Daniel Weise joined BCG nearly 20 years ago as an automotive industry specialist and now, as CEO of the subsidiary Inverto, focuses on supply chain operations across industries. He’s also the co-author of Profit from the Source: Transforming Your Business by Putting Suppliers at the Core, which Harvard Business Review Press released in June.
He told b. about how the supply chain has changed — and how to face its current obstacles.
b.: How do you think the relationship between organizations and their suppliers has shifted in the 21st century?
Weise: Once upon a time, suppliers were often located close to the companies that bought their goods and services. The internet changed that. These days, suppliers can be located across the world — and yet they are still never more than a click away from the buyer …
Suppliers are a scalable source of competitive advantage. They can help companies create products and services that are not only lower cost but also lower risk, more sustainable, higher quality, more innovative, and faster to market.
b.: As supply chains continue to recover from the COVID pandemic, what changes can organizations make?
Weise: To alleviate the current pressures, CEOs should consider setting up a 24/7 procurement and supply chain war room. This is what Apple, Dell, and others did when the semiconductor crisis first struck in 2020.
Also, they should make a noncancellable and nonreturnable commitment to suppliers for an 18-month to 24-month time horizon, ensure their suppliers earmark specific components for their sole use, and collaborate with suppliers to track and trace every order.
Longer term, CEOs should make the systemic changes that will ensure they are well prepared to deal with the next crisis when — not if — it comes. … At a personal level, they should spend more time with their top suppliers, nurturing one-to-one relationships with the CEOs of the … companies that account for half of their supplier budget.
b.: How would you navigate a situation where the supplier isn’t willing to [make changes]?
Weise: The first thing to say is that buyers should differentiate between different types of supplier. The fact is that some of their suppliers are more important to them than others. So, the approach to those we call “A” suppliers needs to be more personal than the approach to their other suppliers …
Above all, we point to what we call a 360-degree program — so-called because it allows a company to provide an exclusive wraparound package of business support to suppliers in return for securing an upfront commitment to double savings every year for an initial three-year period.
b.: How might organizations — even smaller ones — miss out on potential growth opportunities by not hiring a chief production officer?
Weise: In our experience, when the CPO is centrally involved in all the critical stages of a product’s evolution, they significantly lower costs and ensure that the company benefits from the accumulated knowledge and expertise of suppliers in a way that generates value across five other sources of competitive advantage: innovation, quality, sustainability, speed, and risk reduction.
Profit from the Source: Transforming Your Business by Putting Suppliers at the Core is available now.