“Supply chain optimization essentially requires strategic partnerships, where companies collaborate on shared goals like cost reduction, resilience and customer service. But no one wants to invest in the infrastructure for these to succeed unless they truly believe there is a long-term future with the partners such that economic gains can be fully realized.”
— Chad Autry
Myers Distinguished Professor of Supply Chain Management University of Tennessee, Knoxville
according to data from the Reshoring Initiative. That could accelerate even further as manufacturers consider moving production stateside with the hopes of avoiding rising tariffs. While relocating manufacturing facilities is itself a substantial investment, companies that do so may find there are advantages beyond sidestepping tariffs. The closer proximity to customers can make supply chains more flexible and responsive, making new partnerships between suppliers and dealers possible. “Tariffs and their associated cost increases create opportunities for companies to rethink their supply chains to create long-term resilience,” says Chad Autry, Myers distinguished professor of supply chain management at the University of Tennessee, Knoxville. For dealers, that can mean exploring alternative sourcing strategies that reduce their dependence on foreign suppliers or enable them to take advantage of non-tariffed trade routes. Investing in automation, where appropriate, can also mitigate labor costs and offset procurement increases. “By proactively adapting, businesses can use this as a moment to gain a competitive advantage rather than simply reacting to market changes and becoming single-minded or preoccupied with cost control,” Autry adds.
12 FEDA News & Views
Valuing Collaborative Partnerships
For the past year, Autry has been working with the FEDA Future of Distribution Council (FDC), a group composed of dealers and suppliers, to explore how they can reimagine their supply chain by turning competitive mindsets into profitable collaborations. Part of his message has been that companies striving for better supply chain resiliency should consider moving away from a “transactional” mindset fixated on immediate returns toward one that is focused on long-term value creation. Rather than focusing strictly on securing the lowest price , Autry says companies that prioritize collaborative partnerships built through mutual investment in the supply chain often end up creating adaptable networks that can sustain disruptions and drive profitability for everyone involved. Through his work with the FDC, Autry has observed that the foodservice equipment and supplies industry tends to be more transactionally oriented than other industries, which has resulted in some adversarial relationships. This can lead to suppliers and dealers prioritizing short-term gains where one side has a better financial outcome (win-lose) instead of long-term stability that sees
both sides grow (win-win). Companies often gravitate toward the short-term approach because they see win-win relationships as leaving money on the table in certain exchanges, Autry explains, and their goal is to capture as much revenue as possible in every interaction. Although that may seem like the best way to maximize success, it can undermine stability and lead to long- term reductions in performance. Take, for example, a foodservice equipment dealer that frequently switches suppliers to chase the lowest cost. They may be able to attract more buyers or enjoy larger profit margins for a time, but this strategy can lead to quality inconsistencies and supply disruptions that cause customers to lose confidence and look elsewhere. Similarly, suppliers sometimes
pressure dealers with rigid pricing models, especially during periods of economic unease. “[Rigid pricing models] fail to account for changing market conditions and erode trust, reduce flexibility and ultimately increase overall supply chain risk, which can cut into margins in the long run,” Autry says. “The key is to be able to recognize when ‘taking one for the team’ today is worth it to ensure supply, product quality and customer lifetime value tomorrow.”
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