How Supply Chain Professionals and Their Suppliers Can Deal with the Implications of Brexit (Part 2)

Continuing our guest post from Richard Neale, Director of EMEA Marketing, at business intelligence firm Birst, an Infor company.

In part 1, I looked at how companies can integrate data in their supply chains to prepare for Brexit. As I thought through how suppliers can prepare for the changes involved, it struck me that these steps were still passive in nature. They accept the market changes that happen and help companies to prepare, but they focus on switching suppliers to minimise the impact.

How can suppliers look at their situations to avoid some of the problems with supplier switching? Can they take steps to be part of the group of suppliers that are still used, despite increased tariffs or time spent going through customs?

Making more of your service

The word fungible – aside from being fun to say – describes any situation where one supplier or product can be switched for another with little to no impact. Many companies aim to reduce how fungible their products are, to lock in customers and make the prospect of switching either difficult or prohibitively expensive.

An example might be using non-standard connections within devices, or using proprietary parts that can’t be switched out for those from other aftermarket suppliers. For companies with unique products, this approach may see them through Brexit with customers that can’t switch. However these steps can have longer-term unintended consequences.

For example, it may cause resentment among customers and encourage switching in the long run. In a situation such as Brexit, where research data points to companies actively switching suppliers, taking the proprietary route can be a mistake.

Instead, it’s worth looking at how to embed your service more deeply within customer and partner organisations. For supply chain teams, this can be based on smarter use of data. For example, providing more insight to customers on operational performance, as part of a service offering, can entrench a supplier into those customers’ own operations.

How does this work in practice? To start with, it’s important to look at how the company currently manages its interactions with customers. If the focus is on transactions, then companies will optimise their processes to make as much profit per transaction. Under this model, each one is looked at individually and the customer relationship is less important. However, this may not be the best approach for long-term success.

Looking at the complete customer relationship and analysing all transactions in context is vital. Rather than looking at individual deals, some companies look at their overall share of business with the customer, rather than on every deal, and optimise their approach to earn greater profitability over time. In the consumer world, Amazon is a great example of a company where ownership of the customer drives more transactions. Some of these deals will be less profitable than others, but the overall share of wallet is so significant that it leads to greater revenues over time.

For B2B supply chain operators and logistics teams, owning more of each customer through smarter collaboration can provide more security in relationships. As long as overall profitability can be maintained, individual deals can be allowed to go ahead at greater or lesser profit margins. The issue is maintaining the relationship so that both sides benefit enough over time. Putting some guidelines in place – based on efficient analysis of data, and that both sides respect – will help this process.

Turning data into a service

Alongside using data internally to monitor and improve performance, it can also be a good idea to expose some of that information to partners for them to use. Rather than simply supplying reports on service levels, making use of the data you already gather can provide some new opportunities.

The Internet of Things is due to expand rapidly in the logistics and supply chain sectors – real-time data from sensors attached to goods or services can provide a more precise picture of where all orders are at any one point in time. This information can also be mined for more insight over time such as identifying bottlenecks or long-term trends. In the future, this data can be used for predictive analysis and estimating levels of demand for products more accurately.

With potential tariffs and customs checks to consider, this additional insight will be valuable for analysis. However, exposing some of this data to customers for their supply chain teams to use can provide more opportunities to create value. If a customer’s supply chain operation uses the data you provide to them in their own forecasting and reporting, then it strengthens the bond between companies and makes it harder for switching to occur.

This approach is very different from the adversarial approach that some companies are already considering to deal with Brexit. Some 36 percent of companies plan to beat their suppliers down on costs to maintain their own profitability, while 12 percent are pre-emptively pushing up prices to cope. However, looking at your data in context can help you judge whether those decisions are the right ones. Collaborating around data can demonstrate where switching suppliers makes sense, where price increases might be counter-productive, and where taking new approaches can protect against changes in the market.

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