At first glance the relationship layer in the supply chain refers to relationships between the different entities of the supply chain network, such as customers, suppliers, manufacturers, distributors, retailers, resellers etc.
Look closer, and the relationship layer is defined as a type of relationship engagement that typically involves non-logistics activities and non-systemic functions. It comes from a broader definition of supply chain management, and supports a collaborative approach to a wider range of business processes and multi-party disciplines.
Identified by Suppeco Gartner Proxima McKinsey & Company et al, the relationship layer contains upward of c25% negotiated value which is typically lost over term through lack of relationship driven value and poor data retention. Opportunities to generate savings from cost-based approaches are diminishing. Why? because as business shrinks, so do pre-negotiated margins. Whilst ironically, organisations are adopting positions to protect themselves against impending recession.
The fact is, to continue to deliver those increasingly key value targets, customers and suppliers must work together, to innovate.
The relationship layer – A framework for structured and planned execution.
The challenge here is that we don’t live and function inside a legally drafted contract. We operate in the real world where things don’t necessarily run to order or by clause. And neither should we. To do so would surely stymie much needed creative agility – a crucial ingredient required to support all types of innovation.
Fortunately, Suppeco is now differentiating to create structure, planned execution, and management within the relationship layer – the area that lacked any measurability, is now both structured, and manageable to support a substantive opportunity to drive alignment of strategic objectives.
Enabling the ultimate business relationship experience has been in the company’s DNA since the beginning – here in the form of a relationship layer framework, an infrastructure developed to improve the functioning of business relationships by promoting alignment and execution of precision objectives bilaterally as well as between multiple parties.
Suppeco 4 Pillars. Ordered simplification based on universal engagement structures.
The Suppeco relationship layer, which is aptly named Four Pillars, follows an overriding and somewhat logical principle that every supplier engagement regardless of what’s being bought or sold, can be split across these four main categories or “pillars” of engagement, captured each by the following lenses:
The Relationship lens typically focuses on qualities such as commitment, communication, trust, flexibility, strategic alignment, objective setting, governance, and other relationship-based values.
The Commercial lens typically focuses on commercial and financial matters such as actual versus budget, reduction in TCO (total cost of ownership), all aspects of invoicing efficiency, PO management, spend management, and procurement.
The Projects lens emphasises quality and focuses on environmental standards, audit, process quality, security, products and product lines, delivery, skills, staff & resources.
The Service lens emphasises performance and focuses on different aspects of project and service delivery, efficiency across lifecycle, SLA compliance, performance management, and support.
Precision targeted improvement.
Within each of the four pillars, an unlimited array of standard and custom subcategories are ready to provide a more detailed breakdown of the key components that make up each pillar. These subcategories, also known as Reciprocal Assessments, are channels packed with collaborative power, each representing a frictionless workspace where stakeholders – operational to c-suite, and wider communities can come together across an ecosystem to engage with each other securely and in real time, in a more specific and discipline-focused way.
Improvement thrives on functional structure.
Business relationships thrive on structure, otherwise they can become dysfunctional. Similarly, key performance indicators (KPIs) deployed in an unstructured environment are also likely to be deemed ineffective. So, whereas every reciprocal assessment unlocks opportunities to drive collaborative engagement, Suppeco’s KPI creation suite brings the crucial barometers of business performance to support real-time assessment and improvement.
Having standard and custom subcategories within each pillar allows for a more granular level of understanding and management of the relationship, allowing for better identification of areas of improvement, and importantly, greater precision in addressing them.
Meaningful execution within the relationship layer looks like this:
- Distributing the data to the people that need it.
- Aligning to plan on all targeted objectives for execution and management.
- Sharing and collaborating on priorities widely and in real time.
- Reviewing activities with agility and measuring outcomes.
- Assessing engagement cadence and progress.
- Understanding the narrative as well as seeing red, amber, green flags.
- Developing a continuous learning culture of getting the best out of the relationship.
Already highly impactful across industry sectors – visibility but with clear demarcation and boundaries, is helping to reinforce trust, accountability, and transparency within the relationship. This can ultimately lead to better outcomes and greater success for all parties involved. Take a look at Product Network and their partner’s use of the platform to support validated audit compliance across their merchandise supplier operations.
Relationships and trust are a global currency.
In contrast most cost-driven supply chain operations where the focus tends to be that of spend management at every stage of the operation, often comes at the expense of other now increasingly key factors. This narrow, or numbers driven focus, does so without considering the potential risks and long-term implications of its decisions.
On the other hand, a supply chain model that emphasizes the relationship layer can consider and leverage a wider range of factors, including:
- The alignment of long-term strategic customer-supplier objectives.
- The strength of long-term stability and sustainability of the supply chain.
- The quality and reliability of goods and services.
- The needs and preferences of all customers throughout the value chain.
A supply chain that is built on strong relationships is likely to be more resilient and adaptable in the face of disruption and may be better positioned to weather unexpected events. Further insights from Suppeco on Black and Grey Swan events.
Overall, the relationship layer is an important consideration in supply chain management, as it can help to support longevity and create a more stable, transparent, and sustainable supply chain that is better able to meet the needs of all stakeholders.