CSR Meets Supplier Development to Drive Savings/Beat Chinese Competitors: WSJ Coverage

Kudos to The Wall Street Journal for surfacing a great story on how one organization is focusing on supplier development and supplier management as a means to drive savings and outflank Chinese competitors. The article tells the story of how SCA, a maker of recycled paper products, is confronting tighter supply markets and increasing Chinese competition head-on by raising the percentage of supply it obtains from recycling centers from 30% to 50% in 2011. The WSJ notes that SCA's case highlights how "a range of manufacturers have been forming closer relationships with suppliers in order to ensure a steady flow of goods." From closer joint R&D initiatives to lean cost take out to supply chain financing activities aimed at getting working capital in the hands of suppliers more quickly, supplier development can -- and should -- play a key role in procurement strategy and initiatives today.

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:

Leveraging Supplier Management Platforms for Multiple Goals: Risk Reduction, Supplier Diversity and CSR

Supply Risk Management and Supplier Performance Management – Managing Your Supply Base in Real Time

Supply Risk Management – Segmenting the Technology and Content Landscape and Choosing the Right Category of Solutions

The Intersection of Analytics and Supply Chain Risk Management -- Using Intelligence to Drive Early Intervention

Jason Busch

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