7 success factors to implement multitiered supplier collaboration

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. 

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: