In case you think you’ve had a rough time dealing with your PPE challenges, imagine what it would have been like if you had to stand up a Supply Chain, from scratch, and deliver the following:
- Over $250mm
- Less than a week
- Delivery across the globe
- Multiple stakeholders representing multiple companies across multiple industries across multiple geographies – just lots of multiples multiplying the complexity on the buy side!!!
- That’s the challenge our speaker (he’s part of a large GPO who had to find PPE for many of their member companies) at next week’s PERT (Procurement / Supply Executive Round Table) Townhall faced and found out that his organization had never bought any PPE before and therefore didn’t even know where to start.
I won’t divulge everything that he had to do in order to stand up that Supply Chain in 6, yes SIX days, so that you’ll join us next week for the Virtual Townhall but the one thing that I will share is the dependence on relationships with suppliers. It turns out that he had some prior supplier relationships and he was able to quickly re-establish them and get PPE flowing almost immediately. He was thus able to shrink the Response Lead Time (RLT for now until we come up with a better three letter acronym) to almost Zero for the most critical commodity right now. Do you think he was able to provide a competitive advantage for his company? Do you think the multiple companies that got instant access to PPE can now open earlier than others? Do you think that those multiple companies saved a bunch of time, effort, hassle etc. by not having to fight everyone else in the market for limited PPE supplies?
Some dead horses deserve some more beatings so here goes. There is incredible intrinsic and implicit VALUE in supplier relationships. Those that have better supplier relationships will be able to come out of this crisis sooner and better than their competitors. That is an inescapable fact now and will continue to be in the future. Our alumni and clients will easily remember our insistence of focusing on the relationships with suppliers and not just the contract. The fact that we have not figured out a metric to measure the monetary value of the supplier relationships and therefore quantify them as a selection and decision criteria is a trap that we must get out of. Unquantifiable metrics are far more powerful influencers of decisions and behaviors than quantifiable metrics. And while I think that Supplier Relationships can be measured and quantified more than enough to be utilized as Value Drivers or decision criteria, I don’t think there is a need to quantify every Value Driver and we should stop trying. That’s like chasing fool’s gold.
The goalposts have shifted dramatically (my last blog link) and this is one of the areas that the new normal should and will be permanent. The inclusion of RLT as a critical success factor for our function forces the acknowledgement that Supplier Relationship Management Optimization is no longer a want – it’s a need. This is why we identified it as a 2020 trend before COVID and redacted the word Management from the definition of Category Management many years ago.
This is also why we identified Relationship Management as a strategic process many years ago.
These are not temporary changes that we must quickly navigate through and get back to normal. This is our normal going forward where PPE and Jan/San are strategic categories and relationships matter – turns out they matter a lot!!! Our prayers for the safety of all of you and your loved ones.