Will Lovatt, Chief Revenue Officer at Kallikor, discusses how building trust across the supply chain is a strategic advantage and can be the centre of operational strength for supply chain organisations.
The most impactful supply chain problems rarely originate in operations. They are generated upstream, in commercial decisions made without a shared view of operational consequences.
Supplier relationships shape service levels, cost-to-serve, and supply chain resilience. Yet many organisations still treat suppliers as separate parties to be managed, rather than strategic partners to be aligned. That gap then shows up in the following way: a change looks good on paper, then performance gradually deteriorates once it hits the network.
Hidden costs appear, and inefficiencies ripple through the operation. Teams then spend weeks dealing with downstream consequences that no one intended. It’s a commonplace pitfall that is entirely avoidable, and there’s a great business case to motivate change.
A frequent trigger for increased risk and operational costs is a negotiation that prioritises a narrow set of key performance indicators (KPIs). Unit price, margin, and rebate structures can be persuasive in isolation, but they do not capture the operational reality across the combined system.
Even when detailed definitions of range, pack sizes, and buying multiples are covered in the initial negotiations, it’s still common for supply chain logistics to ‘bleed’ value.
Often, the issue is that small incremental changes can drive large ripple effects later on. The pack size of a product is a prime example. A discount for buying cases of 48 might suit a supplier’s production rhythm and improve margin reporting, but it can block shelf space and push days of supply beyond an ideal inventory strategy, with additional handling work also thrown into the mix.
The same dynamic applies to minimum order quantities and where inventory is held. Retailers, for example, routinely balance fast and slow movers within the same supplier relationship, with very different implications for vehicle fill, replenishment frequency, and the best location for stock.
Some of the biggest operational shocks can even arise internally. Promotions are a key example. Whilst strategically useful, they break the conditions an efficient supply chain prefers, i.e., stable flow and predictable volume.
Promotions can create spikes that overwhelm capacity, followed by dips as customers consume stockpiled goods. They can also shift demand across adjacent products, changing the mix in ways that undermine existing replenishment strategies across suppliers and the wider supply chain. In response, some retailers historically moved towards everyday low pricing, recognising that the operational cost of promotions outweighed the commercial upside when impacts were not understood upfront.
Supplier trust can go a long way towards solving these challenges. In practice, it can be a strategic advantage when it improves the quality and speed of decisions across organisational boundaries. Whilst this is unlikely to entail a full ‘open book’ style collaboration, both sides need enough shared operational truth to reduce avoidable cost and risk, and to make any trade-offs explicit, rather than accidental.
Instead of negotiating by assertion, simulation allows teams to evaluate decisions through a shared, operational model of the system and test outcomes before they commit.
A simulated environment supports scenario-based thinking that reflects how supply chains actually behave. Rather than relying on a single forecast, teams can evaluate a range of plausible outcomes with collective foresight. They are able to ask themselves the crucial question – ‘How would the system perform if this happened, and what would it cost?’
This range-based view or probabilistic planning is particularly useful in supplier relationships because it helps both parties see how commercial terms behave under stress and where any fragility is introduced across a wider range of possible scenarios. Strategic choices can be made on the basis of operational truth, and trust becomes tangible when it is backed by data-led evidence.
When both sides can clearly see operational impacts, conversations move faster, disputes are resolved more quickly, and agreements are more robust because they reflect reality.
A shared model also makes it possible to revisit policies via collaborative probabilistic planning, addressing issues such as product flow. Static thresholds and inherited rules often dictate whether items should, for example, route through a national distribution centre, go directly to regional sites, or flow directly to the store. However, the relevance of these rules often degrades over time as range, volume, and mix evolve.
Items held centrally unnecessarily can congest national sites and carry additional handling costs, whilst regional capacity sits underused. As costs rise, margins and service suffer, supplier relationships face greater strain. A shared model supports practical decisions about where stock should flow, and the potential ramifications for capacity and service when assumptions and volumes change.
Supplier trust becomes possible when backed by operational evidence. In volatile conditions, the supply chains that perform best are the ones that can avoid agreements that look strong on paper but create hidden costs within the network.
Decisions amongst leaders that have previously caused friction, such as increased minimum order quantities, pack size changes, or new range introductions, can be modelled in a combined system. Scenario testing and the resulting outputs can be used to align on trade-offs before they become problems.
With shared foresight and decisions that hold up in the real world, trust stops being an aspiration and starts delivering performance.
