How to ensure an appropriate cultural alignment with supply chain partners
While the due diligence process is vital when establishing relationships with supply chain partners, a focus on the overall cultural alignment of the firms must form part of this process.
“Auditing of partners is important, but the complexity of supply chains makes that very difficult, time-consuming and potentially very expensive,” says Craig Paterson, regional director for risk services at JLT Asia.
“Taking a more holistic view, cultural factors should become a key component in decision-making over which supply chain partners to work with.”
Paterson says it is important to feel that suppliers have similar cultural beliefs, take their corporate social responsibilities seriously, and are advocates of the need to constantly review performance, and improve.
“It is about who you want to work with. This is not about reducing the relationship down to a contract. It is not much use suing someone if your reputation is already in tatters,” says Paterson.
“You need to think about the culture of the people you are dealing with — do they have the same values as you in terms of what they want to achieve?
“Understanding the cultural drivers of your suppliers should help to determine those you can relate to and do business with.”
Paterson stresses that there is a major underlying issue around the disparate cultures that combine in supply chain partnerships.
“For a Western company coming to Asia, what they see as the norm might not be the norm in Asia. Even Asia itself is a collection of countries that think very differently from each another.
“So you need to get down to the individual company level and understand how they think and operate.”
Paterson says this is best achieved by getting a potential supply chain partner to complete a questionnaire, either by correspondence or preferably in face-to-face questioning.
“You can gives them [the potential supply chain partner] scenarios and see how they react, you could ask them about their policies and procedures, you could ask what contingency plans they have, ask about their infrastructure, and ask them cultural how they would behave and what would their thinking be.
“You then discover what their values are and how they would react to certain situations. You would then know if you would want to deal with these people,” adds Paterson.