In this excerpt from Strong Supply Chains Through Resilient Operations: 5 Principles for Leaders to Win in a Volatile World, the authors deliver a practical and hands-on discussion of how to future-proof your company’s supply chains by valuing your suppliers and collaborating with them.
To improve resilience, you can start by changing your view of suppliers. They are a source of value. Rather than seeing your supply chain as something you construct out of meaningless individual chain links, envision your suppliers as partners. They need to be strong, because without them, you can’t build a strong supply chain.
Sure, you may be thinking, you’re talking about supplier relationship management (SRM). Yes and no. You do need relationships with your suppliers. And those relationships will be stronger when you manage them. But some people seem to think that SRM is all about bashing vendors over the head until they reduce the price another 4%. That’s not a relationship. Those people are practicing supplier abuse management. As in any relationship, SRM involves communication on the executive level to understand the problems of the other party.
For example, Rational, a company that makes equipment for professional kitchens, won the 2022 Overall category for Kearney’s Factory of the Year program by working in very close collaboration with suppliers. Rational’s SRM focuses on technologies, quality criteria, and building long-term trust so that suppliers are willing to make mutually beneficial investments. Rational’s supplier fitness programs are about managing growth together. For example, if Rational needs suppliers to commit to higher volumes, it sends experts to help implement and optimize, to ensure that development is sustainable for all parties.
Do your suppliers help you with design? Are they involved in open collaboration, with teams at your company, or teams at your other suppliers? Have you given them the visibility they need to make smart and profitable decisions? When you ask these types of questions, you know you’re in a relationship. It’s managing these issues—collaboration, transparency, satisfaction—that’s the heart of your SRM.1 Why? Because your suppliers are a source of value, and you need to maximize that value, not minimize the cost.
We’re not saying, “Don’t pay attention to costs.” Just, “Don’t pay attention only to costs.” For example, when a global food business decided to reduce packaging costs, it shared detailed cost and complexity models with its packaging suppliers. That sparked collaborative ideation that not only further reduced costs but also improved packaging sustainability.
Indeed, for key suppliers, they should be more than sources of value. They should be partners. You are on a journey to resilience, and you want one or more suppliers to join you on this journey. This requires a new mindset. Rather than being transactional, your relationship with this supplier is one of trust. You trust them, they trust you. The top leadership of your firm invests the time and money required to build up that trust. Trust is always a two-way street:
• You may help suppliers in their time of need, trusting that they will help you come your own crises.
• They may ask to see your sales and operations planning (S&OP) details, trusting that you will fix anything that’s wrong. After all, if you have S&OP issues, your suppliers often pay the price—but lack the power to fix them.
• You may ask to see your supplier’s books, knowing that they will trust you not to negotiate on cost. Instead, you want to see where they are struggling and how a joint effort might allay that struggle. For example, if they’re struggling with their own suppliers, you may be able to help with negotiations or reengineering.
You certainly can’t do this with all suppliers. Your engineers are going to travel to their site, your chief procurement officer (CPO) is going to meet with their CEO, and even your CEO will ideally meet their CEO. Obviously, this is only for major suppliers of huge quantities on multimillion dollar contracts. The benefit of bringing in the CPO or CEO, rather than a category manager, is that you may be able to get a longer-term contract. Yet even as you build this trust with major suppliers, you can let that new attitude spill over to other relationships. You can seek to establish a cooperative culture toward suppliers in general—note that it’s the job of the C-suite to cultivate this culture.
Resilience is about strengthening the links in your chain. Building trust with key suppliers provides the strength. Thus empowering suppliers builds resilience. When they’re resilient, the next crisis won’t break them. It won’t tempt them to move to other customers. And thus it won’t break you.
End-to-end thinking builds resilience
Supplier partnerships are not just about shared spreadsheets and engineering specs. They’re also about story. Your suppliers should be able to see an end-to-end picture: how their inputs bring value to the final product. For example, if you make automobiles and your steel producer understands your technical specs, that’s good. But if the producer also understands that your customer is looking for a cool design, that’s a partnership. That’s a producer who will potentially contribute to your next cool design.
