The Lean supply chain relies on value creation – not just price reduction.
All too often, we identify the partners and suppliers based on cost and technical capability. Firstly, we make sure they are technically sound, and then we drive down cost until we can make a clear decision.
Six months before the end of the two or 3-year contract we are back into the next RFP. Once again, we slowly bounce suppliers off each other to get the best price and reduce costs. The cycle continues and continues. And honestly, except for management via SLA’s and some price reduction, I would think it’s fair to say that neither the original company or the suppliers benefit from the relationships in any way.
The Lean approach is different.
1) Forget the 2-year contract and short-termism. The Lean Supply Chain approach is about looking for longer-term contracts so that by working together, you can begin to learn to extract the benefits of working together.
It’s about bing confident with five years or seven years of commitment—the longer, the better so that you can both invest more in the relationship. The energy spent in the RFP processes is a waste. All our energy can, therefore, get redirected in long term strategic activities that benefit both companies.
2) If you can, invest in your suppliers and partners. Make it personal, so everyone is in the same game together. Let’s stop just squeezing price as lean is about creating value. Yes the market will keep changing, so we need flexible suppliers and flexible solutions that all point in the same direction – to make more value with less of everything together.
3) Invest in the Lean training and development of your suppliers and partners. Show how the approach works and identify the win-win opportunities.
Gone are the short term price above all else procurement decisions. Today, the Lean Supply Chain is about building value and value comes from investing in each other without an RFP hanging over the head of both parties.
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