Jul
20
Supply chains have changed enormously over the last 10 years and we really are now talking about a global supply chain. Global supply chains can have various benefits, but are they as perfect as they are often portrayed or do they come with inherent flaws?
Here are the 10 most commonly experienced problems with regard to a global supply chain!
1. First of all the fact that a supply chain is global means that you are no longer doing business with a man (or woman) down the road. Instead you are dealing with a company who may be in 10 different countries. In short you lose the ‘human’ side to the business transactions and whilst this may not be a show stopper, it can result in problems not being resolved as quickly, simply because it is much more impersonal than previously.
2. Like it or not we have to admit that within different continents and countries there are cultural and language difficulties. For the large part these do not present a major problem within the supply chain, but occasionally these differences can simply end up in misunderstandings. For many people who do not have English as their first language, the nuances of the language can often give rise to misunderstandings. So communication and cultural issues can present obstacles (albeit surmountable obstacles) within any global supply chain.
3. Costs. We may all assume that having goods produced in China and then shipped over will be cheaper as it usually is. But we still need to factor in the cost of transporting the goods and keeping them stored in appropriate conditions, for what could be a long period of time.
4. Akin to the issue of costs is the dreaded exchange rate. The Euro, the US dollar and the GP Pound have all been knocked and buffeted by the winds of the financial crisis that spread around the world in 2008-2009 and the exchange rate does impact on the global supply chain. In fact the more countries are involved ie the more global the supply chain, the more it will be affected by the exchange rate.
5. Time can also adversely affect a global supply chain. Some countries have very bureaucratic procedures to enable shipping to set sail or it can take forever to gain customs clearance. Delays can then set a project back, only to find that it is further delayed because the monsoon season has started early or there has been some kind of natural disaster. So it may be nicely sunny in the UK, but other parts of the world may be undergoing real natural disasters, which can really affect the supply chain.
6. There is also another dimension to time and that is that different countries work on different time zones. So the more global the supply chain, the longer it can take to get a reply from several links in the chain, because they are all operating on different time zones. Again this is not a major factor, but can be an inconvenience and should not be ignored.
7. Problems can be harder to resolve. For example if you are having goods shipped over from the Far East, it may take up to 2 weeks for the goods to arrive. What if you then discover that there has been a mistake and the goods that you ordered are not in the consignment? There is simply no room for errors within this system.
8. It can be very difficult to select suppliers in the global supply chain, after all they are often very different in terms of the ethos and philosophy of the company.
9. Increasingly businesses are being driven towards working in a more environmentally conscious way and the global supply chain often does not lend itself to good environmental practices. This is a common problem that is hard to resolve, since all goods manufactured overseas do have to be shipped or flown over.
10. The final point with regard to the global supply chain is simply the working practices of the suppliers. The ipad has recently been subject to negative publicity about the conditions the (suppliers’) workers are subjected to in China. Whether this will change as overseas companies strive to shed their negative image has yet to be seen, but this is an issue for many companies who are involved in the global supply chain.
Jul
20
10 Tips When Negotiating With Suppliers
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Negotiating is not the easiest thing to do and sometimes it can seem as if negotiating with suppliers is far from easy; so if you are new to the world of negotiating then it may be worth taking some time to go through just what you should and shouldn’t do when you are negotiating with suppliers…..
1. First of all it is important to set yourself some goals for the negotiating before you even enter into the negotiations. If you don’t have any clear goals then it will be hard for you to negotiate effectively. Goals will help give your negotiations a focus and also act as a strategy for the negotiations. So take time to figure out exactly what the process will be if it is successful; what will you and your company take away from the negotiations?
2. One thing that you should try to do is to look at the negotiations from the perspective of the supplier. If you were the supplier, what would you want from the negotiations? What would be satisfactory for you? What would be fantastic for you and what would be an insult to your business? Looking at things from the perspective of the supplier really helps you to get a good rounded look at what the negotiating process will involve and what both parties will be looking for. It does take time to do it, but it is worth it in the end.
3. It is also helpful to make a list of priorities and identify before the negotiations which you will be prepared to relax and which will be required to clinch the deal.
4. Consider who you are negotiating with – is it a decision maker? Or will they have to take this to their manager? Knowing who makes the decisions is vital in supplier negotiation.
5. Forget the old days when negotiating was done with a stick and the supplier was seen as very much the inferior partner. Now the emphasis is very much on establishing mutually beneficial relationships that can be helpful to you both. Of course you’ll come across a range of suppliers – and you’ll need tactics to cover each (consider our article on How to deal with difficult suppleirs). So treat the supplier with some respect and they are more likely to respect you.
6. Do not try to keep all the information secret. You will be expected to share some information with your suppliers. This could be about expected or anticipated demand, it could be about future expansion plans etc; but if you shroud the whole process of negotiation in secrecy, then you will not get very far. Consider how an Open book policy with your supplier may assist you in achieving your aims.
7. Conversely, take care not to simply share ALL your sensitive information and data with suppliers! You have to find a balance between being relatively open and not leaving yourself too vulnerable. This is quite difficult and to some extent will rely on your experience and business acumen to know just how much you can share and what should be kept secret.
8. Do not get too hung up on price. Price is a really important issue, but you are seeking to establish a good relationship with the supplier, so you need to think about other things, apart from price. Quality and reliability are as important as price. Often if you buy things ‘cheap’ they can cost you plenty, if they are not fit for purpose, so give due consideration to the issues of quality and reliability.
9. When negotiating with suppliers pay particular heed to how they can help you when things go wrong and indeed whether they will help you. Often the best suppliers are those who will really pull all the stops out to assist when everything is going wrong. So find out just how much emphasis they put on customer care. If they don’t care about their customers then there is no point carrying out the negotiations any further; just walk away.
10. The final point in any negotiating process is simply to be persistent and try to reach a deal that is mutually satisfactory to you both and in that way, the best possible outcome is probably within your grasp; Congratulations!