Supplier Ecosystems: Managing complexities in the supplier chain

This is an excerpt of the original article. It was written for the September-October 2020 edition of Supply Chain Management Review. The full article is available to current subscribers.

September-October 2020

If it’s September, it must be time for Gartner’s take on the Top 25 supply chains. This marks the 16th year that Gartner has put together its list of the leading supply chains across he globe, a list that now also includes an additional five Masters. Those are companies that so consistently made the list year in and year out that they warranted a category all their own. You can read the article, and the web only material we publish on scmr.com, to find out what it takes to become a supply chain leader.

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Companies are under constant pressure to optimize their supply chains to provide complex product and service solutions for customers. The conventional approach has been to find the best suppliers, wherever they are located. By doing so, companies have dispersed their sources of supply across long supply chains that often span the globe. The unanticipated consequence of this approach has been increased supply chain complexity, characterized by a lack of visibility and an increased risk of disruption. Many companies experienced all three of these during COVID. And in this model, the management of that complexity is centralized in the buying company, which bears the responsibility for managing and coordinating the activities of culturally and geographically diverse suppliers.

Supplier ecosystems present a different approach that may provide an opportunity for supply chain managers to overcome the shortcomings of the conventional approach to complex supply chains. In a supplier ecosystem, suppliers have more autonomy and supplier-supplier relationships are allowed to emerge. That shifts some of the responsibility from the buying company and enables supply chain complexities to be managed decentrally.

While the traditional approach leads to long, dispersed supply chains, the ecosystem approach focuses on tightening and integrating supply chains. The ecosystem approach highlights supplier autonomy while acknowledging the buying company’s leadership.

At the Center for Advanced Procurement Strategy (CAPS) Research, we conducted in-depth case studies involving nine multinational companies with varied ecosystem approaches. Based on these case studies we developed a maturity model of supplier ecosystems that is based on processes and practices with implications to the strategic and operational performance benefits from applying the ecosystem approach. Our research has identified various operational and strategic benefits stemming from the supplier ecosystem approach (see About our research).

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