Turn Your Supply Chain Into A Supply Circle

What if the traditional supply chain could be reinvented as a supply circle? That’s the question we asked ourselves recently when we were asked to consult on a client’s business.

Supply chain is an area of business that requires the greatest amount of cooperation, communication and value added service. It is often viewed and managed in a very linear fashion where a product or a service is transformed from one state to another, and in its course, moves from start point to finish point. It would be inherent that a multitude of partners would be involved in the so called “value chain” and they are likely to be in different parts of the world given the diversity of core competencies.

This transformation process has traditionally meant there was a profit to be made every step of the way. This is why businesses with size and critical mass become vertically integrated to keep such profits in their own books.

Changing the paradigm

But what would happen if the business treated each of its value add points along their supply chain with a shared value proposition? Starting with their suppliers and fostering deep, long-term relationships, such that they grow, prosper and become great together. The competitive advantage of having a partner in your product cost management and lifecycle development often outweighs the strategy to jump from one supplier to another on the basis of narrowly focused metrics such as price, service level, geography, etc.

As in any long-term relationship, there has to be a benefit for both parties. It cannot simply be a “how can I get the most out of using this supplier” attitude. When an organization partners with a supplier they should realize that they need them for a particular competency, and understand the value they add to the relationship and subsequently the product or service being developed.

Doing business with a circle of friends

With this kind of thinking, having a circle of friends is clearly a better way to conduct business. It legitimately could redefine supply chains as a synergistic relationship amongst a continuous process that depends on each of the participants in this “supply circle” to make each of them valuable.

Something to think about the next time you start hammering your latest supplier in order to get a better deal.