| Building Strategic Relationships | | | | Leveraging supplier innovation also benefits from |
| Question: | | | | strategic relationships. Working together will benefit |
| If we make the assumption that manufacturers and | | | | both the supplier and customer, leading to improved |
| distributors will be joining forces to secure one | | | | profits, product quality, marketability, and speed of |
| another’s roles in the supply chain a few | | | | implementation. Also, 70-80% of a product’s |
| questions come to mind. First, what role does the | | | | cost is accrued during the development process (1). |
| distributor have in supporting the manufacturer’s | | | | Quite a bit of research has been done on the |
| marketing efforts? How does the distributor | | | | distributor’s benefit from supplier innovation. It |
| integrate with supplier branding efforts? Should they? | | | | reduces lead times for the distributor, it reduces risk |
| How do distributors support the design engineer as | | | | for the distributor, it enhances flexibility and product |
| well? How does the manufacturer support distributor | | | | quality, and it also reduces cost (3). What would the |
| branding efforts for their services? Should they? How | | | | motivation be for the supplier then? After all, it |
| does the manufacturer support the distributor’s | | | | seems that the distributors reap all of the benefits, |
| sales force identification of new product | | | | not to mention being able to take the supplier’s |
| development opportunities? | | | | innovation and send it out for bid. However, if this |
| Introduction: | | | | were case the prospect of collaborative relationships |
| One of the main premises behind forming strategic | | | | would have been killed long ago (3). Therefore |
| relationships is that a supplier and customer working | | | | studies have been conducted for supplier benefits as |
| together can be more productive than each | | | | well. One reason for these studies was the gap |
| operating separately. Much of this can be attributed | | | | between Western and Japanese automakers. It |
| to preventing adversarial relationships as well as | | | | was found that Japanese manufacturers utilized to a |
| competitive relationships. Suppliers and customers | | | | much greater extent supplier innovation to develop |
| may collaborate in multiple ways. They may share | | | | new products faster and better (3). The studies |
| forecasts, they may integrate business processes, | | | | indeed found that the supplier benefits as well. Both |
| they may leverage each others core processes, and | | | | the supplier and the manufacturer share in the |
| other activities to strengthen the supply chain. | | | | increased profits. Also, the supplier will most likely |
| Booz-Allen & Hamilton have referred to the | | | | improve a core process that it can use in other parts |
| supply chain as a supply web because of the | | | | of its business. One of the greatest benefits is the |
| complex nature of today’s supplier base. Many | | | | opportunities for reducing costs. These will lead to |
| firms find themselves supporting multiple roles in the | | | | additional profits aside from the joint profits. The |
| SC simultaneously, such as customer, supplier, and | | | | level of these profits is directly related to the |
| competitor (1). In today’s global market | | | | supplier’s participation level (3). It was also |
| supply chain management is becoming critical, but it is | | | | found that the earlier the supplier is able to get in on |
| often difficult to develop supply chain relationships (3, | | | | product development the better. The development |
| 4). Purchasing has also become a process that once | | | | process is a continuous process needed for further |
| optimized can give a firm a solid competitive | | | | innovations making it an iterative process (3). It is |
| advantage (2). About 70-80% of product cost is | | | | when the supplier and customer are at the height of |
| determined in the early phase of design (1). | | | | collaboration that the greatest results will be |
| Research has indicated that the best way to | | | | achieved, therefore it is important to remember that |
| optimize these processes is to form | | | | collaboration is a duplex process. Much of the |
| supplier-customer relationships. According to | | | | distributor’s role is sharing profits, not intensely |
| Laseter, there are tree prerequisites to long term | | | | negotiating every price quote, and direct equity |
| relationships; mutual dependence, goal congruence, | | | | investment. Much of the supplier’s role is |
| and knowledge competency (1). In these | | | | commitment to build on core processes and perform |
| relationships, the suppliers and distributors need to | | | | the duties that the distributor cannot perform (3). |
| fulfill their roles. Each plays a role in the others | | | | In determining the supplier’s role in supporting |
| marketing and branding efforts and both can benefit | | | | the distributor’s sales force identification of new |
| from leveraging innovation in product design and | | | | products I will draw from my own sales experience. |
| development. The questions are whether or not | | | | In being on the front lines of customer warfare, we |
| this should be done, and why. The discussion will | | | | are often the first people to see the opportunity for |
| outline the arguments behind the conclusion. | | | | a new product. This is often spurred by an |
| Discussion: | | | | innovative process of the customer. Many storage |
| It has been found that for the most part suppliers do | | | | systems have evolved from this process. Early on |
