3 Tips for Making Strategic Decisions About Your Supply Chain
March 29, 2022
Your supply chain is like an extension of your team. While suppliers may be external to your organization, your engineering work depends on those relationships in order to get from a design to a finished product. So how you manage your supply chain can be just as important as how you manage your team—particularly during a time when global supply chains are in flux.
Greg Smyth, a former Group Manager at Tesla turned Career Pivot Coach at Career Pivot Accelerator, has significant experience managing supply chains for large-scale projects in the automotive and energy industries. On episode 1 of Peer Check, he sat down with host and CoLab CEO Adam Keating to talk about lessons learned along the way.
Based on their conversation, this post summarizes three pieces of advice to help you be more strategic in your supply chain decision-making.
1. Choose Partners that are Culturally Aligned
When you’re hiring for your own team, you probably take cultural alignment into consideration. Although culture fit shouldn’t come at the expense of diversity, the people you hire do need to be aligned with the values of your team and organization. Suppliers are no different.
“You can coach someone that's capable and is culturally aligned. You can coach them to unbelievable heights. And I think the same is true for suppliers,” says Smyth. “Gaining cultural alignment—having the right suppliers and partners on board—it just makes such a huge difference.”
Smyth emphasizes the importance of “being thoughtful about which partners you decide to work with,” particularly considering “how intertwined you get.” Once you choose to work with a supplier, that relationship can become very difficult to disentangle. And while some things are coachable, coaching people to fit your culture is not one of them.
“Doing things out in front matters a lot,” explains Smyth. “Otherwise you end up—it's so far from optimal, you're using what I call brute force to make things happen. And you can do a lot with brute force with the right supplier that's culturally aligned, that is willing to be scrappy, and do things differently. You can make a lot happen in a very short period of time.”
However, that willingness to work together and do unconventional things in the short term in order to meet a “crazy deadline” needs to come with an acknowledgement that temporary solutions are exactly that—temporary. After the urgent deadline is met, Smyth says the right supplier should be “willing to move to what the optimized solution is, so that you’re not stuck with this sub-optimal solution that you built just to launch a product quickly.”
Understanding that not every company or supplier will be willing to match your approach is crucial to being able to make decisions about who to work with. As Smyth puts it, some suppliers are “used to launching products in a certain way. And so you have to have them culturally on board to be able to have something like that approach.”
2. Be Prepared to Adjust and Optimize Over Time
Since engineering leaders often start out as engineers, there’s sometimes an impulse to strive for perfection in your supply chain. For Smyth, this was one of the biggest learning curves involved in shifting from an engineering role to a leadership one.
“Being comfortable that you may not pick the right supplier, or that you may not do something perfectly, and being willing to be okay with that and to realize that you can probably repair it or adjust it over time—that was the thing I probably struggled with most,” he admits. Now Smyth recommends a more gradual, continuous approach to making supply chain changes. “I think you want to manage it in a reasonable way and then start to migrate… and then, over time, you're moving towards this optimized supply chain.”
It takes time to get used to managing suppliers in this way, making decisions with limited information, and feeling comfortable with a certain level of risk that’s inherent to the task. “I think you have to be at a certain stage of your career to be more comfortable,” Smyth explains. “When you're right out of school, I would say your judgment or instinct is probably not that great. But it's something you kind of hone over time.”
In the meantime, it’s a matter of experimenting and optimizing. “You should be continuously doing that, where you're trimming suppliers that are not performing well and adding ones that you think are a good fit,” suggests Smyth. “Then you can increase and allocate more and more to them based on their performance. Because if you just go all in—even if it seems on the surface to be a perfect fit… the realities of what manifests down the road, you just don't know. And I think it's almost impossible to fully predict it.”
And there’s another important reason to get comfortable with the fact that perfect decisions are unrealistic: opportunity cost. “Making the theoretical right decision six months from now has a cost that may be more than making the wrong decision now,” Smyth points out. “Thinking about it that way, it was just different from what I was used to.”
3. Develop Mutually Beneficial Supplier Relationships
By choosing your suppliers thoughtfully and making adjustments to fine-tune your supply chain over time, you can start to prioritize building supplier relationships that are mutually beneficial for everyone involved. That means going beyond taking cultural alignment into account when considering a new supplier (or whether to continue with an existing one), and looking at the relationship as a long-term partnership.
After all, as Smyth puts it, your suppliers are people. Whether they work for you directly or indirectly, managing your suppliers and managing your team both require strong people skills. “Ideally, you're creating a mutually beneficial relationship,” he says. “You need to have a high level of trust between those individuals, those teams… and it has to be bidirectional.”
One way engineering managers and leaders can get this wrong is by leaning too hard on their role as the “customer” in a supplier relationship.
“There's sort of a power dynamic between the customer and the supplier. And you can use that, right, that is a point of leverage that you have… But you can't overuse it,” Smyth explains. “You can use it, but it will erode the trust and engagement of the supplier over time.”
Rather than playing the customer card, Smyth recommends honesty and openness. While there are sometimes constraints about what you can disclose to an external partner, Smyth believes it’s important to “be as honest as you can with people, and honest and direct about what your expectations for them are, how they're performing to the level you're expecting, or not expecting.” Not only that, but the open communication should go both ways. “You need to be receptive to how you as a company are performing or not performing.”
And when it comes to building mutually beneficial supplier relationships, one critical but potentially overlooked factor is the alignment (or lack thereof) between each company’s incentives. “If you’re trying to grow a company, and then your supplier’s trying to do the same, those incentives are aligned,” Smyth points out. But if your incentives are at odds with your supplier’s, it’s going to be a difficult relationship. “So understanding even how the contracts are structured, understanding what their individual goals are, will make a huge difference to the long-term performance of those suppliers.”