In today’s global marketplace, the success of a manufacturing company is increasingly dependant on the efficiency of its extended supply chain. The competitiveness of an organization is directly related to how well it can synchronize and accelerate the flow of information and material through the supply chain. Companies that can do this quickly and efficiently will gain a significant time-based competitive advantage; those that don’t, stand to lose business and market share to faster, more efficient competitors.
Fierce competition and more complex supply chains, coupled with customers demanding customized products and shorter lead times, creates significant pressure on operations. The challenges faced by manufacturers are:
• How do we integrate disconnected business processes and systems?
• How can we control actions and performance across a network of distributed partners?
• How can we push supply and demand changes through the supply chain quickly?
No company can overcome these challenges independently; it must have the support of the partners that play key roles in the extended supply chain. Support begins with a mutual understanding among partners that the overriding objective of the supply chain is to satisfy the demands of the end customer more efficiently than competing supply chains. With this as foundation, a company can begin to work with partners to improve constrained processes that impede the flow of information and material.
Why Collaborate?
The flow of material through an enterprise crosses many functional areas. Lack of information, lack of trust, internal competition, etc. have resulted in barriers between functional areas that impede the flow of material and information through the supply chain. The barriers tend to manifest themselves in time and inventory, both of which are expensive commodities. The breakdown of these barriers represents a major opportunity for most organizations to improve their competitiveness.
Similar and more extensive barriers exist between partners in the extended supply chain and opportunities for collaboration between enterprises are extensive. Examples of some of the generic benefits derived from different collaboration efforts include:
• better use and sharing of information to reduce uncertainty about future demand, encouraging more responsive manufacturing
• extended visibility of demand to improve partners’ planning process, allowing better allocation of financial resources for cost reduction
• ability to respond quickly to market dynamics, react faster to shifting customer needs and demands, and to cope with the inevitable day-to-day disruptions in the supply chain.
For a supply chain to be successful, all component members must be closely aligned in meeting business needs, and must work together so that both parties benefit from improved trading practices. The benefits and risks are mutual; reductions in costs have to benefit both partners, if long term development and improvement are to take place. Being able to quantify the benefits derived from a planned or existing collaboration process should be an important component of a collaboration solution. It will aid in both the startup of a collaborative relationship, and on-going continuous improvement as the relationship develops.
The Collaboration Relationship
In a broad sense, collaboration is where individuals, enterprise functional groups or enterprises work together to achieve a common goal. Collaboration is fundamentally a relationship between people. It should facilitate and enable the forming of a relationship, and be flexible and configurable enough to support the relationships as they evolve over time.
There are many factors that affect a relationship, but the key factor is trust, which develops over time. For example, the prospect of turning over control of inventory in your network to a vendor is a scary proposition and requires a leap of faith that in many cases is too drastic. On the other hand, if you can reduce the size of the leap to enable the forming of a relationship - which is the biggest hurdle - and then incrementally open up communication/visibility/control as trust is established, there is a better chance for increasing the amount and quality of collaborative relationships.
Other factors of a business nature that will affect a relationship include:
• The closeness of a relationship, from complete ownership to arms-length
• The degree of mutual dependence of the business of one partner on the other; for example, what proportion of his business does mine represent
• The relative sophistication of each partner in his approach to supply chain management
• The material flow characteristics, such as linear or cyclical demand, seasonal patterns, fast or slow moving products, etc.
• The complexity and size of the range of products supplied, and the flexibility and responsiveness of the network; constrained vs. unconstrained for example
• An ability and commitment to perform
• The necessary technical and management capabilities
• Involvement of senior key people on both sides.
Attributes of Collaboration to Consider when Selecting a Solution
The following are some general attributes of collaboration that need to be addressed in a collaborative solution:
• Longevity: The collaborative solution should support the ability to quickly establish, modify, and conclude applications of collaboration
• Levels of trust: The collaborative solution must support the ability to phase-in visibility, as well as access to and control of data as the relationship evolves
• Partitioning of responsibility, shared responsibility: The system needs to be configurable to model and support the actual partitioning of access privileges and responsibilities
• Awareness/Alerts: There needs to be a way to alert people that problems have occurred, and a notification/communication method• Security: The solution needs to provide appropriate security and an audit trail to protect confidentiality requirements
• Aggregations/Views of Data: Multiple users of the same information are often spread across different functional areas and across different organizations. The different users will want the information presented differently to facilitate their particular planning process, e.g. aggregations on product/location/time period, different units, etc.
• Business Rules: The solution needs to provide an easy way for people to deploy business rules to address their unique requirements.
Software is only one component of the solution. A good supply chain partner should be able to help a manufacturer identify the constraining points in their unique supply chain, with the goal of improving global supply chain performance to drive competitive advantage.
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Anna Wells
January 17, 2023
