I interviewed Hannah Kain who discussed Supplier/Buyer Collaboration.
My name is Hannah Kain.
I was originally born in Denmark, and I started my career in manufacturing and supply chain back in Denmark before even the discipline supply chain was known. In 1990 I immigrated to the US, and in 1997 I started Alom Global Supply Chain management company. We work with the technology companies or companies that have heavy technology in their product or in the supply chain. We are headquartered in Silicon Valley in northern California, and we ship out of 17 locations for our Fortune 100 customers and work in the technology sector, automotive, medical, and a number of other sectors.
One of the things I've noticed over time is how there are a number of new trends in the supply chain industry. The supply chain industry, of course, is relatively new. And one of the areas where changes are happening really fast is in the supplier or vendor, buyer relationship.
What happened some years ago, all of a sudden you could do exchanges online. And you could do bidding, and everything was considered a commodity. The interesting thing that happened here was that while you drive the unit price down, you may drive other costs up.
Unit price has just gone down and down and down. Unit price for manufacturing.But all the supply chain costs -- the compliance cost, the risk management cost, the cross water cost, the customs, the taxes, and of course, especially the logistics costs have gone up and up.
So, the weak spot in the entire idea about driving unit cost down is that unit cost is the most important aspect of purchasing. And what actually has turned out, and a number of researchers have certainly confirmed this, is that driving unit costs down is not going to give you a competitive advantage. It's not going to make you the lowest cost provider, necessarily. It's not going to give you what you really need.
The new trend in relationships between industrial customers, business customers, and suppliers is that the customer looks for who can provide the most value at the end of the day. In a way, of course, it's not new because that's what we used to do in the very old days. But the transparency of the unit cost has just over written what we used to do, which was looking at who can give me a competitive advantage. Who can collaborate with me?
So, we are talking a lot about the supply chain being a competitive advantage, being flexible, being agile, being able to meet customer demands, which keep going up as more flexibility, agility, customization becomes available.
Consequently, having supply chain partners that can deliver that type of flexibility and that are dedicated is really a key factor in competitiveness. I think intuitively, we all know that when we deal with somebody and we treat them very fairly, we don't necessarily overpay them, but we're fair in all our dealings and we have a give and take relationship, we get a better outcome in many ways.
I am reminded of one of my acquaintances who kept negotiating down and down and down with the people who cleaned her house, and finally, they just decided that they could not do it anymore. And she was left doing her own cleaning. It's the same in supply chain and in supplier of relationships. If you are not treating your suppliers fairly, they may service you until they find a better customer. And all of a sudden, you're left without the supplier that really could leverage things are you.
The other issue is when you need an extra favor, you need that extra production lot expedited, you need something done out of the ordinary. Having that relationship where everybody is committed, they know you have done your best to not put anybody in that situation, and yet you are asking for it, and so they are happy to deliver.
In the end, it's about relationships. It's about how are your suppliers are being treated and how do they feel treated by the customers.
So, we have customers we want to go through the hoops for. And we've got customers where we feel that they have really pushed us to the limit where we are asking ourselves whether we are better off or worse off having them as customers.
The interesting thing about supply chain and the next decade is that there's going to be a deficit of staff members. We're going to have about two million unfilled jobs in supply chain in the US alone over the next decade. And consequently, it's really important to be able to outsource to suppliers that one can rely on. Instead of hiring internally, maybe somebody out there can be outsourced to and relieve some of the pressure to hire internally.
But that only works if one has the relationship that allows one to be the customer of choice. And I think that's new thinking about how to become the customer of choice, and how do you get the first mind share among your suppliers.
The other interesting trend that I've been following is the trend about compliance management. Of course, we are all spending more and more time doing compliance management, trying to figure out what's happening earlier in the supply chain. Have the minerals been mined from a conflict mineral mine? Has child labor been used? Indentured labor? Was everybody treated fairly, etc., etc.?
There's only so much you can do in auditing, though. In the end, the best way to ensure that you have alignment is to make sure that you have control alignment, management alignment throughout the supply chain.
So, instead of just looking at unit cost, the most visionary companies out there are looking at whether the suppliers they sign on are culturally and business-wise aligned with them. And then they're looking at whether they then also have suppliers that align with the supplier.
So, therefore, you get an alignment towards the supply chain and consequently, you can cut back on the auditing, because now, instead of just doing auditing, you have the commitment from top management and all the way down to ensure that everybody is doing the right thing. And it becomes part of the DNA in that supply chain.
It's an interesting trend that some companies have made it their business to ensure before they sign supplier on that this alignment is taking place. It means that it's more difficult to become a supplier there, but it also means that there's a lot of loyalty and a lot of visibility and trust in that supply chain. And as we all know, once you've got trust, you can do business much faster.
I'm a big proponent of trading the trust, both on a senior management level and on an operational level among everybody in the supply chain. I feel this is a much more productive way of working than focusing so much on unit cost. In the end, this means that everybody is looking out for everybody else, trying to build a bigger cake and making sure that everybody gets a fair share of the cake based on what they bring to the table.
I'm really excited about these new trends, and I think that they're going to be pervasive, especially among the high end brands that really value their customers and that really are going to win in the success in the supply chain flexibility, agility area.
About Hannah Kain
CEO of ALOM