Extracting Value from Supply Chains is About Avoiding Win-Lose Outcomes
Managing supply chains can easily default to a contractual or transactional process, however for many businesses it’s becoming a more strategic and high stakes activity. There are opportunities to be found if the working relationship has the right footing.
We often hear of companies squeezing every last cent out of the businesses in their supply chain, implying that it’s a win-lose game. That’s fine if that’s the way you want to play it, however it’s unlikely to foster the innovation and strong partnerships needed to create value-adding business models. Given that supply chain costs typically compose around 55 per cent of total product costs – a figure that is growing due to outsourcing trends – it should receive a lot of management attention.
Just the other day, a freight business disclosed that it’s struggling to change mindsets around supply chain practices. And for good reason, integrated business models require high levels of collaboration to create win-win outcomes. Their organisation is constantly restructuring for cost cutting purposes and this mindset pervades their supply chain relationships.
This required skillset is collaborative leadership – moving away from command and control systems to ones grounded in influence and empowerment, where the right conditions are created for partners to work on solutions together. In particular, it’s about working across functions and organisational boundaries to work as equals and unearth new insights together.
Collaborative leadership may sound simple but it can be a challenging because it is very dependent upon the culture of the organisation in question. Key questions confronting leaders include:
- What value can potentially be created by rebalancing the relationship?
- How do we start the ideation and innovation process?
- How do we overcome different motivations, cultures and languages used by the parties?
- What tools can we use for an agile / efficient development process?
- What will success look like at various stages of this relationship?
It’s worth finding out about collaborative leadership skills and how to take advantage of unrealised opportunities for performance and growth.