A 2009 global study by Vantage Partners of customer supplier negotiations and contracts “found that suppliers in Asia report that they are only able to deliver, on average, 59 percent of the total potential value of their contracts with customers. (Supplier Collaboration in Asian Markets, My Purchasing Center)
“Suppliers laid much of the responsibility at the feet of their customers, citing unclear requirements, frequent changes to specifications, inaccurate and late forecasts, and failure to provide adequate staff access and support as primary explanations for under-delivery.
“Research and experience working with companies on global and low cost region sourcing initiatives indicate that structural challenges of working with Asian suppliers [geographic distance, problematic communications and infrastructure, etc.] are tractable, and that the root causes of failure have a great deal to do with the manner in which companies build and manage (or fail to) relationships with their Asia-based suppliers.”
These findings are proof, once again, that western manufacturers are leaving tons of money on the table by not effectively supporting their Global Sourcing strategy with a disciplined Supplier Collaboration or Supplier Relationship Management strategy. Surprisingly, the study also found that even with domestic suppliers, who understand the western customers needs more clearly and have a longer, better established relationship with them, that less that 70 percent of the potential value of these contracts are making it to the customer. So whether sourcing in India or Indiana, the message is the same! A strong Supplier Collaboration program is necessary to deliver maximum value from the supply base to dramatically improve the bottom line.
To implement a successful Supplier Collaboration program requires extensive benchmarking and a culture change in the organization. To help with this journey, the Institute for Supplier Collaboration was founded. The ISC helps corporations see the value in establishing a collaborative ecosystem with their supply base both domestically and abroad and provides them the tools to be successful in their endeavors.