Taking care of relationships with downstream suppliers

When market goods are in high demand, the companies that make them know they have to get it right or else. Many just miss the chance to make a lot more sales, and others release products late, which means a lot of write-offs and markdowns. It's becoming more and more important to be able to match supply and demand across time and customer preference. Retailers are getting very impatient with makers who can't meet their needs. The number of new products coming out is at an all-time high, and shelf space is growing at a slow but steady rate of 3% to 5% per year. It's not enough for makers and retailers to work together upstream; what's really important now is making sure that the speed of downstream information matches the speed of business.

From the early days of Wal-Mart's Retail Link to the ability to trade online in the 1990s to the work being done to create a standard language for products in UCCNet and Transora to GS-1, a lot of money is being put into aligning manufacturers and suppliers. Many people have found that these investments have paid off and made relationships much better. Still, the fact that shelf shortages happen so often shows that there is still room for change. In the 21st century, collaboration must be close between not only the retailer and the manufacturer, but also the manufacturer and all downstream suppliers and stakeholders, such as logistics, raw materials, subcontractors, packaging, quality/validation services, and yes, even legal and financial departments. Because there are so many places where things could go wrong, getting the right product to the right place at the right time and for the right price takes a laser-like focus on these parts further down the line.

When we look more closely, we see four main problems and trends:

One main reason why delivery dates are missed is that raw material providers and fill-to-kit subcontractors can't see a manufacturer's constantly changing demand plan in real time, which means they can't change a commit-to-promise. In the same way, packaging providers have to make sure that production, delivery, and sometimes design and art all work together with a manufacturer's tight schedules and needs to cut down on inventory, warehouse space, and costs for unfinished goods. When you combine supplier visualization tools with demand planning and supplier management, you can create the closed-loop system you need to move to a just-in-time (JIT) setting. No company wants to get two million Christmas product wraps on December 26 when the finished goods have been ready since December 19 and are set to go on sale on December 21. 

Time is wrong, place is right, offering is right. How many times have you heard, "it's being loaded," "it's already in transit," or "it's at the dock and you'll get it on time," only to miss the date and all the business problems that come with it? Why is it so important to keep an eye on the shipping of finished goods but not as important to have better visibility into the transit state of suppliers? With their strong connections to shipper systems, today's transportation solutions can give you insight further downstream and let you take the right corrective action. More than that, connecting real-time changes in transportation to product schedules can be a way to find big shipping problems early on. When the master planner finds out that a shipment will be one day late, they can change the production run and may need to add a second or third shift. It gives you the important information you need to keep track of both delivery and prices while making the plant as effective and efficient as possible. 

Does the material from your sources meet quality standards? If not, can they show proof? In 2007, there were quality problems in the pet food and toy businesses that had terrible effects on both reputation and finances. A lot of trade groups are now making policy and validation plans. As a link in the supply chain, do you make sure that your sellers follow quality rules and that their reporting solutions are checked? Do not forget this: Given that you are the source, you are responsible. Because of this, companies that make things must make sure that the companies that supply them have systems and processes in place that meet both customer and legal requirements. A lot of orders are missed for reasons other than not having the right products ready. For example, letters of credit are sent out in the wrong amount, quality assurance liability bonds have not been signed off by legal, and there are many delays that cause raw materials or contract made goods to sit and wait. Support groups don't get to be on the critical road until they become a bottleneck. And once the root reason is found, everyone in the company doesn't understand how it happened. Important thing to remember: Just as important as the right price is the right method.

When you look at these four major pain points together, it's clear that collaboration between retailers and manufacturers is getting attention and moving in the right direction, but collaboration between retailers and customers has been ignored. The downstream network is a lot more complicated. Before a product gets to the customer, it comes from up to fifty different vendors. A company can always meet the strict delivery needs of its customers at the right cost by combining supply chain performance with financial management, manufacturing, and quality processes. To solve the problem, we need a system that supports best practices for working together and seeing what suppliers are doing.