This oft used adage is shaping the collaborative supply chain management: “The enemy of my enemy is my friend.” This saying has made its way into movies and lives of millions through social media and the Internet. This implies that working with other people who are typically thought of as competitors can actually be more beneficial than attempting to try to do something alone.
Ironically in the supply chain, this saying remains true. As a result, the supply chain has become increasingly collaborative, and supply chain entities are taking note of how collaboration between once-perceived enemies and competitors can actually help build trust with consumers, maintain compliance with authoritative entities, ensure transparency across the organization, be applied and implemented through different software, and further drive customer-centric focus. Let’s take a closer look at how collaborative supply chain management is continuing to become a key factor in efficiency through three totems.
Totem 1: Customers Demand New Business Models From Collaborative Supply Chain Management
Today’s consumers are starkly different from the consumers of the past. Today’s consumers want a customized product without any rationale for delays or expense. Modern consumers are and always will be the driving forces behind the supply chain. Since a typical supply chain entity may view competition as a bad thing, consumers tend to take an opposite approach. Consumers know competition helps to keep businesses on their toes, such as reducing costs and improving the quality of a product.
Consequently, businesses that operate with a business model that was designed for the consumers of the past are more likely to fail in modern supply chain processes. Since the driving force behind competition has changed, the viewpoint on competition must also change, explains Alexis Rotenberg of JDA.
For example, a supplier who works more closely with a manufacturer can be attuned to how the needs of the manufacturer will change through the analysis of point of sale data that is shared from the manufacturer to the supplier. Now, this example does not apply to what must supply chain entities think of as competitors. However, if competitors do not share information, such as the current going rates for one of the big three LTL carriers, the basic rule set of competition fails. In addition, supply chain entities need to define three further subcategories of collaborative supply chain management business models, which include defining a relationship between suppliers and other partners in the supply chain, creating collaborative business models that can be applied to large-scale production, and defining the current capabilities and limitations for each party in a given collaborative model.
For competition to stay active, Company A needs to know what Company B is doing. As a result, new business models need to be created that are going to strengthen collaboration and improve efficiency, which results in savings for the end users, specifically customers.
In fact, Deloitte University Press put together an amazing infographic on the evolution from linear supply chain management to collaborative supply chain management, stating:
Having helped transform the operating and performance models of most major enterprises over the last few decades, many supply chains are now playing an even more central strategic role. They are helping lead their businesses into the dynamic, hyper-connected, and collaborative world of ecosystems. In doing so, many are now creating and leading more complex systems perhaps better characterized as value webs. The word “chain” has a powerful metaphoric logic that captures well a series of discrete links by which goods are bought, have value added to them, and are sold to the next value-adder—up until an end buyer consumes them. This remains of critical importance. However, increasingly, value is being created not only within firms, but in the rich interactions between them. Linear sequences of procurement are increasingly supplemented by more iterative and innovation-oriented collaborations.
To be sure, in a world of value webs, the essential goals of traditional supply chain management do not go away. But they are often augmented by new imperatives—like learning, agility, and renewal. Collaboration is an addition to, not a replacement of, traditionally more closed, contractual arrangements. Clear commitments to meet rigorously monitored standards and service-level agreements will remain critical. But to claim the benefits of an increasingly fluid and interdependent value web, leaders should surround their contracts with trust; build on transactions and one-time deals to cultivate long-term relationships and mutual learning; combine the power of control with the potential of co-creation; make sure that defined, fixed standards do not create barriers to valuable innovation and co-evolution; and not only leverage leading practices, but also aim to create “next practices.”
Totem 2: Trust, Compliance, and Transparency Are Crucial.
The modern supply chain faces pressures from all over the globe. The topics of sustainability are not just ideals, but government-mandated requirements in some areas. For the oil and gas industries, compliance includes extensive reports, maintenance of facilities to ensure the safety of employees and consumers, tons of testing, and extensive research, reports an Achilles’ blog post regarding collaborative supply chain management in oil and gas. Now, this does not even take into account how supply chain entities in the oil and gas industry, such as drillers, refineries, and shipping gas across the country, must work together to ensure the cost of a barrel of oil does not exceed X, which translates into the cost that the consumer pays.
Therefore, the whole process begins again by focusing on the consumer and how a supply chain entity is able to maintain trust with the consumer, which reflects in this case through maintaining transparency of where oil comes from, where its refined, how it’s better, and why their price is currently competitive with other collaborative supply chain management entities in the oil and gas industry.
Unfortunately, the need for transparency, trust, and compliance measures leads to another focus on collaboration, better, more reliable, and collaborative software.
Totem 3: Increasing Collaboration Through Collaboration Effective Software Development and Deployment.
Obviously, competitors are in business to stay ahead of the curve and continue production. Yet, sharing trade secrets and key processes with other suppliers seems counterproductive. However, this is where third-party logistics providers have come into play. Since third party logistics providers focus on improving collaborative supply chain management between competitors, they have an inherent, vested interest in ensuring the privacy, cost-effectiveness, and efficiency of the entire operation are held to the highest standards. As a result, the increasing volume of products being moved and created in the modern supply chain has given rise to an era of huge data collection, analysis, and applications.
As a result, many of these third party logistic providers, as well as supply chain entities within and outside of the respective provider, are continuously looking toward software and technology as a solution for increasing and improving collaboration without sacrificing competitive advantage. Essentially, software collaboration allows for an aggregation of data that would be impractical and potentially threatening each company if attempted outside of a secure environment. Therefore, collaborative supply chain management relies heavily on the evolution of this software, explains Bridget McCrea of Logistics Management.
The demand for collaborative supply chain management is growing from foreign lands to domestic production. Supply chain entities need to understand how these three totems of collaboration are continuing to place collaboration at the heart of maintaining efficient supply chain management processes and extending today’s capabilities to meet the demands of tomorrow.