I know this sounds simple, but before doing anything, a clear objective should be set. So many times, we are just going through the motions of our category. Our cup contract is up; well, let’s do an RFP!
Are we a least-cost supply chain? Do we value quality before cost? How much do we value partnerships? Ensure supply?
All these things should be defined and aligned within the group before doing anything. If not, just some of the points below could be consequences:
Ineffective negotiation
If your associate does not know what is important, they will not get the most out of their negotiation. They may end up with a superior quality product that damages your bottom line. The associate can negotiate prices so low that if there is a strain on supply, your company is the last one to get the product. There could definitely be some insecurity and second-guessing by the associate.
Reputation Damage
Take the example above of a superior product. Your culinary team will be satisfied with the excellent quality you were able to source. Your finance team, not so much. The associate may not seem competent to one of their biggest stakeholders because finance is trying to manage the bottom line.
"If your associate does not know what is important, they will not get the most out of their negotiation"
From marketing’s perspective, yes, you negotiated the least cost, but did you ensure supply to carry out their initiative?
“Does the supply chain know what they are doing?” will be the question.
Extra Work
In that marketing initiative mentioned above, no supply means a variety of things. Lost sales, reputation, morale, and a change in plans may end up costing more than the money you saved in your negotiations.
The buyer may now have to find alternate suppliers at a position of disadvantage, not to mention your supply management team will need hours upon hours to manage all these inventory situations.
Employee Morale / Retention
Your team will feel a significant amount of stress operating in this kind of environment. We have gone through a couple of years where it was hard to control things at times. Agreeing on a strategy will go a long way. People want to work for proactive teams that have objectives defined. They do not want to do emergency busy work. They want to feel they are contributing to something big, not firefighting, because of a lack of strategy.
My whole point here is that it is not possible to be everything, but you can fulfill ALL your objectives once they are defined, and there is alignment. It’s very hard to get people in a room and gain alignment, but it will definitely be worth it. The consequences are far greater than those mentioned above.
It is all connected. Not only do the actions taken by one end of the supply chain affect another end of the supply chain. The actions of one end of the supply chain affect other ends of the organization. We should make sure our house is in order.
