For Better or Worse

19 October, 2017

Andrew Leach, who for over a decade was responsible for supplier risk at one of the world’s largest aerospace companies, describes his close working relationships with key suppliers and how he kept them in good shape. 

Remember these words? ‘…from this day forward, for better, for worse, for richer, for poorer, in sickness and health ....’

Maybe nowadays traditional marriage vows are not heard quite so frequently in public, but these words are unbeatable when it comes to portraying the kind of business relationship a key supplier might have with its main customer(s) over very long-term contracts. 

In some industries, like global aerospace for example, in which I had responsibility for supply chain risk management, we had an extraordinarily close working relationships with key suppliers.

To be honest, sometimes there was a limited field of suppliers to choose from. On more than one occasion, despite detailed research of the market, we would find that there simply was no direct competitor with the same expertise or technical proficiency that could provide the particular components they manufactured and we needed.

Even if a rival manufacturer has the technical capability, it might not be able to provide the components in the same quantities, or to the same exacting schedule or at a price that made commercial sense to us.  The pressure was therefore always on to forge very long term key supplier partnerships, and deal effectively with any issues as soon as they arose. 

My role, in the most simple terms, was to spot any threat, financial or otherwise, that might imperil my firm’s output and spot it as early as possible in order to do something about it before it became too big a problem and threatened our whole supply chain.

Like a good marriage, relationships with key suppliers demand constant communication and honesty on both sides. We were very careful before the final signing of contracts to ensure that our key suppliers were as prepared as we were to handle the inevitable ups and down of any long term relationship and had the same commitment to dealing with issues as soon as they emerged, rather than burying their heads in the sand.

Business relationships are never static and like all relationships they inevitably ebb and flow. Perhaps this is caused by a key manager leaving and their replacement is less able or is still too new for the role. Or perhaps when the supplier has taken on more work for other customers that has left it temporarily under-resourced on our account. The causes of supply fluctuations are many and various.

While we necessarily paid close attention to the financial stability of our suppliers, using Company Watch and other products to give us early warnings of signs of trouble ahead, we held regular face to face meetings with key suppliers to discuss issues like quality and delivery performance. 

Both sides treated these regular quarterly meetings as positive, creative forums, where we would also discuss commercial opportunities to work together on additional new projects.

A critical focus of these meetings was on a supplier’s investment capacity and their ability to innovate. As I’m sure you know, aerospace is a cutting edge industry that demands a huge commitment to constant innovation and investment. So balance sheet strength is not just a matter of financial stability, it is also about having the ability to keep in step with the wider market, and essential because our customers demanded a sense of our pipeline of better, more efficient products for the future. 

But let me be clear, my focus as Head of Purchase Risk was to look out for supply chain danger. If I felt we were not getting our points across or were not being listened to by a key supplier, I was unafraid to challenge strongly its management, even to the point where we would insist they look again at the capability of their FD, or Operations Director, or whoever we saw as the obstacle to improving their performance.

The fact of the matter is that we couldn’t accept a failure in our supply chain. A failure at a single company could slow or halt the whole global production process, threatening our business and the livelihoods at all the other suppliers.

Of course, supply chain break down would also mean a threat to our customers, multiplying the risks to their business. Ultimately, many hundreds of thousands of jobs and livelihoods could rest on the ability of a just one company to make a ‘widget’. This is why supply chain management was as important as engineering excellence in the company’s thinking.

Andrew Leach is now an independent supply chain risk consultant. He is best contacted by email: [email protected]