What are the advantages of close supplier and customer relationships, when practicing lean

Ian Bannister

Ian Bannister

So much more than just a recruiter - A valued-partner, helping our clients on their journey to enterprise excellence

Published Aug 5, 2016

One of my clients – a major manufacturing organisation – is struggling with supply chain management, specifically with managing its stock. They are trying to reduce holding expensive inventory in their warehouse so want to pull it directly from their suppliers when needed.  The challenge is making sure they have sufficient stock to reduce costs but also to keep the production lines running.  It seems to me that implementing this kind of Kanban-driven, pull-based supply model successfully will ultimately come down to building stronger supplier relationships.

Implementing Lean supply chain management starts with an evaluation of all parts of the supply chain, identifying where there is waste. Or, to put it another way, the points in the supply chain where there is no value delivery to the customer.  This evaluation process itself requires a closeness of relationship with your suppliers as you will have to be open and honest with each other about where the issues are. The incentive, of course, lies in the mutual benefits to both manufacturer and supplier of having a Lean supply chain.

The analysis stage of the process is likely to throw up all sorts of both expected and unexpected problems.  In the supply chain there are said to be seven wastes and, depending on the complexity and number of suppliers involved in the chain, there could be a huge number of variables:

• System complexity—additional, unnecessary, steps and confusing processes
• Lead time—excessive waiting times
• Transport—unnecessary movement of product
• Space—holding places for unnecessary inventory
• Inventory—inactive raw, work-in-progress, or finished goods
• Human effort—activity that does not add value
• Packaging—containers that transport air or allow damage

However, by implementing a relatively simple Kanban system (either electronically or using physical cards to track a product’s movement through the supply chain) it’s possible to organise the chaos and quickly prioritise the tasks. 

As with so much of Lean implementation, teamwork and leadership across the supplier/ manufacturer divide are vital.  Treat your suppliers as part of your team and you’ll find that fixing problems collaboratively leads to mutual savings. At this stage the relationship becomes a virtuous circle, where the closer the collaboration, the greater the benefits. In the service industry, suppliers even ‘implant’ key members of their team within clients’ businesses in order to foster a closer and more collaborative relationship.

Another benefit of developing strong supplier relationships is the opportunity to learn from each other. Getting a different perspective and seeing a problem ‘from the other side’ can often speed up the fixing process.  It also builds empathy, which is a powerful ally when there’s an issue to be solved.

Lastly, I would advocate taking the long view. It takes time to build trust with suppliers, but the value of long-term relationships within a Lean supply chain is enormous.

As always, feel free to get in touch with your thoughts. I’d love to hear how you’ve deepened the relationship between manufacturer and supplier as part of your Lean journey.