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Why supply chain matters to you

March 16, 2012

Managing supply chain risk depends on increased levels of partnering. Suppliers who can demonstrate their superior capabilities will have a source of competitive advantage – and two of the key ways capability is demonstrated are through the approach to negotiation and the terms and conditions on offer.

Many sell-side contracts and commercial professionals see supply chain as something that has little relevance to them. They think of it as another term for Procurement. Think again – because it lies right at the heart of your future.

Today’s commercial and contracts experts must have a grasp not only of what commitments are needed, but also whether they are sustainable. Your work is increasingly about the delivery of terms that reflect quality – the factors that build trust, gain repeat business and support greater collaboration.

Our understanding of the purpose of contracts and negotiations needs to shift from a focus on today’s limitations to an understanding of the market’s needs. Risk management must shift from being simply an analysis of the risks associated with making a commitment, to an understanding of the risks of NOT making that commitment. For example, if customer demands are for faster on-boarding, what capabilities are needed to meet that need? If inaccurate or opaque billing is a regular source of complaint, what must we do to fix this issue and avoid customer dissatisfaction? If your product or service is being commoditized, what terms and commitments are needed to distinguish your company from competition?

Each of these questions is actually a supply chain issue. Our customers think of supply chains. Your ability to win in the market and to avoid contentious contract issues depends increasingly on YOUR ability to see the world through the eyes of customers and prospects and to ensure you have the terms and contract performance capabilities that will enable you to win. And then to collaborate, in ways that keep you an important link in your customer’s supply chain.

Next week, I will write about this from a Procurement perspective – and highlight why there is often failure to address supply chain issues effectively because of mismatched behaviors and communications.

One Comment
  1. Tim, A savvy supplier wil understand that most purchase decisions are based upon the total cost or total life cycle cost of the relationship. If a supplier doesn’t support supply chain needs of the customer, what they are also doing is adding to the customer’s cost of doing business with them. In the end they will either lose business or they will need to price their product less to offset that difference.

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