When we talk of a cricket match, there is a collaboration between the two batsman to make runs and there is a collaboration between the bowler and the fielders to stop the flow of runs and get wickets. Similarly, collaboration is also needed in supply chain operations. The collaboration can be both internal i.e. between various departments or different factories or warehouses of an organization or can be external i.e. between the organization and it suppliers or customers. So, what exactly is supply chain collaboration? It is a partnership between various departments, factories, or warehouses within an organization to achieve common goals. This is something which every organization tries to achieve doing a digital transformation bringing in all the various departments, factories, and warehouses in a single platform. The challenge is mainly when we go for external collaboration where two or more organizations form a relationship or partnership based on trust, information sharing and decision making try to achieve common goals such as reducing cost or risk, improve quality and market value and many more. In this document we would mainly talk about the external collaboration in more detail and how do we approach, execute and what are the benefits we can take back to each of the organizations.
As discussed previously, supply chain collaboration is a methodology to integrate business processes and activities of multiple organizations in the supply chain to form a jointly managed system with shared goals. E.g – BMW & Toyota collaborated in 2011 to create an environment friendly luxury vehicle. But can we collaborate with any of our suppliers or customers? The answer is a straight NO. We have seen that in scenarios it has proved difficult to implement with reasons as increased dependency on technology, not clear on whom and when to collaborate and a lack of trust between the collaborative partners. So, the fact is there are certain pillars that it based on: Trust, Mutuality, Information exchange, Openness & Communication which is essentially needed between the parties involved. But when we say all of these, it does not mean all the information on every single decision will be shared across but the decisions in areas of collaboration should be transparent between all the parties.
There are two main of collaboration that we have seen between various organizations:
a. Vertical Collaboration: In this, multiple organizations from different levels or stages of supply chain share their responsibilities, resources, and other information to serve similar customers
b. Horizontal Collaboration: In this, multiple organizations collaborate at the same level of the supply chain for ease of work and coordinated effort towards a common goal.
Depending on the organizations involved in a collaboration, it can be either vertical or horizontal or it can be a mix of both. Other than the two types, there are 3 general levels
i. Transaction integration which involves automation of business processes or integrations
ii. Information sharing to help partners make the best decisions
iii. Strategic Collaboration where partners get involved in planning, process redesign and also sharing of risk and reward.
To achieve this, we need to avoid:
1. Data extraction and analysis in siloes
2. Processes & functions siloed returning conflicting goals
3. People are dispersed globally resulting in decision making with minimal understanding of the cross-functional areas
Also, I would like to call out important steps behind the success of a collaboration. It is seen that if they are taken care, chances of wrong footings are minimal.
a. Work together in areas with a strong footing
b. Turn win-lose to win-win situations or opportunities
c. Select partners based on ability, strategic goals & value potential
d. Invest in infrastructure and people
e. Collaborate for a long term
f. Establish a joint performance management system
In fact, what supply chain collaboration builds i.e. Visibility, Agility & Resiliency
In addition to these challenges there are more:
a. Asynchronous collaboration resulting in manual processing
b. Changes at various processes with a backdrop impact due to non-tagging of similar processes
c. Standardization in terms of data, processes, or others
d. Planning linked with execution
e. Data security when sharing across multiple trading partners
f. Data Quality issues leading to inefficiencies, errors & delays
We discussed about the organizational challenges, but when we talk of data sharing there are various technical challenges that prop up:
ii. Data Format
iv. Contact person
v. Human errors
vi. Acknowledgement & traceability
All these challenges need to be taken care to have a successful supply chain collaboration. There are various strategies that supply chain leaders use:
a. Analyze & prioritize with time and getting a quick or rapid response
b. Share information and have access to information on the trading partner network
c. Networkwide collaboration in areas of priority
d. Scenario planning & positive actions on key focus areas
To address these challenges and take forward the strategies, different forms and approaches are adhered to:
a. Collaboration platforms: Organizations can use collaboration platforms, such as cloud-based supply chain management systems, to enable real-time communication and information sharing between supply chain partners. These platforms can provide visibility into supply chain operations, facilitate collaboration on planning and decision-making, and improve supply chain efficiency and responsiveness. Collaborative communication in terms of frequency, direction, mode, and influence strategy
b. Collaborative execution in supply chain transactions
c. Open Innovative approach builds on capabilities – knowledge exploration & exploitation, horizontal & vertical collaboration, incremental & radical innovation
d. Shared metrics and incentives: Supply chain partners can collaborate on shared metrics and incentives to align their goals and objectives. This can help to improve supply chain performance, reduce costs, and increase customer satisfaction
e. Coordinating contract in terms of providing incentives for members to have decentralized supply chain behave as a coordinated by specifying contract parameters
f. Joint decision making
g. Joint knowledge creation
h. Resources sharing
With addressing all these challenges, taking different strategies, and adhering to approaches and enabling technology transformation and digitization, supply chain collaboration is achieved bringing in
a. Flexible Supply chains
b. Smart Manufacturing
c. Remanufacturing, reduce, reuse and recycling
d. Supply chain visibility and resilience
So, the question is, how is your organization placed? Do you do collaboration with your suppliers, customers and other similar organizations manufacturing? Have you faced similar problems and were you successful in overcoming those. This document discusses on the details of supply chain collaboration, their challenges, strategies and approaches that need to be taken to achieve this.
Please feel free to share your feedback/questions in the comments section or via email.