Supplier Diversity

Growing Supplier Capacity through Leadership Development

High performing suppliers need high performing leadership, and client organizations are helping them develop the right skills for success.
By Gerald Donald

There are many examples of corporations investing in developing leadership skills at the organizational and supplier levels. Following are just three examples.

The LEAD Institute offers the "Honda Supplier Leadership Skills & Style Development Program," which offers participants focused training in work unit performance improvement; personal style and interpersonal skills; and leading and managing others.

Cummins developed a position with the title "Global Supplier Improvement Leader," and the job duties are dedicated to building supplier capabilities and strengthening performance, continuous improvement, accountability, and leadership. The person holding the job must be able to coach and mentor suppliers, drive improvement through the supply chain, and support consensus among stakeholders.

The Georgia Tech Scheller College of Business offers a team-based "Supply Chain Leader Development Program" that is designed for high- to mid-level directors and managers in areas of global operations and supply chain. The five-day executive education program offers a blended learning experience via case studies, experiential activities, lectures, peer-to-peer, and team activities. The modules cover strategic thinking, operational excellence, and custom program options. Strategic thinking covers topics like developing an end-to-end supply chain leadership mindset, supply chain alignments, managing supply chain risks, and other relevant topics. Operational excellence includes managing inventory, logistics excellence, value creation, and managing non-financial and operational performance. Custom program options cover topics like strategic negotiation skills and corporate value creation.

Building Supplier Capacity Begins at the Organizational Level
These three examples show the approaches companies are taking to develop capacity building suppliers. They are developing leadership in their organizational leaders and in their suppliers – leaders who can develop markets, achieve operational excellence, think strategically, allocate resources, drive accountability, deliver results, manage a volatile business environment, and build capacity.

Supplier leadership also requires the ability to work collaboratively. One of the characteristics of a high performance organization is leadership at every level of the organization. Corporations need leadership that can mobilize the organization as needed, including the supply chain, and suppliers need leaders who can build high-performance organizations.

Supply chains are more global and more complex than they have ever been before, located across multiple countries in which each has unique risks and the power to disrupt the upline supply chain. Corporate procurement and sourcing professionals depended mostly on price in the past to select suppliers, but today they need suppliers who can grow capacity, manage risks, and provide consistently excellent performance. They need to be partners who can generate value for their own companies and for corporate clients at the same time. Suppliers need high-quality leadership within their companies who can work with equally high-quality corporate supply chain leaders.

If organizational leaders and supplier leadership need the same qualities, it makes sense for corporations to invest in leadership training for key suppliers as well as corporate leaders. Many companies have developed their supply chains based on incremental cost savings and not on their ability to support organizational objectives or to create long-term values. Common issues among suppliers include failure to comply with regulatory standards, poor customer service, poorly designed products or services, and price volatility.

As supply chains grow to be more diverse and complex, they are also exposed to risks that are unpredictable – environmental, political, and economic. The specific kinds of risks depend on the location of the supplier, but every key supplier needs a risk management plan in place.

Building Supplier Capabilities and Capacity on Business Objectives
To minimize the risks of supply chain disruption and to get the greatest value, suppliers need to understand and evolve capabilities around business objectives. To effectively achieve objectives, leadership in the supply chain should be capable of running their companies toward this end. They should know how to manage cash flow, inventories, logistics, risks, technology, sustainability, talent, technology (i.e. data analytics, cybersecurity, transparency, etc.), uncertainty, and scalability.

To build capacity, suppliers should know how to adapt to seasonal inventory requirements, expand production as the corporation grows, manage continuous improvement, and manage potential growth based on information supplied by their corporate customers.

Short-term tactical management approaches in the volatile global marketplace are going to leave suppliers and customers unable to meet objectives. Senior managers in critical supplier companies should have skills to develop and implement longer-term strategies for growth.

Investing in the leadership training in the supply chain is a natural next step in supplier relationship management and risk management.

As an example, Apple recognized the impact suppliers have on protecting everything of importance to success – from having the capacity to meet customer demands to preserving human rights. The company invests in developing the knowledge and skills suppliers need to act responsibly and be successful. As Apple raises its benchmarks, the collaborative training approach enables the company to successfully meet demand. The company regularly assesses the performance of suppliers to move them up the performance scale and provides the training tools, education, and support needed based on the assessments. The results of this approach have been impressive with the company building ecosystems of suppliers providing the continuous product improvements the company needs to maintain its competitive advantage and the capacity to deliver to the market on a timely basis.

Leading Across Functions
Investments in key and high potential suppliers will lead to growing spend with the supplier. Leadership training at the supplier level should be cross-functional to be most effective. This is the reason the examples mentioned at the beginning of this discussion cover a range of leadership topics because that is what effective supplier leadership needs – to manage across its own functions to achieve desired performance. If unable to reach this state, corporate customers will end the relationship when the supplier does not produce as expected or needed.

Companies like Apple, Honda, Proctor & Gamble, Toyota, L'Oréal, Johnson & Johnson, and other multinationals have led the way in supplier leadership training. However, smaller companies with global supply chains have many of the same issues as the multinationals.

Developing strong leadership skills in key suppliers is not a new management fad. It is a competitive strategy for a complex volatile business environment.