Likewise, if you make iPhones, your supplier should understand more than the value of Apple. (“Ooh, Apple is a powerful company, I’d better do exactly as they say.”) Instead your supplier should understand the customer’s value: the value of having glass that I can touch, but that doesn’t break if I drop it. That’s a supplier who builds your priorities into its decisions. (“Ooh, my engineers just stumbled across a way to make that glass thinner. Let me tell Apple!”)
But how is the supplier going to gain that knowledge? From your procurement team. These people used to do what we call “desktop procurement”—research into markets, costs, prices, and so on. Instead, they need to get to know suppliers and their products. Specifically, your procurement teams need knowledge of how suppliers create value for us} and knowledge of how we create value for customers. The more they know about each, the more they can collaborate, develop, reengineer, and otherwise transform the supply chain. Indeed, when you have great answers to both questions, you become a disruptor—someone who can overcome industry thinking in a radical way.2
In other words, your category buyers need to be real managers of the category. If they just focus on “How can I get savings?” they do not have the big picture. They need to know everything about the market: What are the technologies? What is unique? What is distinctive about each supplier? … This is why they matter. And this is why the right goals and incentives must be in place. For example, when a manufacturer of industrial assets had an opportunity to switch cable suppliers, the category manager did more than look at the 25% savings opportunity. She called engineering to learn how the cables were used, what drove materials costs, and what drove total cost of ownership. She learned that cheaper cables might break on average within four years rather than five—but the product had a five-year warranty. The company would be more resilient by rejecting the switch and discussing collaborative cost reductions with the incumbent supplier. But would she have made that choice if her incentives measured only procurement savings?
Yet supplier management is not merely a job for procurement. Your entire firm must think end-to-end about resilient supply chains. For example, if procurement is going to find alternative materials, it needs support from R&D. And if it’s going to qualify those materials, it needs testing support from manufacturing.
Furthermore, a resilient supply chain may require devolved and decentralized decision-making to manage the inevitable disruptions. If a tree falls across a remote shipping lane and no Wall Street Journal reporter is there to hear it, does it have an impact? Most decidedly yes—and the news will reach your local representatives long before it reaches those involved in top-down decision-making.
Indeed, modern supply networks have become so complex that no single player within them has the power to control the whole value chain from material extraction through to consumption. You can no longer use the traditional siloed approach to managing them. Everyone needs to collaborate more. All participants—from sub-tier suppliers to tech platforms, producers, and distributors—need to deploy predictive data analytics to achieve maximum visibility. You want visibility into changing demand and supply constraints as they emerge, as well as visibility into hidden risks that could be lurking both upstream and downstream.3 This is why we talk about supplier ecosystems and empowering those ecosystems. The phrase “supply chain” is still handy because so many know what it means. But in a sense both parts of it are outdated: (1) you’re no longer looking at supplies that arrive at your factory; instead, you’re looking at a value chain that goes all the way to the end consumer. (2) It shouldn’t be a chain, with all the weakest-link implications of that word; instead, you should lean into the interdependencies and manage it as an ecosystem.
Generative AI (GenAI) is being deployed by 72% of supply chain organizations, but most are experiencing just middling results for productivity and ROI, according to a survey by Gartner, Inc.
That’s because productivity gains from the use of GenAI for individual, desk-based workers are not translating to greater team-level productivity. Additionally, the deployment of GenAI tools is increasing anxiety among many employees, providing a dampening effect on their productivity, Gartner found.
To solve those problems, chief supply chain officers (CSCOs) deploying GenAI need to shift from a sole focus on efficiency to a strategy that incorporates full organizational productivity. This strategy must better incorporate frontline workers, assuage growing employee anxieties from the use of GenAI tools, and focus on use-cases that promote creativity and innovation, rather than only on saving time.
"Early GenAI deployments within supply chain reveal a productivity paradox," Sam Berndt, Senior Director in Gartner’s Supply Chain practice, said in the report. "While its use has enhanced individual productivity for desk-based roles, these gains are not cascading through the rest of the function and are actually making the overall working environment worse for many employees. CSCOs need to retool their deployment strategies to address these negative outcomes.”
As part of the research, Gartner surveyed 265 global respondents in August 2024 to assess the impact of GenAI in supply chain organizations. In addition to the survey, Gartner conducted 75 qualitative interviews with supply chain leaders to gain deeper insights into the deployment and impact of GenAI on productivity, ROI, and employee experience, focusing on both desk-based and frontline workers.
