A recent March 26, 2010 article in the New York Times, Closing of Auto Plant Forces Suppliers to Scramble, outlines the impact buying pattern changes have on suppliers that focus on single (or few) purchasing contracts. In this case, a manufacturing plant that primarily served a single manufacturing group is finding itself having to scramble for new customers after the manufacturing group is closing its doors. The plant had all of its metaphorical eggs in one basket, and now, is racing to find new business opportunities and to re-invent itself to stay in business.

 

While a key point here appears to be that the diversification of supply customers & contracts is central to the risk management strategy of a supplier, what is not necessarily clear is how to accomplish that diversification. Interestingly, in the article, we learn about plant manager that are taking on the role of sales and change agents, finding ways to leverage the capabilities or facilities to serve new customers, and often, new markets. While reading through this, and other associated stories, the value of being part of a business network has rarely been clearer or more compelling to me.

 

With the Ariba Supplier Network and Ariba Discovery, suppliers are able to leverage the value of all the other buyers- and suppliers- on the network. We frequently see that suppliers of one buying entity are gaining value from their presence on the network by receiving new business opportunities, from new buyers, via Ariba Discovery. This allows the supplier to not only increase their revenue, but to increase their customer base, and ultimately diversify and mitigate risk.

 

However, one of the other benefits- one which I've been aware of, but this recent reading really helped make clearer- is the value of the other suppliers on the network. As we see businesses re-inventing themselves to serve new markets, we also see new challenges facing the companies. In many cases, those challenges will include the need to source new components or services to meet the challenges of the new customer and/or new market. In this case, the supplier will also become a buyer. Membership in a business network allows the supplier to utilize the network to solve those emerging supply needs more efficiently than ever before.

 

When suppliers go through rapid transformations and are able to discover a new potential business line or customer, the last thing they need to worry about is how to source the incidental new needs that factor into supporting the new relationship. Finding suppliers takes time, and when the time of management is being spent on finding new business, frequently there may be little time or staff resources to find the right supply chain members to service the opportunity. When suppliers are already plugged into a network, they not only can find access to the new opportunities, but they can easily shift from wearing their supplier hat, over to wearing their buyer hat, and efficiently find the resources they need to take advantage of new opportunities.