The average lifespan of the companies has dropped from 60 years in 1950’s to under 20 years today. The rise of technology, provoking fast changes on the market, was identified as the main factor. However, recently, climate change and the new global economical paradigm have also emerged as major disruption factors. So what will it take to maintain a sustainable business in the future?
Facing disruption together
United Nation identified “Partnership for the goals” as their 17th point on the Sustainable Development agenda. It supposes that all stakeholders work together towards sustainability.
In that sense, Philips’ Director of Supplier Sustainability, recently explained that it is necessary to create a symbiotic relation with your stakeholders. Companies should set up common goals in order to face the risks and catch up the opportunities together.
To face the risks and protect your brand it might be necessary to involve in programs that require industry wise adoption. As an example, The Social & Labor Convergence Project is a multi-stakeholder’s initiative that aims at improving the working conditions in the overall apparel and footwear supply chain.
But other partnership programs are meant to move your company forward through differentiating innovation. The latest often requires specific expertise that might not be available in-house. This is the opportunity to develop closer relationships with your supply chain or smaller structures.
The power of supply chain partnerships
The traditional pruning and price obsession tends to diminish returns when suppliers’ conditions get tougher. If the size of the supplier pool shrinks, both your choice and the quality of supplies will suffer.
This is why Accenture stresses, on a long series of report, the need of changing procurement methods. They include strategic partnerships as a key component to master procurement. Their report from 2007 points out that companies with strong suppliers’ partnership spend about 50% less to manage the supply chain but still succeed to save 30% cost.
In that same report procurement leaders also highlight that partnerships improve the reputation of their company. Stakeholders do not see them as cost killers anymore but as valuable contributors to the strategic agenda of the business.
How to establish successful partnerships with suppliers?
You first need to find the right partner that understands current and future trends in the industry. He should be able to walk with you on that journey as the market evolves. Whenever you decide to set up a partnership, it needs to have a strong backing from a board member such as the procurement director.
As partnership starts, you shall have a very open communication with your supplier. You should be able to discuss about the risks they are facing in the industry context. You particularly need to acknowledge and understand the pain points and issues and how to work to solve those together.
In a second step you both need to agree on the goals. They must be beneficial for all players. You will design a road map to reach those goals depending on each partner maturity. In order to set up powerful programs, you should not hesitate to seek advice and help from external organizations and experts.
It is better to start with a few pilot projects and then deploy more broadly to the rest of the supply chain. This enables to refine your process and motivate all actors through successful examples.
Progressing together through capacity building
In its white paper from 2013, UL describes the capacity building as a solution to go further only addressing systemic issues. As they describe simple non-conformity monitoring system fails to identify root-causes of the problems. They might thus continuously come back. Capacity building helps paving “the way for real change that can drive increased productivity, greater employee commitment and stronger financial results”.
They describe the example of a pharmaceutical manufacturer with social compliance issues.In that factory employees were working over 90 hours per week and up to 30 days in a row. As it was not in line with client requirements, the later decided invest in a consulting project. The consultant found the main root-cause to be a lack of optimization in the production process where bottleneck where observed. After operating major changes in the workspace they managed to increase the productivity and switch from 2 to 3 shifts. Thanks to the productivity increase, the salaries could remain stable with less overtime for employee. This partnership towards common goals enabled both parties to achieve greater success and foster a continuous improvement philosophy.
So what does it take to become a sustainable business? Probably setting up broad and diverse partnerships to embrace changes and face disruption. You should become part of an integrated solution for your customers and seek for joint commitment with your suppliers to mutually grow businesses through the partnership.