In SCA's case, the company is providing hard dollar support for suppliers as well as counseling and consulting in other areas. Specifically, SCA provides "recycling centers with financial backing to buy upgraded equipment and offers consultation on operations and marketing. In return, the recycling centers sell recovered fiber exclusively to SCA. (The recycling centers may sell varieties of recovered paper that SCA doesn't need to other manufacturers.)" For companies that do not have the balance sheet of SCA, a similar means of achieving the same end is to sign multi-year off-take agreements, which then allow suppliers to raise capital at more advantageous terms from banks and other creditors.
As it is in so many supplier development initiatives, simply tossing money -- strings attached -- at suppliers only solves part of the problem. In addition, to drive sustainable results overtime, it's critical to invest in joint cost take out and process improvement initiatives where both parties can share in the benefit. Still, as SCA's case shows, supplier development can -- and should -- serve as a cornerstone of overall business strategy and competitive advantage in a marketplace where global competitors in China and other LCCS locales often have the advantage of government backing, subsidies, rebates, lower corporate taxes and artificially depressed currencies.
Spend Matters and sister-site MetalMiner have covered the topic of supplier partnering and supplier development extensively in our downloadable research (free with registration), including how to apply technology to help manage overall initiatives. If you're curious to learn more about the subject, here's a highlight of some of the available research titles from the past few months: