4 minute read 19 Jul 2023
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7 success factors to implement multitiered supplier collaboration

Ehap Sabri
By Ehap Sabri

EY Americas Supply Chain Technology Co-Leader of Planning

Ehap is an esteemed supply chain industry leader with an unwavering commitment to delivering exceptional value for clients, setting him apart as a formidable presence in the industry.

4 minute read 19 Jul 2023
Related topics Alliances Supply chain
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Implementing a multitiered supplier collaboration strategy can help organizations remain competitive in today’s volatile business landscape.

Enabled by digital technologies, multitiered supplier collaboration brings visibility, efficiency and agility to organizations as they navigate today’s complex supply chain.

Three questions to ask

  • What is multitiered collaboration?
  • Why is multitiered supplier collaboration necessary in mitigating supply chain disruptions?
  • What are key factors for implementing a successful multitiered supplier collaboration strategy?

Supply chains are global, complex ecosystems of suppliers and customers, dependent on each other to succeed, yet prone to disruptions.

Now is the time to consider implementing a robust multitiered supplier collaboration strategy that harnesses the power of digital technologies, like artificial intelligence (AI) and machine learning (ML) and execute on the seven success factors discussed later, to enhance the efficiency, effectiveness and responsiveness of your supply chain operations. 

Multitiered supplier interdependence

Today’s supply chains are more interconnected than ever; one glitch can harm the entire ecosystem.

Consider a multinational automotive company with Tier 1, Tier 2 and Tier 3 suppliers involved in the production of a specific vehicle component, such as electronic control units (ECUs).

The Tier 1 supplier manufactures the final assembled ECUs and supplies them to the automotive company. The Tier 1 supplier relies on multiple Tier 2 suppliers for key components and parts required to produce the ECUs. One critical component, let’s say a specialized microcontroller, is supplied by a Tier 2 supplier.

Now, suppose the Tier 3 supplier, responsible for manufacturing and supplying the specialized microcontrollers to the Tier 2 supplier, faces unexpected production disruptions and doesn’t provide visibility to their customers. As a result, the Tier 3 supplier is unable to meet the demands of the Tier 2 supplier, leading to a shortage of microcontrollers.

This shortage of microcontrollers has a significant impact on the Tier 2 supplier’s ability to fulfil orders and deliver the necessary components to the Tier 1 supplier. Consequently, the Tier 1 supplier faces a disruption in their ECU production line, causing delays in supplying the automotive company with the required number of ECUs.

Highlighting the interconnectedness of suppliers at different tiers within the supply chain, this scenario emphasizes the importance of timely visibility, effective collaboration and contingency planning to mitigate disruptions. 

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Multitiered supplier collaboration – explained

Multitiered supplier collaboration refers to the coordination and planning between internal departments and supplier partners to maintain an optimized supply chain flow.

A flow sustained through shared real-time visibility and processes designed to facilitate transparency to make informative decisions, effectively meet demand and ensure on-time delivery.

Encompassing the entire scope of supply chain functions, multitiered supplier collaboration includes but is not limited to forecasting; logistics; operations; capacity planning; and inventory, risk and resource management.

Further, multitiered supplier collaboration offers data-sharing and automation to help mitigate and manage perceived risk, ensuring continuity of supply.

Multitiered supplier collaboration – the why

Given all the factors involved in bringing a final product to market, many supply chains remain fragmented and manual – leading to costly errors.

As globalization continues, global supply chains will deepen in complexity, further driving the need for collaboration. This requires high levels of commitment, trust and transparency, alignment to each other’s standards, goals and objectives, and shared perceptions of success.

Implementing a robust multitiered supplier collaboration strategy is crucial for organizations to achieve greater visibility, coordination, risk management, innovation, cost optimization and customer satisfaction.

Multitiered supplier collaboration – the how

Technology will continue transforming future supply chains. In turn, those who recognize technology as a competitive advantage will remain resilient in volatile environments.

Implementing digital technologies to enable collaboration is no small feat, as multiple departments and supplier partners must connect and communicate up and down the supply chain.

That said, here’s a proven blueprint to get started:

  • Clear objectives and alignment

    Analyze your current supply chain to identify your specific needs/pain points. Clearly define the objectives and desired outcomes of the supplier collaboration strategy to ensure alignment to the organization’s goals; clearly communicate the objectives to suppliers to foster shared understanding and commitment.

  • Supplier segmentation and onboarding strategy

    Categorize suppliers into distinct segments based on specific criteria like volume, strategic relationship, current technology landscape, process readiness and IT maturity. This will help you manage supplier relationships more effectively by tailoring strategies and approaches according to unique characteristics and requirements of each segment. This also helps in deciding who should be part of wave 1 of implementing the strategy and how to incentivize them.

  • Select the right software vendor

    Capabilities to look for in a collaboration software to support multitiered collaboration include:

    1. Scalability
    2. Configurable workflows
    3. Optimized UI/UX dashboards
    4. Real-time data capture and sharing
    5. Established connections with carriers
    6. Seamless, real-time messaging capabilities 
    7. Enables the creation of bill of materials (BOM) across multiple tiers
    8. End-to-end visibility with significant investments in new digital technologies, such as ML, AI, cloud computing, predictive analytics and Internet of Things (IoT)

  • Engage a partner

    Select a partner who is familiar with the entire lifecycle of the transformation and can assist with leading practices to onboard and incentivize suppliers, as well as pinpoint critical enablers to realize collaboration success. Experienced partners can help in value tracking and effort recalibration to ensure projects deliver on their promised ROI.

  • Cultural alignment and mindset shift

    Successful collaboration requires cultural alignment and a mindset shift within your organization. Encourage open communication, trust and mutual respect. Foster a culture that values collaboration, knowledge sharing and continuous improvement. Promote a shift from a transactional mindset to a relationship-based approach.

  • Change management

    Integrating change management practices into the supplier collaboration strategy helps overcome resistance, fosters a positive collaborative culture and ensures smooth adoption of new processes and ways of working.

  • Strong leadership and commitment

    Secure top-level leadership support and commitment to drive the supplier collaboration strategy. Leadership should demonstrate the importance of collaboration, allocate necessary resources and actively participate in fostering collaboration among stakeholders.

It’s your move

Prioritizing and adopting multitiered supplier collaboration empowers you to control the narrative around your business as challenges arise. Leveraging the above success factors would increase your chance in succeeding and achieving the expected benefits. 

Summary

Not only will multitiered supplier collaboration help mitigate risks, it will also improve productivity, increase efficiency, reduce manual errors and ensure meeting customer demand – leading to increased customer loyalty and expanded market share.

About this article

Ehap Sabri
By Ehap Sabri

EY Americas Supply Chain Technology Co-Leader of Planning

Ehap is an esteemed supply chain industry leader with an unwavering commitment to delivering exceptional value for clients, setting him apart as a formidable presence in the industry.

Related topics Alliances Supply chain
Upvote