| not understand the process that their | | | | in case flow technology the sections of storage bays |
| customer’s perform in making supplier selection | | | | were isolated in the warehouse and because items |
| decisions. Therefore it is important that suppliers | | | | were picked by hand, vertical space was underutilized |
| develop some type of “scorecard” system | | | | because humans could only reach so high. When |
| to evaluate themselves from their customer’s | | | | space began becoming premium the need was seen |
| perspective (2). This will help hem understand the | | | | to integrate case flow racking below pallet storage |
| process and benefit the relationship. Once a supplier | | | | racking to maximize vertical space. From there it |
| is selected marketing and branding issues can be | | | | evolved into “pick modules” that often |
| addressed. When it comes to marketing, a supplier | | | | encompass multiple levels. This allowed cases to be |
| can benefit greatly from the distributor’s efforts, | | | | picked from below while forklift operators pulled from |
| and vice-versa. A cooperative effort can maximize | | | | above to replenish the case flow. This evolution |
| the dollars spent on marketing. If the manufacturer | | | | could not have been completed by the distributor |
| realizes the distributor will be increasing the visibility of | | | | alone. The distributors often do not have the |
| the manufacturer’s brand then they are more | | | | production capability or design capabilities of the |
| willing to contribute more to the effort, monetarily | | | | supplier, and therefore it is critical for the supplier to |
| and otherwise. The successful distributor will be the | | | | be involved in the design and development of this |
| driver of the marketing effort with the supplier | | | | idea into a new product. The supplier should support |
| supporting the effort as necessary. The distributor | | | | the distributors sales force by providing the |
| should present a “focused, coordinated, goal | | | | engineering, design, and manufacturing capabilities. |
| oriented… strategic plan” because the supplier | | | | Their benefit is that they get to draw from this |
| needs to know that their goals will be met along with | | | | innovation and profit from sales to other |
| the distributor’s. This means the distributor | | | | distributors. The distributor benefits by being able |
| must prove the worth of their plan in order to | | | | to offer a new and innovative product to its |
| receive their support. This will bring return business to | | | | customers and well as set the market on pricing. |
| the distributor, in turn benefiting the supplier (5). | | | | Conclusion: |
| Suppliers and distributors can benefit from | | | | Strategic relationships clearly benefit both parties. |
| collaborative branding efforts as well. The | | | | However, it is a continuous relationship that requires |
| reputations of the firms lie in each others hands (7). | | | | commitment and reciprocity to work. Collaborative |
| There is evidence to support the suggestion that | | | | efforts in marketing and branding can benefit |
| failure to support the brand between supply chain | | | | suppliers and customers by increasing their profits by |
| partners is a “barrier to success”. Branding | | | | maximizing brand recognition and loyalty with |
| can be defined as a set of marketing activities | | | | customers. A focused marketing strategy will |
| combined with names, symbols, services, and | | | | maximize advertising dollars. The key to marketing |
| processes that differentiate one firm from another. | | | | is leveraging the supplier to maximize the |
| This is also under the assumptions that a customer | | | | distributor’s return on investment since the |
| can “perceive” these differences and that | | | | distributor will most likely be making the larger |
| they will act accordingly (4). A brand can also define | | | | contribution to promote the supplier. Brand |
| a company, so it is important that the partners, all | | | | representation is important to the success of the |
| the way to individual employees, understand what | | | | supply chain. Breakdowns in communication, |
| the brand means and act accordingly. Any problems, | | | | integration, and cross functional knowledge can |
| whether they are related to the distributor pitching | | | | diminish a brand’s image, making it difficult for |
| other brands or employees speaking errantly on the | | | | the supply chain to succeed. It takes mutual |
| phone, can diminish a brand’s image. Distributors | | | | understanding of brand importance to make the |
| need to work together to increase brand leverage, | | | | relationship work. Supplier innovation can be the |
| and the suppliers should compensate them for their | | | | greatest benefit of a strategic relationship. This |
| efforts. This is because the supplier will profit by | | | | innovation can save both the supplier and customer |
| understanding the end user more from the | | | | money as well as get the distributors product to |
| distributor’s end-user relationship. Also, regular | | | | market faster. The supplier can also contribute to |
| performance reviews should be performed (6). | | | | the distributor’s sales force identification of new |
| These efforts can help establish repeat customers as | | | | products. The sales force has the most exposure |
| well as bring in new business, benefiting both parties | | | | to the end user and can facilitate bringing ideas to |
| (7). The firms can also grow from integrating the | | | | the manufacturer who has the better capabilities to |
| branding strategy with their supply chain strategy (4). | | | | act on those ideas. |