity to step in and help, or provide them with enough time to source from different suppliers.

4. Manage working capital

To establish and maintain leadership, organizations must innovate. Most often capital is tied up in paying suppliers with few funds invested in R&D. Some companies choose to extend accounts payable as long as possible to free up capital that can be invested into R&D and innovation. This requires strong supplier relations, built on trust as most times delaying payment can erode partnerships, affect terms of payment, and cause less willingness for collaboration. These strategies are even more beneficial in the retail space where suppliers consider special arrangements on payments in exchange for better shelf space and product visibility.

5. Set clear expectations and KPIs

Suppliers are not mind readers; their success relies on communicating with their customers, understanding their demand needs, and receiving honest feedback. Organizations that rely on hundreds, maybe thousands, of suppliers to fill demand find themselves reacting to supplier behavior rather than anticipating concerns and preparing ahead of time. A comprehensive supplier management strategy helps organizations arrange suppliers based on different tiers of importance and reliability.

Suppliers should be held accountable for their promises; all communications, formal and informal should be properly logged and followed up with. It is unwise to trust a supplier with more work or a better project, if they have repeatedly failed to meet deadlines in the past.

Organizations should keep detailed information on supplier communications, contracts, and improvement based on their internal key performance indicators. While all businesses appreciate a supplier’s ability to deliver high quality goods on time, organizations should also have individual characteristics they value from their suppliers. It is important that these characteristics are shared with suppliers and used to measure their ability to improve on these indicators.

6. Find opportunities and improve supply chain sustainability

Consumers are becoming increasingly more concerned with how their products are manufactured and sourced. According to The Nielsen Company: 55% of global online consumers in over 60 countries assert that they are willing to pay more for products and services provided by companies that are committed to positive social change and environmental protection. In the past we have seen numerous examples of global leaders fail consumer expectations. These organizations depend on a vast network of global suppliers to bring their products to market, but in the eyes of consumers it is their responsibility to ensure that their practices have minimal impact.

To meet the growing demands of customers, organizations must work closely with suppliers, conduct regular audits, and analyze findings. Managing supplier relationships strategically allows global companies to set standards and utilize existing assessments such as the Higg Index. To reach sustainability best practices, communication with suppliers must be collaborative and transparent with stated common goals and clear ability to measure efforts.

According to the Council for Supply Chain Management Professionals (CSCMP), supplier relationship management is a comprehensive approach to planning and managing an organization’s interactions with providers of goods and services. This practice is supported by a dynamic SRM strategy that retains information that can be used for analysis. The overall objective of SRM is to streamline transactions and manage communications. As supply chains become more diverse and exposed to various global risks, these practices help organizations become market leaders, mitigate risk, hold suppliers accountable and measure their supply chain footprint.

This blog appeared on the Cerasis Transportation Company Blog, visit them for more information on logistics, 3PL and supply chain management thought leadership.