Gartner’s data showed an increase in productivity from GenAI for desk-based workers, with GenAI tools saving 4.11 hours of time weekly for these employees. The time saved also correlated to increased output and higher quality work. However, these gains decreased when assessing team-level productivity. The amount of time saved declined to 1.5 hours per team member weekly, and there was no correlation to either improved output or higher quality of work.
Additional negative organizational impacts of GenAI deployments include:
Frontline workers have failed to make similar productivity gains as their desk-based counterparts, despite recording a similar amount of time savings from the use of GenAI tools.
Employees report higher levels of anxiety as they are exposed to a growing number of GenAI tools at work, with the average supply chain employee now utilizing 3.6 GenAI tools on average.
Higher anxiety among employees correlates to lower levels of overall productivity.
“In their pursuit of efficiency and time savings, CSCOs may be inadvertently creating a productivity ‘doom loop,’ whereby they continuously pilot new GenAI tools, increasing employee anxiety, which leads to lower levels of productivity,” said Berndt. “Rather than introducing even more GenAI tools into the work environment, CSCOs need to reexamine their overall strategy.”
According to Gartner, three ways to better boost organizational productivity through GenAI are: find creativity-based GenAI use cases to unlock benefits beyond mere time savings; train employees how to make use of the time they are saving from the use GenAI tools; and shift the focus from measuring automation to measuring innovation.
Business software vendor Cleo has acquired DataTrans Solutions, a cloud-based procurement automation and EDI solutions provider, saying the move enhances Cleo’s supply chain orchestration with new procurement automation capabilities.
According to Chicago-based Cleo, the acquisition comes as companies increasingly look to digitalize their procurement processes, instead of relying on inefficient and expensive manual approaches.
By buying Texas-based DataTrans, Cleo said it will gain an expanded ability to help businesses streamline procurement, optimize working capital, and strengthen supplier relationships. Specifically, by integrating DTS’s procurement automation capabilities, Cleo will be able to provide businesses with solutions including: a supplier EDI & testing portal; web EDI & PDF digitization; and supplier scorecarding & performance tracking.
“Cleo’s vision is to deliver true supply chain orchestration by bridging the gap between planning and execution,” Cleo President and CEO Mahesh Rajasekharan said in a release. “With DTS’s technology embedded into CIC, we’re empowering procurement teams to reduce costs, improve efficiency, and minimize supply chain risks—all through automation.”
And many of them will have a budget to do it, since 51% of supply chain professionals with existing innovation budgets saw an increase earmarked for 2025, suggesting an even greater emphasis on investing in new technologies to meet rising demand, Kenco said in its “2025 Supply Chain Innovation” survey.
One of the biggest targets for innovation spending will artificial intelligence, as supply chain leaders look to use AI to automate time-consuming tasks. The survey showed that 41% are making AI a key part of their innovation strategy, with a third already leveraging it for data visibility, 29% for quality control, and 26% for labor optimization.
Still, lingering concerns around how to effectively and securely implement AI are leading some companies to sidestep the technology altogether. More than a third – 35% – said they’re largely prevented from using AI because of company policy, leaving an opportunity to streamline operations on the table.
“Avoiding AI entirely is no longer an option. Implementing it strategically can give supply chain-focused companies a serious competitive advantage,” Kristi Montgomery, Vice President, Innovation, Research & Development at Kenco, said in a release. “Now’s the time for organizations to explore and experiment with the tech, especially for automating data-heavy operations such as demand planning, shipping, and receiving to optimize your operations and unlock true efficiency.”
Among the survey’s other top findings:
there was essentially three-way tie for which physical automation tools professionals are looking to adopt in the coming year: robotics (43%), sensors and automatic identification (40%), and 3D printing (40%).
professionals tend to select a proven developer for providing supply chain innovation, but many also pick start-ups. Forty-five percent said they work with a mix of new and established developers, compared to 39% who work with established technologies only.
there’s room to grow in partnering with 3PLs for innovation: only 13% said their 3PL identified a need for innovation, and just 8% partnered with a 3PL to bring a technology to life.
Even as a last-minute deal today appeared to delay the tariff on Mexico, that deal is set to last only one month, and tariffs on the other two countries are still set to go into effect at midnight tonight.
