Logistics Manager Analysis: Managing IT Supplier Relationships

Supply chains thrive on effective relationships but achieving them is a challenge. But how do you effectively manage IT supplier relationships, from the point of tender through to legacy systems? 

Yet the need for increased digitalisation in the sector is paramount, according to Phil Ashton, co-founder and chief executive at AI start-up 7bridges, who says “the whole of the logistics industry can fairly well be summarised as 10 to 15 years behind other industries in terms of digitisation”.

“It is driven off paper and manuals and standard operating procedures,” he says of supply chain and logistics. “The amount of knowledge locked up in individuals is also extremely high. It is a systematically underinvested area and for most businesses it is just seen as a cost of doing business. With our customers we say that they have exactly all the information they need to automate what they are doing.

Aston says that the starting point for most businesses was web 1.0, which was basically getting processes that were on paper and put them online. But, with his hypothesis that logistics is lagging behind when it comes to digitisation, he says: “You’ve got to leapfrog this and get ahead of the curve, and that is looking at the way Amazon operates even in your supply chain, by taking that data and using it to make the decisions that you are currently devolving to every individual, who is having to make every single decision in a completely disintegrated fashion. They are making it in a siloed, isolated way from every other decision made in the business. That is terrible for you. You don’t want that.

“The biggest single thing that is driving the digitalisation of the supply chain as a whole is the emergence of a clear competitive threat. The number of businesses that have been worried about the entry of an Amazon into their particular value chain has grown astronomically in the past ten years. And one of the things that has been an enabler for that has been that they can pivot their supply chain due to the digital element of it. It has stopped been viewed as a cost of doing business, it is not tax, it is not duty, it is something you have to be good at and it is something you have to have a core competency in.”

But Covid-19 has accentuated problems and accelerated change in a global supply chain environment that was already under stress. Supply disruptions are no longer a once in a generation act of god; they have become routine. Factor in many organisations being behind the curve when it comes to digitalisation and the rush to roll-out projects could be overwhelming, and fraught with difficulties.

David Grimes, founder and chief executive of Sorted Group, says that a true partnerships is about collaboration and mutual understanding of expectations: “A supplier – particularly one in a supply chain – should be a flexible enabler of growth, and ultimately this comes down to that old saying: ‘your supplier should be an extension of your team’.

For Grimes, collaboration and clarity of communication are key to creating one seamless operation, as ultimately, the job of a supplier is to make your life easier.

“This is certainly the case when it comes down to management of carrier and warehouse operations,” he says. “Should there be any hurdles on the way, a supplier should always be in a position to offer help and guidance on the easiest and most efficient way to solve a challenge, whatever it may be. You should always have clear knowledge of how best to seek a response or resolution to an issue and know how long it will take. Despite the benefits of an integrated partnership, a supplier is an expert in their own software and should be keen to support however possible.”

Grimes advised that when choosing or reviewing a supplier, one way to assess their capabilities is by looking at whether they’ve recently won new clients and who has chosen to work with them.

At the same time just buying the right bit of kit doesn’t mean it’s going to go well in the long run. Jonathan Whiteside, principal technology consultant at Dept, says it is crucial to recognise that a successful platform selection does not equal a successful platform implementation.  “While making the right choice is clearly important, it’s still only the start. The implementation is a whole new project in itself that will demand a careful transition. Often, not enough attention is paid to the implementation and further development of the technology solution during the vendor selection process.”

He also says that choosing a technology solution does not take place in a vacuum and the whole organisation must be able to work well with the system selected: “You should consider the business processes and requirements of different parts of your organisation with a multidisciplinary team. It’s neither an IT nor a business project, it’s both.”

Too many cooks.
With major procurements now having to be constantly monitored and actively managed, companies don’t feel they have the bandwidth to interact with the myriad small suppliers, says Karl Heinrich Lauri, managing team member at material requirements planning software vendor MRPeasy.

As a result he warns that SMEs risk being squeezed out of the eco-system: “There is a similar dynamic upstream in the supply chain – suppliers with their hands full dealing with major accounts, changing their requirements on a daily basis, are less eager to service small, intermittent orders, or to prioritise smaller customers in times of shortage.”

Lauri says the small manufacturer may reasonably say that they don’t really need sophisticated manufacturing resource planning – the issues are well understood and can be accommodated on a couple of simple spreadsheets: “But look at this from the corporate customers’ point of view – what do they want, expect, and increasingly demand?” he says, “in three words, simplicity, visibility and confidence.

“Customers, no matter where they are in the supply chain, demand visibility and confidence. They need the certainty that the goods are in stock, or an order has completed a key manufacturing process, or that it will arrive in the booked docking slot. They want the assurance that, if problems do arise, the SME has the systems to pick them up, act on them, and if necessary, advise the customer. They may require real time access to and visibility of progress reports.”

As with any relationship as it matures, the amount of time spent apart is as crucial as the amount of time spent together is, so what is the right level of contact to ensure a relationship remains on track for both parties?

Emile Monette, director of value chain security at Synopsys, says it depends on the importance of the supplier to the buyer.

“For example, if the supplier provides an off-the-shelf commodity for which there are numerous other sources and no special purchasing requirements, the buyer may be able to accept more risk and ask for less information. On the other hand, if a supplier is critical to the functioning of the buying organisation and there are few or no other sources, or the cost of changing is otherwise high, the buyer needs to invest more time and resources managing that critical supplier relationship.”

Another thorny issue is managing a migration from one supplier to another, which means building a relationship with a new supplier, and establishing best practice for the onboarding processes.

Monette’s Synopsys colleague Don Davidson, director of cyber- supply-chain risk management says that in such a scenario: “If you’re not aware of your assets – along the same lines as a hardware or software Bill of Materials – then you will not be able to effectively manage what you’re not able see.”

He also says that all parties need to agree how to measure the hardware assurance and software assurance aspects of cybersecurity and cyber-supply chain risk management: “We can’t manage what we can’t measure.  It’s not as simple as categorising ‘good’ and ‘bad’; rather, there needs to be a tiers-of-trust, risk-based system to assist in both cyber and traditional supply chain risk management.”