The most optimal supply chains have collaborative practices in place. They don’t operate in their own bubble but instead collaborate beyond their own borders with partner businesses with the aim of benefiting both. This brief article explores how supply chain collaboration should work.
A successful collaboration can lead to significant reduction in costs throughout the supply chain as well as bringing about other benefits such as increased speed, improved service levels and a high level of customer satisfaction. Collaboration in the supply chain can deliver great value, which in the ever-squeezed margins of supply chain business is hugely attractive.
However, for collaboration to work, the partner companies must ‘sing from the same hymn sheet’. Collaborations don’t work just by their mere existence. Given 80% of companies in one survey from gmaonline.org reported that they were involved in a minimum of one collaboration initiative, getting it right is essential.
Identifying the common errors in supply chain collaborations can help you to make successful collaborations which work, are profitable and long-lasting. The typical stumbling blocks to workable collaborations focus on four key areas:
• Differences in business organisation fail to produce alignment
• Buy-in doesn’t happen across all business levels within both collaborative parties
• Sharing of information is restricted for multiple reasons
• Overall incentives for collaborative success are misaligned with one partner benefiting more than the other
Successful Supply Chain Collaboration
Successful supply chain collaborations have certain elements in common. Focusing on developing collaborations that take these elements in to consideration will help ensure a positive outcome for all.
Build on Strengths Rather Than Weaknesses
It’s all too tempting to chase a collaboration which will fill a gap in your own capabilities. However, the most successful collaborations instead focus on ‘selling’ their strength. This will likely mean mutual benefit supported by excellent infrastructure.
Choose Partners Carefully
Don’t simply jump to collaborate with your known largest supplier or customer. Whilst this seems sensible, you need to look more closely at choosing partners who not only have capability but have matching value potential to you. Ask yourself: is this collaboration going to be worth the effort?
Get the Right Benefit Sharing Strategy in Place
The best collaborations occur when there is equal benefit sharing, or they are proportional to input. For example, a manufacturer and a retailer will likely both benefit from optimising product lines because the sales will benefit both.
Consider Performance Management Metrics
Collaborations require careful and constant management. Ensure that the parties involved have aligned performance metrics whilst also allowing for some degree of ‘trade-off’. Communication is essential here for reviewing the collaboration as well as problem-solving any issues.
Collaborations typically take time to reap rewards, therefore be prepared to give the collaboration time to bed down. Therefore ensure your performance management metrics take your collaboration in to the future.
The Payback is Worth the Effort
Collaboration can be hugely beneficial for both sides. Knowing how best to implement them can be hard. Paul Trudgian Ltd are supply chain experts and we’ve witnessed the collaborations that succeed and the ones that have failed. Seek our advice to ensure a collaboration that makes it worth the effort.