Adversarial supply chains have no place in the future

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Collaborate.jpgHistorically, relationships between supply chain partners have ranged from distant to adversarial, with organisations focused primarily on pushing costs up- or downstream, at the expense of their relationships. However, increasingly supply chain collaboration is ‘no longer seen as losing control, but gaining intelligence, capabilities and resources’.¹

Defined by Monczka, Trent and Handfield as, “the process by which partners adopt a high level of purposeful co-operation to maintain a trading relationship over time, where both parties have the power to shape its nature and future direction… and mechanisms for managing conflict are built into the relationship”², collaboration between supply chain partners is the smart way forward, Tech-Pro Personnel tells SmartProcurement.

Managed well, benefits accrue to all partners in the collaboration, including increased revenue/margins; more efficient supply chain processes; reduced costs and duplication; innovation; transparency across all levels of the supply chain and the opportunity to mitigate against the risk of unplanned disruptions.

Is collaboration occurring in the supply chain?

While supply chain professionals agree that collaboration is the future of supply chain management, challenges do exist.

Earlier this year, 60% of respondents to MIT/PwC’s Supply Chain and Risk Management survey cited “Alignment between Partners in the Supply Chain” as the most important of seven enablers of supply chain maturity.³

Similarly, a survey by Deloitte/ASQ found that “organisations that engaged with suppliers at any tier were 38% more likely to achieve or surpass their expectations”.

Yet, research by North Carolina State University found that over 50% of supplier development initiatives are considered failures; reasons given include:5

• Lack of trust, hampering information sharing and transparency.
• Lack of commitment across all levels in partner organisations.
• Insufficient allocation of resources – people and technology.
• Misaligned culture and infrastructure, creating misunderstanding and increasing costs.
• Misaligned goals and expectations.
• Unequally accrued benefits.
• Lack of effective, mutual performance measurement metrics.
• Lack of a formal agreement governing the relationship.

Despite these challenges, supply chain collaboration is taking root, with 68% of respondents to GE’s Global Innovation Barometer indicating that they had either developed/improved products or created new business models through collaboration.

Success factors for supply chain collaboration

Collaboration is accelerating in the South African supply chain, with revenue from collaborative innovation growing 38% in the past year.

Many South African organisations – and their global suppliers - have benefitted from collaborative efforts:

Toyota South Africa, together with its spare-part component partners, has gained unprecedented visibility throughout the logistics chain using an integrated, information-sharing approach, developed by Imperial’s Tran-Send Container Logistics, to view real time data. In the process Toyota has boosted logistics planning and customer service.

With the intention of improving supplier relationships and maintaining standards throughout the supply chain, Woolworths recently joined the Sedex Information Exchange, a global collaborative platform for sharing ethical supply chain data that reduces risk, protects reputations and improves processes.9

A research partnership between the Council for Scientific and Industrial Research (CSIR) and Nestle South Africa, aimed at deriving mutual benefit from scientific research, will see Nestle fund research projects, share scientific expertise and explore ways to translate academic research into beneficial commercial products, while giving the CSIR access to international nutraceutical technology. All new products developed by this venture will be manufactured in South Africa.10

Research suggests that success factors for supply chain collaboration include:6

• Choose partners carefully, based on capability, strategic goals and value potential, rather than size or spend.
• Relationships should be governed by a formal, documented agreement that details responsibilities, sets congruent goals and determines a win-win benefit-sharing model.
• Collaborate in areas of strength for maximum benefit.
• Mutual commitment, across all levels, is important.
• Intra-company collaboration is critical to success, however, lack of co-ordination among internal departments can lead to project failure.
• Invest in infrastructure and people. Integrated information-sharing technologies and additional resources are important building blocks for collaboration.
• Create a transparent, joint performance-measurement system that monitors and evaluates progress.
• Engage for the long-term. Most projects only start to bear fruit once all challenges have been resolved, which can take time.

Have you been involved in a supply chain collaboration project? We’d like to hear about your experiences, successes and challenges. Join our discussion.

1: supplychainforesight, Barloworld Logistics, 2013.
2: Purchasing and Supply Chain Management, Monczka, Trent, Handfield, Cincinnati, OH: South Western College Publishing, 1998.
3: ‘Supply Chain and Risk Management’, an MIT and PwC Research Study for the MIT Forum for Supply Chain Innovation 2013.
4: ‘Resilience and Growth through Supply Chain Innovation’, Deloitte, 2013.
5: ‘Implementation Issues: Developing Collaborative Supplier Partnerships’, Fillard, Frahm, Mercer and Scott, NCSU (North Carolina State University), 2011.
6: Various sources including MIT/ PwC/ Deloitte/ NCSU/ Booz/ University of Tennessee.
7: GE Global Innovation Barometer 2013.
8: ‘Achieving Supply Chain Visibility through the Toyota System Integration’, Press Release issued by Imperial Logistics, 2013.
9: ‘South African Sustainability Leader, Woolworths, joins Sedex to Drive Transparency Throughout the Supply Chain’, Press Release issued by Sedex, 2013.
10: ‘Nestle Announces Research Partnership with the CSIR’, Press Release issued by Nestle, 2013.

1 Comment

The post does a great job explaining the importance of supply chain collaboration. Supply chain maturity is the third out of four levels of supply chain maturity. After a company successfully achieves collaboration, the fourth and final stage is maximizing supply chain agility.

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