Supplier Relationships: 4 Real-World Lessons
Some of the biggest companies in the world started with just two people. Jobs and Wozniak. Hewlett and Packard. Or, in our case, James Golden and Bill Morean. Jabil started with a business partnership between two people, and we've never forgotten the importance or power of a relationship. That's why we focus on building strong and effective supplier relationships.
COVID-19 has brought the issue and associated risk of single-sourcing to the forefront of supply chain leaders' thoughts. In a 2020 Jabil-sponsored survey of more than 700 supply chain decision-makers, nine out of 10 reported direct business impact from sourcing issues. No wonder 43% stated that effectively assessing their existing supplier base will be a key part of their supply chain strategy in the next two years.
Moreover, as a result of battling the fallout from COVID-19, more companies are looking to external support. According to our survey, 40% are adjusting their sourcing partnerships and 30% are expanding their EMS partnerships. Others are looking for manufacturing partners to absorb risk and tackle challenges.
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Supplier relationships have evolved significantly over the past few years as original equipment manufacturers (OEMs) have increasingly begun to outsource non-core competencies, thus making them more reliant on partners for innovation, security of supply, risk absorption, corporate social responsibility and cost savings. This dynamic is changing supplier relations, evolving them into a competitive advantage and making them more vital to bottom-line success. Supplier relationship management is now front and center.
We had the opportunity to talk to four of our key suppliers about our strategic relationship. Each of them discusses what an ideal supplier relationship looks like and how to build and sustain a supplier partnership that will help your business grow and achieve its goals.
Staying Ahead of Supply Chain Management Challenges
In a constantly changing field, it takes ingenuity and resources to stay ahead of every trend, change and challenge. That's why we don't just rely on our supplier partners to deliver the parts we need; we also need them to help keep us informed of market fluctuations. That's one of the reasons we work with Vishay, a $3 billion manufacturer of quality passive components and semiconductors.
"Jabil is one of our major global accounts," Vishay's Senior Vice President Peter Williams said. "Our relationship, I would say, is excellent."
Vishay specializes in the commodities that they're supplying into Jabil, and we share target markets, such as high-reliability industrial, aerospace, medical and automotive. This makes their insight invaluable while assessing the current state of the market and planning for the future. Vishay consistently briefs Jabil on the latest component trends they see and the most cutting-edge technologies that they have available.
Williams explained, "We see three segments, which will continue to drive growth as we go forward: connectivity/5G-type applications, mobility (electric vehicles, transportation), and then the third growth area we see is the environment, which is driving automation into the overall markets to provide cleaner, more reliable power."
Vishay advises Jabil on where we may want to upgrade components to provide lower cost and more readily available components. This helps us weather disruptions and better serve our customers when the market tightens up, like in the case of component shortages and COVID-19.
Takeaway #1: Partners Can Broaden Your Company's Perspective and Drive Growth
A partner can give you a specialized perspective of their market, which is especially useful in such a complicated and volatile field as supply chain. A well-informed partner can help cover any blind spots or overlooked trends and help you develop a strategic approach to reach your goals, no matter the market conditions.
A successful partnership should benefit both parties as they share knowledge and resources to thrive in challenging times. It is the quintessential "give and take" that we look for in human relationships—when one side is continually giving, it becomes draining. But when the parties rise together, the momentum from one pushes the other to unimagined heights.
"We work in a market that is quite volatile, and with Jabil, it provides stability," Williams shared. "Jabil has continued to grow, regardless of the market situation, and that's helped our business to remain consistent. We look to support Jabil in the constrained markets to the best of our abilities, and as the markets continue to turn in the other direction, Jabil [has] supported us, continuing to load our factories, so we continue to see a growth in the partnership between the two companies."
Supporting Jabil's Evolution with Strategic Sourcing
Jabil's evolution over the last five decades has been anything but typical.
"Jabil has evolved from the typical SMT [surface-mount technology] manufacturing business environment to many other market segments [with] more volatility [and] infrastructure: medical, aerospace, transportation," said Wee Kah Khim, executive vice president of automated board inspection at ViTrox, a supplier of essential testing equipment and other inspection technologies. "So, we see a need to change or evolve our organization structure to strengthen our partnership with Jabil."
"If you look at the top EMS[es] in the world, they are all our customers, and we've found that Jabil is the only one that's evolved from EMS to plastic molding, precision machining and also packaging... [Jabil's] inspection requirement is very broad and very unique now."
Our continual evolution into new industries and capabilities means that we need a partner that can shift with us. Headquartered in Penang, Malyasia, ViTrox has been a vital indirect supplier to Jabil for more than 10 years.
Because ViTrox has been a trusted supplier for more than a decade, they've seen how our company has grown, spreading into new sectors and investing in cutting-edge technologies, and they've been there to help us along the way. This means staying in close communication to analyze the latest market changes and discuss roadmaps for the latest equipment.
But beyond being able to meet Jabil's evolving demand for new inspection equipment, ViTrox also found that the two companies share cultural values.
"The other thing that's always been unique is the culture within Jabil. I think they have strong values," said Benjamin Lichtwardt, a global account manager at ViTrox who works with Jabil. "ViTrox is also a company that looks to value their employees, so I think those dovetail nicely with Jabil and leads to a great relationship."
Takeaway #2: A Great Partner Evolves with You and Shares Your Cultural Values
I have already talked about how a partner should support your growth. But to do that well, your partner needs to have the flexibility to evolve with you. It's an understatement to say that Jabil has changed over the past 50 years—including our supplier relationship management efforts. But that level of growth, not only in terms of numbers of employees but in the industries and sectors that we operate in, is only possible with strategic supplier relationships that are willing to grow and evolve with us.
