I often hear misconceptions about the differences between 'suppliers' and 'supply chain partners.' In this text, I focus on making the distinction clear to make it easier for you to make better strategic decisions for your supply chain.
Your supply chain is the network of external companies you rely on for producing and distributing products, solutions, and services. These external companies are often referred to as suppliers, which in my opinion, often leads to confusion. As a matter of fact, you, as a manufacturing company, can rely on different supply chain management solutions to ensure the supply of components when producing a product. Below, I will clarify the two leading supply solutions and how they differ from each other.
What is the difference between a supplier and a supply chain partner?
According to me, there are mainly two types of solutions for ensuring a supply. Either you cooperate with numerous suppliers or a supply chain partner. Before I explain when you should choose one or the other, I'll define a clear distinction between them.
A supplier is a company that provides you with a product or service. They are often chosen through a request process (after the hassle of finding them), which means you offer several potential suppliers to get back with the price, minimum order quantity, and lead times. Often, you'll sign with the supplier who provides the best offer. After that, you'll have a business relationship until the end of the transaction.
A supply chain partner is also a company that will provide you with the product or service you'll need. The difference is that a supply chain partner has a full-service solution for sourcing, quality control, and logistics and consists of a network of multiple suppliers. In Bufabs case in a combination with in-house production of special parts. The main distinction is that you only have one contact and thus a much closer relationship.
The business relationship between you and your supply chain partner is based on reliability, trust, and expertise, and your partner has a deep understanding of your needs and will work proactively to achieve your goals.
What to consider when choosing between a supplier or a supply chain partner
Based on my explanation above, you might think that a supply chain partner is an obvious choice. But that is not the conclusion I want to convey. What's the best solution for you depends on several circumstances.
With my experience in the automotive, electrical, and energy industries, I know that the characteristics of components vary a lot. You are probably familiar with categorizing components into A, B, or C-parts. A-parts are components with the highest value, B-parts have intermediate values, and C-parts have the least values.
If I take a car manufacturing plant as an example, an engine would be considered an A-part, the windscreens a B-part, while fasteners, sheet metal parts, and milled details would be C-parts.
As a car manufacturer, you would probably have a large variety of fasteners, nuts, and bolts, but I don't think you require as much variety when it comes to windscreens. So, it would probably make sense to stick with one supplier of the windscreens. However, it would be costly to source multiple separated suppliers for each part of fasteners, nuts, and bolts. The procurement and administration cost would be overwhelming. That's why I believe more and more companies are choosing a supply chain partner for C-parts.
This is my advice to consider when choosing between a supplier or a supply chain partner:
Collaborating with one partner who provides you with a full-service solution for sourcing, quality control, and logistics for C-parts leads to increased efficiency and reduced total cost of ownership.
I hope you can apply this example to your organization and make better strategic decisions for your supply chain.
Get the Guide to a Seamless Supply Chain of C-Parts
Do you want to know more about how to implement a seamless supply chain of C-parts? Then, I can warmly recommend the guide below, where I explain what a seamless supply chain of C-parts is, why it's important, and how to achieve it.