Once new U.S. tariffs go into effect, those other countries are widely expected to respond with retaliatory tariffs of their own on U.S. exports, that would reduce demand for U.S. and manufacturing goods. In the context of that unpredictable business landscape, many U.S. business groups have been pressuring the White House to pull back from the new policy.
Here is a sampling of the reaction to the tariff plan by the U.S. business community:
American Association of Port Authorities (AAPA)
“Tariffs are taxes,” AAPA President and CEO Cary Davis said in a release. “Though the port industry supports President Trump’s efforts to combat the flow of illicit drugs, tariffs will slow down our supply chains, tax American businesses, and increase costs for hard-working citizens. Instead, we call on the Administration and Congress to thoughtfully pursue alternatives to achieving these policy goals and exempt items critical to national security from tariffs, including port equipment.”
Retail Industry Leaders Association (RILA)
“We understand the president is working toward an agreement. The leaders of all four nations should come together and work to reach a deal before Feb. 4 because enacting broad-based tariffs will be disruptive to the U.S. economy,” Michael Hanson, RILA’s Senior Executive Vice President of Public Affairs, said in a release. “The American people are counting on President Trump to grow the U.S. economy and lower inflation, and broad-based tariffs will put that at risk.”
National Association of Manufacturers (NAM)
“Manufacturers understand the need to deal with any sort of crisis that involves illicit drugs crossing our border, and we hope the three countries can come together quickly to confront this challenge,” NAM President and CEO Jay Timmons said in a release. “However, with essential tax reforms left on the cutting room floor by the last Congress and the Biden administration, manufacturers are already facing mounting cost pressures. A 25% tariff on Canada and Mexico threatens to upend the very supply chains that have made U.S. manufacturing more competitive globally. The ripple effects will be severe, particularly for small and medium-sized manufacturers that lack the flexibility and capital to rapidly find alternative suppliers or absorb skyrocketing energy costs. These businesses—employing millions of American workers—will face significant disruptions. Ultimately, manufacturers will bear the brunt of these tariffs, undermining our ability to sell our products at a competitive price and putting American jobs at risk.”
American Apparel & Footwear Association (AAFA)
“Widespread tariff actions on Mexico, Canada, and China announced this evening will inject massive costs into our inflation-weary economy while exposing us to a damaging tit-for-tat tariff war that will harm key export markets that U.S. farmers and manufacturers need,” Steve Lamar, AAFA’s president and CEO, said in a release. “We should be forging deeper collaboration with our free trade agreement partners, not taking actions that call into question the very foundation of that partnership."
Healthcare Distribution Alliance (HDA)
“We are concerned that placing tariffs on generic drug products produced outside the U.S. will put additional pressure on an industry that is already experiencing financial distress. Distributors and generic manufacturers and cannot absorb the rising costs of broad tariffs. It is worth noting that distributors operate on low profit margins — 0.3 percent. As a result, the U.S. will likely see new and worsened shortages of important medications and the costs will be passed down to payers and patients, including those in the Medicare and Medicaid programs,” the group said in a statement.
National Retail Federation (NRF)
“We support the Trump administration’s goal of strengthening trade relationships and creating fair and favorable terms for America,” NRF Executive Vice President of Government Relations David French said in a release. “But imposing steep tariffs on three of our closest trading partners is a serious step. We strongly encourage all parties to continue negotiating to find solutions that will strengthen trade relationships and avoid shifting the costs of shared policy failures onto the backs of American families, workers and small businesses.”
In a statement, DCA airport officials said they would open the facility again today for flights after planes were grounded for more than 12 hours. “Reagan National airport will resume flight operations at 11:00am. All airport roads and terminals are open. Some flights have been delayed or cancelled, so passengers are encouraged to check with their airline for specific flight information,” the facility said in a social media post.
An investigation into the cause of the crash is now underway, being led by the National Transportation Safety Board (NTSB) and assisted by the Federal Aviation Administration (FAA). Neither agency had released additional information yet today.
First responders say nearly 70 people may have died in the crash, including all 60 passengers and four crew on the American Airlines flight and three soldiers in the military helicopter after both aircraft appeared to explode upon impact and fall into the Potomac River.
Editor's note:This article was revised on February 3.