IMD International

SOUPING UP THE SUPPLY CHAIN

Super supplier collaboration

By Professors Corey Billington, Carlos Cordon and Tom Vollmann (July, 2006)

Excerpt from webcast: Collaboration as a core capability, creating the super supplier (1:25)

Almost all organizations work with suppliers with greater or lesser degrees of success. Billington, Cordon and Vollmann explore a new concept: super supplier collaboration. Super suppliers not only provide materials or services at reasonable price levels, they hugely enhance productivity, returns and the competitive advantage of both parties. So what are these super suppliers, and where can you get one?

Super Suppliers – an introduction
In super supplier collaboration, both firms truly work together in a win-win situation. Discarding the outdated model of combative customer-supplier relationships, suppliers gain significant competitive advantage. They do this by adopting unbiased competitive intelligence, insights, and engineering expertise and using it against their competition.

Creating a “super collaborative” relationship Start your journey with one supplier. Ask your procurement department to analyze which supplier is best suited for super collaboration. Also, find out with which supplier you can generate mutual trust and reciprocal preferential treatment. Managers in both firms must work diligently to form a relationship that can bear long-term pressure and scrutiny, and create a system of continuous measurement.

The checklist
The following checklist outlines activities that a firm should have completed prior to starting a “super collaborative” relationship. Procurement has strategy, measures, and a charter for competitive advantage that goes beyond “price-take-down”. A spend category has been identified where a market opportunity exists to have a “super collaborative” relationship. All functions in both organizations are committed to the relationship. A structure has been organized that will continuously evaluate, communicate and improve the “super collaborative” relationship. It will handle the continuous communication and alignment internally and with the supplier function.

Only through commitment
The customer focus for super collaboration is a commitment from the entire firm and all its functions to create significant competitive advantage for the selected supplier. The offer is that the supplier creates significant advantage for its firm. “Super collaborative” relationships require diplomacy and will be impossible to create and maintain without a consistent, long-term and collaborative mindset. This will require choosing appropriate procurement professionals.

The art of motorcycle maintenance
One brief example to illustrate the success of this type of relationship. In a six-year period, Honda of America achieved an overall competitive gain of 26% with a number of super collaborative suppliers! This while the consumer price index rose 11% and a major competitor was feeling good as its constrained its materials cost to only rise by 7% during this period. It works!

The future
If super collaborative relationships are yielding such compelling results - why isn’t every firm racing to form one? Simply put, it takes an empowered procurement function and devoted strategic effort over a long period of time. However, correctly done, the commitment and energy invested can provide significant results that would be impossible for a firm to accomplish on its own.


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