Creating value through supply chain partner management

As a pragmatic, logical person, I frequently find myself, not without some difficulty, attempting to calculate a hard return or quantitative portion to the more qualitative aspects associated with value-laden terms such as transparency or sustainability. The calculation is significant, since many business decisions are influenced by hard, cold analysis. When this calculation is successful, the value and logical arguments become well-rounded and can therefore appeal to almost all business professionals and many consumers.

If we consider transparency, in a business-to-business context, there are many filters to potentially consider; those selected dependent on what parts of the transparency journey apply to the business. In simplest terms, a package can be transparent, or a product can be clear. Clean label illustrates a manifestation of this value too.

We can be transparent in what we identify about our company, culture and operation. This can be represented as visual capture of product and process, disclosures and narrative about history, operations and practices, and even outright disclosure of real challenges and the struggles to overcome them. Finally, we can be transparent with our supply chain partners. How we act with them is not only a manifestation of company culture and values, it can create bottom line real value and return.

In all the above examples, a company creates an emotional engagement, and in the best instance, delivers a trusting relationship, hence the trust transparency connection we have spoken of before. This engagement is increasingly valuable to consumers as well as to supply chain partners who almost always have purchase options. These buyers of your products and services will ultimately apply a real number to this value provided, even if it’s only additional purchase elasticity, but what else can we examine to help quantify the real value of these best business practices?

What is the real, quantitative value of transparency?

  1. Secure and commit to long-term relationships: Outside of the obvious in potential savings in the direct costs associated with new vendor qualification, an organization thinking about longer term, partner-supporting contracts ensures stability of supply, which in turn allows sales and margin growth, a partner commitment to jobs, which in turn, directly leads to a stable, knowledgeable, motivated workforce. Security of supply, managed in this fashion, makes for fewer outages, with a direct impact on inventory management and related savings.
  2. Invest in sustainability: The right sustainability initiatives directly lead to securing long-term sources of materials and expertise. This in turn leads to cost stability, measured forward planning, and repeat sales and margin growth. Environment and field to shelf stewardship is at the epicenter of providing long term stable supply.
  3. Fair compensation throughout: Fair compensation for everyone involved has huge emotional value, but it can also be made more quantifiable. When managed and communicated well, it is an important aspect of supply chain partner assurances. It supports having appropriately motivated and trained individuals involved at all levels, and is a disincentive for economic adulteration.
  4. Managing the cost of quality and risk: Fair transparent practice does not incent short cuts which can have a disastrous impact on quality, allows adequate QC in general, makes for fewer defects which impacts total real product cost, and does not add risk (and cost) to the operation. Ensuring you have a sustainable program provides assurances in repeat process, and mitigates risk of adulterated, fraudulent or contaminated material entering the supply chain.

We’re often told “that’s a nice to have, but you can’t put a price tag on it.” With a little bit of examination and insight many of these ‘nice to have’s’ can, in fact, be at least in part quantified and tied ultimately to a bottom line.

~Len

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