A lack of available tools means supply disruption sits atop the RBA’s list of concerns. Supplier Management significantly influences (at least) 2 of the three factors that determine supply capacity, writes Dan Harry from procurement and supply chain consultancy State of Flux.
In November, Reserve Bank of Australia (RBA) Governor Philip Lowe cited that there is little that the RBA could do to control and influence the supply of goods. This lack of control makes for restless nights for Lowe, with little respite in sight. The well-publicised levers that the RBA has used over the past 18 months are aimed at influencing the demand side of the economic equation, leaving the supply-side unaccounted for and organisations solely responsible for how they structure their supply chains. Lowe referenced four factors that influence long-term changes to supply. None of which the RBA and their playbook have much influence over:
- Increased Near-Sourcing – organisations prefer to source goods from closer to their operation to minimise threats of disruption.
- Aging Workforce – less and less of the world’s population is of working age, meaning that supply is effectively capped despite any rise in demand.
- Climate Change – extreme weather events almost doubled in the 20 years from 2000-2019 when compared to 1980-1999.
- Renewable Energy transition – whilst we navigate the changes from fossil fuels to renewables, there will be inevitable disruptions and a need from energy providers to subsidise their move away from existing infrastructure into renewable networks (think higher energy prices)
For organisations to navigate the supply wilderness, three factors must be considered: Physical Stock, Productivity and Labour Supply. And, here’s where Supplier Management comes in. Of the three factors of supply, managing suppliers has strong influence over at least two. Successful Supplier Management underpins which organisations thrive and which organisations wither. Here’s how:
Physical Stock
Although organisations cannot directly control how much stock their suppliers have, they can influence the allocation of supplier stock. Therefore, becoming a Customer of Choice is central to effective Supplier Management. Customers of Choice are routinely given preferential treatment and are twice more likely than other organisations to be granted priority access to a supplier’s scarce resources. Concentrating efforts on consistent, repeatable behaviours such as being both Trustworthy and Trusting, establishing long-term partnerships and communicating effectively are the keys to organisations being considered as a supplier’s Customer of Choice.
Productivity
Establishing efficient supplier partnerships saves time and money and improves quality. Again, although organisations can’t influence what happens within their supplier’s four walls, organisations can position themselves to take advantage of new supplier innovations and enhancements. By exhibiting Customer of Choice behaviours, such as those mentioned above and sharing their own long-term plans with key suppliers, organisations become three times more likely to access supplier innovation. State of Flux’s 2022 Global Research showed a 50% increase in global Supplier Management technology maturity. This showcases how organisations seek to automate manual tasks, proactively address supply chain challenges in partnership with their suppliers, and do more with less.
Labour Supply
Here’s where the article title comes into play. How we manage our suppliers won’t influence the ability of suppliers to hire more staff or change the population of the available workforce. However, the changing nature of labour supply means that organisations will be forced to work smarter, not harder, with both their customers and suppliers (see Physical Stock and Productivity notes above).
Final Thoughts
By aligning with their key suppliers for the long term, establishing clear expectations of both parties and sharing information (probably more than we’ve traditionally been comfortable with), organisations and their suppliers are best positioned to navigate supply disruption…..together. Perhaps then, organisations won’t feel so isolated and the RBA rests a little easier (leading to lower interest rates soon, maybe?).
