Working with partners rather than suppliers is the key to success.
When times are uncertain (like now), being able to sit down and work through your supply chain issues with your partners, will enable you to get your product where you need it. This is why working with partners rather than suppliers is the key to success.
At a recent founder meetup in Wellington, I got asked by one of the founders, what would be my top tips for someone setting up a supply chain for their startup. It made me think about what are the really key things that make the difference in setting up a robust supply chain, without having a massive operations team to support you. Something that was told to me time and time again, from the moment I stepped off the plane in Hong Kong was that, we didn’t work with suppliers, we worked with partners.
Trust is key to every Partnership (in work and play!)
Working with a Chinese supply base, one of the first questions I would get from clients was “How are you sure you can trust your suppliers?” My answer was always the same… are you telling me that you don’t think you have had issues with a supplier outside China?? Yes, there is always a risk, but there is a risk anywhere in the world. So this advice does not only apply to working with suppliers in China or Asia, it applies with suppliers anywhere in the world. When you are a startup and you are looking to build something new and innovative, you need to collaborate not dictate to your supply base.
They need to be your partner.
You need to spend time getting to know them, understand what drives them, why would they want to work with you even though you are a high risk startup?
Like any relationship, trust is key and it goes both ways. We visited every supplier, we had lunch with every supplier, we spent time getting to know every supplier’s process. Collaboration, it seems like the most obvious thing but so many times, companies have a tendency to forget.
Always do your homework and question every detail
At this same founder meetup, I got asked if you have such an open relationship with a supplier then how can you make sure you are price competitive. And he was right, the buyer needs to always be aware but in any relationship it goes without saying that you will potentially talk to other people. You need to still do your own homework, getting pricing from other suppliers, finding out their leadtimes… and if you find that you are being taken advantage of, then you can have that discussion. Quite often if there was a massive price difference between two suppliers, when you dug down into the details, there were typically materials missing, or a step in the process that hadn’t been included. So you always need to make sure you question every detail. And if it isn’t the case that there is a material/process issue, then you know the supplier was overcharging you and your values weren’t aligned. It’s time to look elsewhere.
Always maintain control of your core IP
At the end of the day, if the core value proposition of your business sits in a unique process/part in your hardware then you need to make sure you maintain control of that. Whether you are a large corporate or a small startup this is something that always needs to be managed. This can be done in a few different ways. Some options are that you can separate the manufacturing of some of your key components, or maintain final assembly in-house so that you can ensure that the combination of all the sub-processes can’t be known outside the organisation. Your supplier partnerships will understand this and will work with you to ensure your IP is protected where possible.
When components are short and production lines are full, being able to sit down and talk with your supplier is key to getting your product on the production line and finished goods out to your customers.
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