Why Vendors May Not Benefit from Supply Chain Collaboration as Much as You Think

February 13, 2018 5:26 pm

Long ago, many companies realized they couldn’t handle all aspects of product development and manufacturing. For more than 25 years, vendors across the globe have been assisting western brands in bringing products to market. These days, a vendor’s role in the supply chain is more critical than ever, as they provide either important components or the finished products themselves. A byproduct of a vendor’s  role is to collaborate and deliver important information to their customers, which may be just as critical as the physical items themselves.

A recent blog post by the Supply Chain Network highlights the competitive advantage gained by this collaboration. Vendors are required to supply various levels of information to their customers in order to create a well-oiled supply chain. This information includes shipping details, sample tracking, production status, packing lists, shipping paperwork and more. Have you ever considered what it takes for vendors to supply this information to their customers? If so, you understand that something is wrong with this picture.

Vendors supply customers with information in a variety of ways. Some transactions are supplied via EDI, some through supply chain management systems, some through spreadsheet management, and others via email.  At the same time, vendors have their own systems to which they feed information as well.  The problem is, the vendor systems rarely talk to the customer systems, thus causing one of the largest redundant processes on the planet.

Consider the flow of data in the other direction. Customers send vendors master data and related documents, such as specifications, PO’s, RFQ’s, etc. for the parts or products they need to produce.  Much of this master data is most often re-input into the vendor’s system. This redundancy occurs for every customer the vendor supplies – and each customer works differently. As a result, vendors have different sets of instructions and processes for each of their customers, making their work incredibly complex. And sadly, vendors rarely benefit from the information contained in customer systems – to them, they’re just different beasts that must be fed.

So, this mother of all redundancies has a labor cost associated with it, and customers almost always ignore it because the vendor seemingly just bears it. But as we all know, those costs are ultimately passed along to the customer. So as a result, this redundancy has a large impact on speed to market as well.

Whether companies admit it or not, redundancy at any link in the supply chain slows it down.  Collaboration with vendors in the supply chain will always yield results, but the true benefit will not be actualized until this redundancy is addressed and corrected.

Unfortunately, there is no silver bullet to immediately solve this problem. So, here are a few ideas that will take some time to implement, but are worth exploring – and keep in mind, one-size does not fit all.

  1. Develop transactional standards – the National Retail Federation has made some inroads here, but there’s much more work to do, and they only cover retail.  Perhaps if you have enough clout, you can have some impact on an industry standard’s board to take this on.
  2. Blockchain – an emerging technology that may have implications for supply chain information management. PWC defines it as, “decentralized ledger that keeps a record of all transactions that take place across a peer-to-peer network. The major innovation is that the technology allows market participants to transfer assets across the Internet without the need for a centralized third party.” Blockchain was originally used to manage cryptocurrency, but has many other potential applications. Several large consulting companies and corporations have started some projects in this arena, but it’s too soon to tell if it will have an impact on the redundant data issue.  Regardless, this technology is one to watch as it has a lot of potential.
  3. Acquire/own your entire supply chain – this is not feasible for most organizations, but companies may want to look at acquiring vendors or building their own plants to produce all the components of a product. This is appealing because all aspects of production can be controlled with one enterprise software solution, thus increasing efficiency. The recent cut in the corporate tax rate may also make this investment more palatable for some U.S. companies.

So, while there are many other possible alternatives to solve this vendor redundancy problem, all of them will take ingenuity and resources. The improved collaboration, insight, and speed to market gained by eliminating vendor redundancy will be an enormous benefit to those who can make it work.

About Us

Founded in 2001, Singletree Technologies, LLC is a software and consulting company that focuses its efforts on streamlining the business processes of Retail and Wholesale companies in various industries. We know that an application needs to adapt to each client’s business. We also know that no matter how well the application fits the business, if it doesn’t allow the end-user to work in an efficient and time-saving manner, we have not hit the mark.

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