As those familiar with W. Edwards Deming know, Business Alliances are the most important part of supply chain management. For those not familiar with Deming, he was an American economist who rebuilt post-war Japan and came back to the United States in the 1980s to address why Japanese manufacturing had beaten American manufacturing. Total quality control is his most well-known ideas, but one of his 14 points addresses the need to develop strategic partnerships with suppliers.
In Out of The Crisis, he points out that Japanese companies learned early that “the best solution to improvement of incoming materials is to make a partner of every vendor, and to work together with him on a long-term relationship of loyalty and trust.”
Loyalty and Trust
Instead of focusing on developing your supply chain via cheapest partners, fastest partners, or other surface level concerns, Deming recommends that businesses choose to develop interpersonal attributes with vendors. Loyalty and trust are two characteristics required for friendship, for leader/follower relationships or even for marriage.
The principles that apply to personal relationships also apply to supply chain relationships. If you cannot trust your vendor to deliver the right parts on time, and communicate when they cannot, then you will often lose money in a variety of ways. Lost or delayed inventory loses customers, causes you to seek additional vendors, and causes production delays.
Do Not Demand Perfection: Plan it.
Business alliances treat every vendor as a partner, including key players on the vendor’s team with your own key employees. This relationship creates an atmosphere of seeking perfection: because each organization asks how can I help you while furthering my own business? In marriage, the best relationships are where both partners are bringing their best to the other. Likewise, the best business alliance creates a win-win scenario for both parties.
With the attitude of everyone wins at the center of your supply chain relationships, variances, reworks and other production issues are cause for learning and relationship building. Plan for increasing quality throughout the supply chain, enact those plans. This produces another of Deming’s 14 points, to “Drive out fear, so that everyone may work effectively for the company.”
Relationships Expand Your Business
Avoid the costs of marketing and capital to expand your business: strategic partnerships produce more business, because your customers and suppliers become your greatest assets and marketing tools. With trust, loyalty, and everyone planning to succeed together, a business partnership expands your company without any additional costs. For more information on business alliances, contact us.