Are internal suppliers good suppliers?
A few years ago, I had just joined a renowned international high-tech company as Supply Chain Director. I’d come from an automotive supplier, where I’d developed habits of customer/supplier relations that were, shall we say, frank and direct, and sometimes a little rough. When things weren’t going well, we said so, and demanded action.
In this Anglo-Saxon high-tech multinational, we had an internal supplier who manufactured semiconductors for us. We were in the middle of a microcontroller supply crisis with this entity. So I picked up the phone to express our dissatisfaction, explain our minimum requirements, and demand a recovery plan.
The next day, I got a call from my boss, who’d had the boss of my contact at our internal supplier. It was explained to me that we couldn’t behave like that towards our colleagues and friends…
When you ask a multinational company who their worst suppliers are, it’s not unusual for internal suppliers to be mentioned. Customer/supplier relations within the same company present particular difficulties, as they are often the product of internal politics.
We’re part of the same family, but…
When you’re suppliers or internal customers, you share common things: a common history, a common hierarchy, a common corporate culture, no doubt common performance indicators, as well as perhaps IT systems.
This doesn’t mean, however, that relations are transparent, clear and win/win, because the relationship is also imbued with politics: you and the parties you deal with report to common managerial strata. Your respective bosses may be on excellent terms… or they may hate each other fiercely. But above all, your objectives are not necessarily aligned. You’re each in a separate silo. We’re part of the same family, but each in his own bedroom…
Uniting internal customers and suppliers is easy…
The good news is that if you’re part of the same family, with a little managerial determination from the family council, it’s possible to make simple decisions to change everything.
Three things are enough to turn the table around:
- Share a common understanding of the importance of flow, and the reality of the company’s flows. It’s common sense applied, and there are education programs and consultants who can help you get the right messages across.
- Implement shared visibility. Even if you have disparate ERP systems, putting internal customer and supplier information on the same intuitive digital platform takes a few months. We can help with Intuiflow…
- Switch internal customer/supplier relations to “VMI” mode – Vendor Managed Inventory – in other words, make the internal supplier responsible for ensuring the availability of the right product in the right quantity at the right time – to its internal customers, whatever the circumstances. The internal supplier has access to internal customers’ actual consumption, their actual inventories, their actual production or sales orders, and their forecasts. The supplier, faced with the real need for agility, has the means to allocate his capacity in the best possible way, and to make informed decisions.
…yet complicated to implement!
For years, we’ve been encouraging our multi-site customers to adopt this approach. The majority of our customers have done so with great success, whether for manufacturing or distribution flows.
However, we have also seen some customers give up and go backwards. Several of our customers had set up an inter-site VMI mode, and then reverted to a traditional relationship: the customer site places orders, and the supplier site must manage to deliver them on time.
The main reasons for this? Performance indicators limited to the site, lack of trust, power games (I’m the customer, you’re the supplier, so I’m the boss), managerial turnover…
Keep at it!
If you’re in a position to orchestrate internal customer/supplier relations within your company, don’t hesitate: share end-to-end visibility, establish VMI flows, clarify upstream/downstream responsibilities, orchestrate meeting points within S&OP processes to reinforce trust and counteract political games – your end customers, the real customers, will be grateful!
