Why understanding your supply chain matters (let's consider sourcing)
Supply chains are a team effort, the better the support provided by a node in the supply chain, the better the system becomes.
Start with effective supply chain governance
Supply chains are complex functions that touch every aspect of a business from human resources to coordinating forecasts with sales and marketing teams. As companies are increasingly accountable for the supplier relationships they establish, the management of supplier sourcing decisions plays a crucial role in avoiding unnecessary, negative attention. Therefore, supply chain leaders must have a management infrastructure that enables effective communication with supplier management teams, whether providing direction or receiving feedback.
Then, consider leader messaging
Effective communication is anchored in solid leadership direction. The supply chain must have focus, actions should cascade from a senior leader's intent and permeate every area of the supply chain. For example, a company’s core belief that sustainability is vital to protecting our future may surface in C-suite statements about sustainable sourcing. It is clear the sourcing team must factor sustainability into their supplier selection criteria; however, what does “sustainable sourcing” mean? Supply chain leaders must provide the clarity necessary to establish guidance consistent with the intent of the company’s core beliefs. “I want our sourcing decisions to favor suppliers with a sustainability strategy consistent with our strategy. They must embrace emissions reduction and show commitment to ethical labor practices.”
Then, consider your culture
The supply chain culture should align with leadership direction and the company’s mission/strategy. When the company’s purpose is clear (mission/strategy), as well as how it fulfills its purpose (leadership direction), building a complementary culture requires less effort. We see cultural disconnects surface in the form of strikes, unflattering news coverage about workplace issues, and passive aggressive behaviors. If the boss says sustainability is a priority and suppliers must meet specific criteria, it is important that the supply chain culture gives priority to sustainability for substantive and sustainable action to occur. This means individual needs and values, as well as organizational beliefs and values should be consistent with that direction.
Then, consider how stuff gets done
To ensure reliability in sourcing, there should be a system composed of policies, processes, and tools to ensure sourcing is standardized across the supply chain, to include a standardized "exceptions" process. Standardization provides flexibility to either centralize sourcing as a single function or decentralize within the supply chain. The value of standardization is in normalized performance. Consider the difference between buying clothing online from multiple e-tailers where a consistent experience is unlikely versus purchases from an online marketplace like Amazon, Walmart, or Shopify where supplier performance standards ensure consumers have a fairly consistent experience.
Then, consider how the stuff getting done connects to the broader system
Supplier sourcing quality is only as good as the requirements received; what’s known about past performance; price competitiveness; and availability. Therefore, visibility into how sourcing decisions show up downstream in the supply chain is crucial. If a supplier is not being used as intended, that’s important information for supplier management teams. These teams rely on supply chain functions to be communicative to improve sourcing decisions. It is truly a team effort, the better the support provided by a node in the supply chain system, the better the system becomes.