Over the past few years, the manufacturing industry has risen to the challenge as the global ecosystem we operate in has become increasingly complex. We are all aware of the issues that have disrupted our lives – including a global pandemic, supply chain constraints, tarriff disputes, and geopolitical strife – but the takeaway shouldn’t be that we need to batten down the hatches, isolate, and weather out these storms alone.
Rather, studies have shown that companies with stronger, more collaborative relationships with their suppliers enjoyed higher growth, lower operating costs, and greater profitability – not to mention higher resiliency. As a McKinsey & Company article states, we “now have a once-in-a-generation opportunity to future-proof… supply chains.”
In other words – the time to act is now.
In today’s complex, ever-evolving world, manufacturers need to make it a priority to maximize deep collaboration with their suppliers and customers, and find new ways to safeguard business continuity, realize sustainability commitments, improve the customer experience, and increase competitiveness. This will require the entire manufacturing ecosystem – from suppliers to manufacturers to end customers – to work together differently and more dynamically to solve problems.
The Evolving Role of Manufacturing Partnerships
I previously wrote about how in the next era of globalization companies will have to be more strategic about balancing the supply chain ecosystem. Rather than favoring production hubs that might be halfway across the world from their most important markets and customers, companies will need to build out a nuanced strategy that includes regionalized supply chains.
This is a crucial move as resiliency has become more important. Moreover, as sustainability requirements are increasingly prioritized by governing bodies, investors, and customers, companies need to collaborate with value chain partners to meet sustainability goals.
Imagine being faced with the challenge of meeting cost per unit requirements and reducing the risk of transportation delays – all while progressing toward specific sustainability commitments such as net-zero emissions and zero-waste. These are just some of the many variables that today’s manufacturing companies must juggle.
Balancing these considerations and landing on a viable strategy cannot be done in a vacuum. No more are the days when a company would send out requests for quotes and choose their suppliers without further relationship-building. By necessity, these relationships are now more strategic in nature, with customers needing to be more open and honest about their challenges and goals to foster more collaboration and resilience. Collaboration in this new dynamic means everyone has to be more transparent.
For example, Flex has partnered with CDP, a global non-profit that runs the world's environmental disclosure system for companies, cities, states, and regions, and invited our preferred suppliers to participate in our supplier greenhouse gas (GHG) emissions reduction program. We developed the program with strong educational elements to help meet suppliers where they are and establish common, fundamental understanding of what a greenhouse gas is, why it’s critical to measure emissions, and how suppliers can take a methodical approach to disclosure.
In 2021, 60 percent of our preferred suppliers disclosed operational emissions through CDP, 29 percent disclosed GHG emissions reduction targets, and seven percent set a renewable energy target. Rather than focusing only on our own emissions, this approach – which involves ongoing communication, knowledge-sharing, and collaboration with our suppliers – enables us to help promote sustainability throughout the value chain.
To ensure long-term success, manufacturing companies need to have tightly integrated ecosystems with close-knit relationships with their suppliers. In this way, companies can design, vertically integrate, and deliver products by tapping into a robust supply chain ecosystem that allows them to exceed their customers’ expectations by driving innovation, improving sustainability, and delivering a superior customer experience. Achieving this result requires prioritizing trusted partnerships that provide broader and deeper services.
Collaboration Must Be Intentional
Achieving more collaborative and transparent relationships will be most challenging for companies who have always operated on autopilot, relying on legacy models that emphasized efficiency and achieving the lowest possible unit cost over deep partnership. In these cases, it is crucial to move quickly on multiple fronts to build the right culture, systems, and engagement models to nurture more collaborative supplier relationships.
As Rana Forhoohar, a columnist at the Financial Times, states in an interview with Harvard Business Review, “The world is not flat; the world is bumpy. We had these just-in-time, quote-end-quote 'efficient' supply chains that were built, taking products around the world […]. But when anything goes wrong, be it a tsunami, be it a geopolitical event, be it a war, a trade war, a cold war, a hot war, you get problems.”
The ”bumpy” world we live in requires a more strategic approach to engaging with partners. Companies must embed this ethos into the fabric of their culture and ensure that they have top-down sponsorship from executives who understand how critical collaboration is for driving innovation, meeting business objectives, and staying competitive.
At Flex, our entire ecosystem is built on this high level of collaboration, and it enables our customers to scale quickly, pivot in times of crisis, and continually optimize our operations. For example, at the height of the pandemic-induced worker shortage in Southeast Asia and when facing high tariffs, one of our customers in the floor care space experienced a spike in demand for products.
Instead of falling prey to fulfillment issues, they were able to work with Flex to alleviate the backlog by quickly adding another production node in a different country where facilities, staff, processes, and systems were already in place. By having these relationships – and capabilities – ready-to-go in numerous regions, the floor care company was able to be more resilient and meet their end customers’ needs.
Rising Tide of Collaboration Lifts All Boats
A more strategic, collaborative relationship can ultimately help all players in the manufacturing supply chain. Here are some potential benefits:
- Business continuity and resilience are baked into the process, which means that suppliers and manufacturing companies are able to respond and recover quickly to disruptions, while customers continue to have a positive experience.
- The initial investment into getting the process right keeps total costs down in the long run instead of having to pay for numerous starts and stops, as well as short-term engagements with suppliers who do not fully understand or care about your business objectives.
- By partnering with the right suppliers, companies can leverage existing capabilities and expertise – including how to build out regional supply chains and meet sustainability requirements –to suit their business and shorten their own learning curve.
We operate in a complex, global ecosystem where we have the tools and opportunities for greater collaboration than ever. We must take advantage of where globalization has led us – to this next era of instant communcation and digital capabilities – to harness insights, learn from each other, and work together to find the best path forward.
For manufacturing companies, now is the time to transform supply chains from legacy models, working closely with suppliers to achieve better resiliency and sustainability, and to ultimately deliver the best possible customer experience. And those manufacturers that best leverage the new version of collaboration will be in the best position to succeed in the coming years.
References:
https://www.mckinsey.com/capabilities/operations/our-insights/future-proofing-the-supply-chain
https://www.sdcexec.com/sourcing-procurement/manufacturing/article/22526163/flex-the-great-rebalancing-act-reaping-the-benefits-of-regional-flexibility-and-global-scale
https://hbr.org/2022/11/what-the-next-era-of-globalization-will-look-like
