The many benefits of supply chain collaboration by strategic partners has been well documented over countless articles and press releases. According to a recent post by Pascal Fernandez in Supply and Demand Chain Executive Magazine, there are seven approaches to developing a Supply Chain Collaboration with your trading partners:
1.Accidental: Accidentally engaging with a partner whose culture and appetite for collaboration matches yours is the business version of love at first sight. Provided the value proposition is relevant, this may be a historical milestone for your business.
2.Erratic: When frequent exchanges and sufficient time are not devoted to collaboration, the long-term value can’t be seen beyond the short-term issues. Collaboration at this level can identify great ideas and opportunities for improvement, but may lack the time commitment needed to realize their true value. The risk is losing track of the other party’s strategic interests and not realizing they changed before it’s too late
3.Reactive: Reacting to information requests, but not seeing the bigger picture of the value that ongoing collaborative practices may hold can result in a false sense of security. You may feel as though you are performing to expectations, but often you may find yourself losing the customer to the competition. Being reactive is not good enough in supply chain management. One needs to always be on the front foot—over perform to expectations, take the extra step to better cover a potential shortage risk and answer the questions that were not asked.
4.Complacent: When you stop looking for incremental improvements in the working relationship, you miss opportunities and fail to identify risks. These common behaviors also often lead to lost customers and decreased supply chain competitiveness. Remember, it is much more expensive to win a new customer than to retain an existing one. Customer retention is imperative at this point. Let paranoia be your best friend. If you think everything is running smoothly, think again.
5.Tactical: Partners may share tactical information on a regular basis through established electronic data interchange (EDI) and business-to-business (B2B) processes, but the horizon for collaborative planning is limited. This is perfectly acceptable when all parties realized the limits of their partnership and defined their involvement in the relationship with regard to the return on investment (ROI) they receive. It is important to validate mutual expectations regularly and adapt accordingly.
6.Forced/Unbalanced: Collaboration is not a unilateral declaration; rather it’s the acceptance that the interests of both sides are equally important. Examples of forced cooperation can include imposing inefficient processes on the other party, utilizing non-standard B2B protocols or an excessive cost transparency requirement. These kinds of actions can drive one of the parties to disinvest, disengage or die. There needs to be a frequent validation of the benefit for everyone involved.
7.Strategic: The Holy Grail of collaboration. This includes sharing long-term visions, plans, collaborating on new systems, products, etc. Strategic collaboration always starts with leaders on both sides being smart enough to recognize that, in the give-and-take relationship, giving is what matters most. At the same time, this is also about understanding and respecting the other party’s limits and constraints as being your own. A classic example is on-time delivery to a customer request. If an unreasonable market demand were part of day-to-day reality, in a strategic collaborative mode, the supplier would be part of an advanced/extended sales and operations planning (S&OP) process, receiving the very latest demand patterns and market trends, and in return, sharing the existing possibilities and limitations. It does not weaken commitments made, it just makes the energy spent much more efficient. The real stress test for strategic collaboration is not sharing profit, but sharing losses when things go wrong.
In a world where supply chains are stretched across many players and geographies, no supply chain can afford to have a weak link. Achieving the highest level of collaborative maturity takes time and commitment. But, when players share both the risks and rewards of the supply chain through efficient end-to-end collaboration, total cost is reduced, responsiveness improved and risk mitigated—a win for all players involved.
Pascal’s full article on the approached to Supply Chain Collaboration can be read here.