Collaboration: The New Standard in the Supply Chain

Collaboration is becoming more and more critical to managing the supply chain process. Collaboration can take many forms in the supply chain, such as visibility, data sharing, collaborative forecasting, outsourcing, sharing resources, or joint processes. Context is needed to understand what is meant by collaboration". In this report, TEC Research Analyst Bob Eastman looks at collaboration and how it relates to demand planning and forecasting, sales and operations planning, vendor-managed inventory, and logistics, and gives important milestones marking the development of the use of collaboration in the supply chain over the last 50 years.
Collaboration has become a popular concept in the supply chain space. While it may not have quite achieved the saturation status of “big data” or “the cloud” it has earned its place on any technology buzzword bingo card.

Collaboration is becoming more and more critical to managing the supply chain process. Once a competitive advantage and differentiator, it is now quickly becoming table stakes for having a competitive supply chain.

With this, many supply chain vendors have learned that it is wise to use the term “collaboration” and its variants in some abundance when talking about their products, solutions, and value propositions. One vendor touts “sourcing and supply chain collaboration with vendors and suppliers”. Another claims their tool “can aid in collaborative decision-making.” Yet another claims to be a “cloud-based supply chain collaboration platform.” One vendor says that it is focusing its collaborative capabilities for the aerospace and defense industry, while another touts a focus on the grocery industry.

What “collaboration” or “visibility” means in the context of demand planning and forecasting is different, however, than what is meant in a vendor-managed inventory context, or in the logistics segment of the supply chain space. It is very important to understand what is meant by such terms as “visibility” and “collaboration,” and the context in which these terms are used. How is one to make sense of all of this? Following is a framework and a few examples to help sort this out for you.

What Does Supply Chain Collaboration Mean?

It is easy enough to say that collaboration is the act of multiple parties in a supply chain working together. Supply chain collaboration involves more than this, however, and one only needs to hear about “visibility”, “vendor-managed inventory” (VMI), or “collaborative forecasting” to get a sense that “collaboration” is more multi-dimensional.

Collaboration can be conceptualized, at some level, as taking one or more of five forms:

Collaboration Form Examples Usage
Visibility Portal, exchange, EDI, e-mail, fax Information sharing, for better supply chain performance and service levels
Alignment Collaborative forecasting Mutually agreeable targets to optimize performance by multiple supply chain parties
Responsibility delegation / outsourcing Vendor-managed inventory Responsibility outsourced to another supply chain partner
Resource pooling Logistics co-loading Synergies leveraged between need for cost savings or other efficiencies
Transformation Joint process improvement; training; KPI or metrics, training tracking Coordinated efforts with supply chain partners for extended process improvement and performance
Inspired by Egide Karuranga, Jean-Marc Frayret, Sophie D'Amours, "Measurement and Determinants of Supply Chain Collaboration », 2008, CIRRELT (Centre interunivsersitaire de recherche sur les reseaux d’entreprise, la logistique et le transport), Montreal, Québec.
EDI: electronic data interchange; KPI: key performance indicator

The Promise and Peril of Collaboration

The pace and complexity of the business world—increased competition, with mounting pressure to keep costs down, escalating service delivery expectations, and shorter product lifecycles in many industries—conspire to make supply chain collaboration even more critical. Companies are increasingly finding that there is more to be gained from working collaboratively with supply chain partners than in a situation based on a power-oriented “win-lose” model. Collaboration is moving from best practice to table stakes in many supply chain contexts.

Collaboration, however, does have its issues, the most significant of which has to do with the “T” word: Trust. No matter how much sense collaboration makes, no matter how strong the value proposition and ROI, collaboration still requires at least two parties who trust each other.

Creating and maintaining trust, it seems, is easier said than done. And when trust is in jeopardy, damaged, or broken, time that should be spent on leveraging the collaboration is instead siphoned off by non–value-added oversight activities. Additional verification tasks or audits are added, increasing the cost for all parties, often undercutting the initial business case for the collaboration.  

Other issues that can undermine collaboration can include:

  • a poorly constructed or understood justification for the collaboration;
  • the failure to identify relevant risks;
  • issues with data, information, or process integrity;
  • the failure to get buy-in from key stakeholders in each supply chain partner;
  • a lack of ongoing, frank communication between the supply chain partners;
  • an excessive focus on metrics results in gaming the system to meet measurements, and therefore losing sight of, and possibly even undermining, the strategic objectives of the collaboration; and
  • selecting and deploying a technology that is not the best fit for the intended use.

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