Choosing a new supply chain partner can be one of the best decisions you’ll make this quarter or it could turn out to be a major headache for your organization. Supply chains all around the world are becoming swift in movement and innovation, so much so that any one company is hard-pressed to keep up with all the changes in their industry.
Adding a supply chain partner can give you powerful, strategic leverage to meet new trends and customer demands without making significant infrastructure investments. But, how do you choose the right partner? What hoops should you use before adding someone to the lifeblood of your organization?
While there’s no magic bullet or secret formula to guaranteeing a new supply chain partner will instantly gel and properly integrate, you can mitigate risk and increase the chance for success by establishing common cultural and business grounds while asking for thought leadership before signing anything.
The following five are some top factors we think can build you a better supply chain partnership.
Know the Language
The ownership and location of your supply chain partner an essential piece of the puzzle for two very important reasons:
• You must have a demand in the regions they operate, or plan on an expansion into those markets, for the partnership to have the utmost value.
• You need to have a cultural understanding of how business is done wherever your partner is based. Many countries and even different regions within a country will have a different work ethic and different outlooks on how business is run.
Knowing about your potential partner’s base is important for understanding their expectations for the dealing and what you need to bring to the table. And one thing that may be apparent – but needs to be said because sometimes people get excited and forget – their home base establishes some legal considerations.
Legal considerations aren’t just what are legitimate in a country but also what’s a common practice that skirts the law. Even if everybody’s doing it, you can get caught in the liability net if your partner acts in an unsavory manner to facilitate your operations.
If you’re looking for an immediate win, or are venturing out with a small footprint, consider a U.S.-owned company whose cultural you’ll understand and have common ground with, even if they have operations outside of the States.
ISO certifications can be a great way to get a handle on what potential partners know because it gives you some independent verification.
ISO 9001 is a pretty good standard for assessing quality management systems and so you know that your partner is knowledgably enough to comply with regulations related to your business. ISO 9001 also covers requirements around quality planning, order review and resource management, all of which are incredibly important in the modern supply chain.
While certifications won’t guarantee every part of a potential partner is running in tip-top shape, they do establish a baseline competence and help you know what to expect. You also know that your partner has some accountability in the space.
Opinions on What Matters
For manufacturers, we can live or die by how well the warehouse performs. Since the modern warehouse is becoming more automated and integrated with retailer and other manufacturer partners, any supply chain companies you add to the mix need to be up-to-date.
Part of this includes the ability to give you a coherent opinion on systems and services used in warehouse management, plus thoughts on how best to balance loads, modes and shipments.
You want someone who is at or above your technological level because they at least can integrate with your operations, and potentially can suggest systems that may save you time and money.
With manufacturers placing an increased importance on agile development, new partners should have their own opinions on how to achieve more with less and how to share that savings. Now the tricky part: what would you say if your potential partner asked you about current and future software, cloud or infrastructure deployments?
Get a complete set of financial information for your potential partners. It’s another one of those that seems a bit obvious, but you’d be surprised about how many partnerships form on good faith and poor revenue models.
Ask for the information that’s most pertinent to your business, and make sure to ask for anything you’d be willing to share. Think about what you’d like a partner to ask for, so you could gauge their fiscal acumen, and make similar requests.
Some of the basics include disaster recovery plans, cash-on-hand, footprint estimates, sourcing areas and costs, and customer concentrations.
The Almighty Word of Mouth
Customer concentrations also give you a good segue into a asking for what might be the most important piece, though it sometimes gets a little uncomfortable for your partner, and that’s the customer referral and recommendation.
Happy customers tend to be future customers. So, you’ll want to get a handle on the customer retention levels and see how many companies are willing to say good things about your potential partner. The list you’re given will be full of strong advocates, and that’s okay initially. You can judge their quality based on how well these advocates layer on the praise and how specific that praise is.
Advocates and evangelists that don’t get into specifics aren’t the best sign.
If you have an established trust with your contact at a potential partner, you’ve got a big ask of them. Ask for the name of a customer that wasn’t satisfied but that your potential partner thinks they could win back. To get this, you’ll need to be willing to share the same piece of info.
This final bit will help you find out where hiccups might be and what help your potential partner may need. Every now and again that business process that’s struggling will be in your wheelhouse. If you can help that process improvement soon after your partnership starts, it’s a strong early win. And we all know that early wins make every relationship that much better.
By Philip Odette, 2014