However, flexibility is only possible if the two partners are in close communication about their needs, abilities and potential solutions. It's important to set up clear lines of supplier communication and to meet regularly, even when things are going smoothly. That will help keep operations running when a disruption inevitably occurs.
A strong cultural alignment is also important. Many companies can offer adequate domain expertise, but what sets a great strategic partner apart is their company culture and how compatible it is with yours. At Jabil, we believe that people are our power, and we like to work with partners who share these values.
Growing Stronger Through Changes and Challenges
"The exciting part of the Jabil relationship really is the design aspect of it," explained Rob Farrell, senior sales director at TTM Technologies, a manufacturer of circuit boards, backplane assemblies and RF microwave components. "That's where they [Jabil] are going and understanding those market segments, trying to develop capabilities to support that... We have a very good portfolio to support all aspects of the business from an electronics standpoint."
TTM operates in many of the same industries that Jabil does—aerospace and defense, telecommunications, automotive and healthcare to name a few. Because of their industry knowledge, TTM has helped us proactively make changes, so that when a market shifts, we're ahead of the trend and ready to help our customers.
"Jabil likes to push the envelope," Farrell reflected." Jabil likes to align their business units with where their customers are going. And we take a lot of pride in that. We feel that our ability to launch programs really aligns with what Jabil is trying to do. It's more than putting components on boards; it's understanding these markets and really driving to success."
Jabil and TTM have been in collaboration for nearly 20 years. In that time, they've had to navigate all kinds of disruptions, using their shared knowledge and resources to come out of these stronger.
"Our ability to support Jabil really comes from our ability to be a one-stop solution, bringing in the engineering resources and support to better understand what your challenges are and what solutions we can provide," Farrell stated.
Takeaway #3: Partners with Industry Expertise Can Help You Navigate Challenges
Supply chain is a complicated and volatile field. Disruptions aren't just likely; they're inevitable. One of the greatest benefits of strong supplier relationships is that you don't have to face difficulties alone. A knowledgeable partner can help you navigate challenging times by offering their insight and resources so that you can thrive despite the fluctuations of the current market.
This second lesson may sound obvious, but it's important. Build key supplier relationships with those that operate in the same industries that you do. This way, they're familiar with the market dynamics and can prepare you for a crisis as well as help guide you through it. This is a key piece to supply chain resilience.
Most manufacturers wouldn't necessarily pick a supplier that doesn't work in their niche or industry, but as your company grows and expands into new areas, it's good to assess the value that the working relationship is offering. If the company can't or doesn't evolve with you (an important factor I discussed in the previous case study), then it may be time to explore other options. Find a supplier that values continuous improvement as much as you do.
Aligning and Optimizing Business Models
When Denise Lingenfelter, director of global accounts, joined Digi-Key seven years ago, she was given a specific task: engage with Jabil at an executive level and establish a global partnership. She visited as many Jabil sites as she could and kept up with Jabil's global acquisitions to pinpoint sites' and company's needs and match it with the Digi-Key model.
Digi-Key is a distribution partner for a variety of commodities, particularly semiconductors, passives, and sensors. As a customer-driven electronic component distributor, the Minnesota-based company currently stocks more than 1.8 million Stock Keeping Units (SKUs). They serve more than 850 manufacturers, and Jabil is a strategic preferred partner.
"I think the relationship we have at the executive level is very open, very honest, and we have the opportunity to develop some meaningful strategies," Lingenfelter stated. "Without that, we wouldn't be as far along as we are with Jabil, so we very much value that."
Jabil's business model aligns well with Digi-Key's. They approach work, challenges and the future with the same mindset and goals.
"What intrigues us and what's exciting about what Jabil is doing is when you look at their business model and innovation, working with customers from design all the way up to production, it's a really strong fit with our business model," Paul Dosser, Digi-Key's vice president of business development, reflected.
"Jabil is forward-thinking in how they want to run their supply chain," Lingenfelter shared. "Digital initiatives are key within Jabil, and that aligns perfectly with where we are going as a corporation as well."
Takeaway #4: Look for a Proactive Partner Whose Business Model Matches Yours
A great partner doesn't just wait for you to approach them with a problem. In a strong supplier relationship, your partners proactively invest in determining what your pain points are and how their company can help. By visiting our sites and talking to our leaders, Lingenfelter was able to determine the capabilities and services that would make Digi-Key an invaluable partner.
It's also beneficial to partner with a company whose model and mindset aligns with your own. It's useful to have goals that align and a common vision for the future.
"I think the important thing in having the relationship with their [Jabil's] supply chain teams, their procurement team and their executives, is that we really try to match values and models," Dosser said. "Ultimately, what can drive great solutions efficiently and effectively for the end-customer is what it's all about, so we could not be more bullish about what things look like for both of us in the future."
No one succeeds alone. This is true in life, in business and especially in supply chain. It is impossible to operate a strong, complex supply chain without support from a network of strategic suppliers. A supplier relationship management program can serve many purposes: find pain points, encourage growth, navigate challenging times and make your supply chain more resilient. But at the end of the day, the ultimate goal of these strategic relationships for both partners is to not just survive but thrive through collaboration. Together. An effective supplier relationship management strategy can enable success.
Special Report: Supply Chain Resilience in a Post-Pandemic World
Insights from over 700 supply chain decision-makers at OEMs with more than $500 million in revenue on how they are managing their supply chains in light of COVID-19 and other market dynamics.