supply chain collaboration
DESCRIPTION
A review of the types of relationships that exist within Supply Chain Management.TRANSCRIPT
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Supply Chain Collaboration
Clarifying Supply Chain Relationships
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Clarifying Supply Chain Relationships
Outline:• Supply Chain Relationship Definition &
Clarification
• Deeper Dive Into Collaboration
• Reality Check of Supply Chain Relationships
• Charting Collaboration Levels & Power
• Supply Chain Information Sharing
• Components of S C Relationships
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Clarifying Supply Chain Relationships
A Supply Chain Can Be Described as a Set of Relationships Among Suppliers, Manufacturers, Distributors, and Retailers That Facilitates The Transformation of Raw Materials Into Finished Goods
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Clarifying Supply Chain Relationships
“…The single most important ingredient for successful SCM may be trusting relationships among partners in the supply chain, where each party has confidence in the other members’ capabilities and actions. And trust building is characterized as an ongoing process that must be continually managed.”
Rob Handfield, Director Supply Chain Resource Consortium (SCRC)
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Clarifying Supply Chain Relationships
True Partnerships are Difficult to Achieve and Maintain, but They Reap the Most Benefits Operationally and Financially
Historically, it was Always Believed That an Adversarial Relationship was Necessary to Establish the Required Checks & Balances
As Always, Global Supply Chains Make Relationship Building and Strengthening More Difficult
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Clarifying Supply Chain Relationships
One VP of Materials Management at a Fortune 500 Manufacturer Expressed this Feeling:
“Supply chain management is one of the most emotional experiences I’ve ever witnessed. There have been so many mythologies that have developed over the years, people blaming other people for their problems, based on some incident that may or may not have occurred sometime in the past. Once you get everyone together into the same room, you begin to realize the number of false perceptions that exist. People are still very reluctant to let someone else make decisions within their area.”
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Clarifying Supply Chain Relationships
Supply Chain Collaboration is a Commonly Used Term That is Actually Applied to Several Different Kinds of Relationships:• Arm-Length Relationships
• Cooperation
• Coordination
• Collaboration
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Clarifying Supply Chain Relationships
Some Other Terms That Have Been Used:• Co-Opetition
• Relationship Between 2 Competitors That Have Agreed to Work Together for Mutual Benefit.
• Coercion• Customer “Strong-Arms” Supplier to Provide Products
or Services at a Predetermined Price
• Co-Packer• Supplier Produces What Customer Is/Was Capable of
Producing in Addition to or Replacing Customer’s Output
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Clarifying Supply Chain Relationships
Arm-Length Relationships
• Most Common
• Little Investment by Either Party in the Relationship (Able to Change Suppliers Quickly)
• Minimal Information Sharing
• Limited Interaction Between Companies
• Low Trust & Commitment
• Short Term, Contract Based
• Adversarial
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Cooperation
• Grew Out of the Need to Manage Increasingly Complicated Information & Material Flow
• Parties Are More Tightly Linked, Sharing More Information
• Fewer Suppliers, Longer Term Relationships
• Still Utilizing Short Term Perspective
• Initial Emergence of Integration & Interdependency
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Clarifying Supply Chain Relationships
Coordination• Information Technology More of a Factor
• Amount of Data Infrastructure & Sharing is Increased
• Information Systems More Strongly Linked
• More Emphasis on Strategy
• Collaborative Planning, Forecasting, Replenishment Utilized
• Vendor Managed Inventory (VMI) an Option
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Clarifying Supply Chain Relationships
Collaboration• Two Reasons Why Collaboration is Popular:
•Supply Chain Management Strategy Has Changed Priority From Mass Production/Quality to Customer Satisfaction (Which still requires a Quality focus)
•Information Technology is Advancing Rapidly and is More Affordable, Allowing Companies to Implement More Sophisticated Supply Chain Partnerships
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Clarifying Supply Chain Relationships
Collaboration (cont.)
• Refers to the Most Committed Relationship Between Organizations With No Equity Relationship
• Link Between Companies, in a Supply Chain Context, is as Strong as it Can be Before Joint Venture or Vertical Integration
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Collaboration (cont.)
• Two Key Points Separate Collaboration From the Preceding Relationships:
1)Elements of Cooperation & Coordination Are Stronger• Greater Trust, Commitment, Data Sharing
2)Greater Diversity of Non-Logistics Activities Performed Jointly• Product Design, PLM, Quality Assurance,
Forecasting
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Collaboration (cont.)
• Two Types of Collaboration Have Emerged:
• Type 1 (Skill Substitution) Involves Companies Working Together in Logistics and Manufacturing Activities (SCM)
•More Traditional SCM, Logistics Management
•Virtual Network With Each Organization Linked via Technology
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Clarifying Supply Chain Relationships
Collaboration (cont.)
• Two Types of Collaboration Have Emerged (cont.)
• Type 2 (Organizational Learning) Involves More Non-Logistics Activities
•Broader Definition of SCM
•Considered a Strategic Alliance Where Buyers & Suppliers Function More as a Single System
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Clarifying Supply Chain Relationships
Degrees of Collaboration
• Measuring the Level of Collaboration That Exists Falls Into Two Categories:1. How Companies Interact With Each Other
• Trust • Commitment• Balance of Power• Resolving Cultural Differences
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Degrees of Collaboration
• Measuring the Level of Collaboration That Exists Falls Into Two Categories: (cont.)
2. The Means By Which They Interact• Information Systems• Collaborative Controlling System • Risk/Reward Sharing Structure• Joint Decision Making Process• Conflict Management System
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Collaboration Reality Check
• Resources & Trust Are Scarce
• “Winner Takes All” Still Prevails
• Distrust & Wariness Are Still Prevalent, Especially in Developing Economies
• Exerting Power by One Party (Customer) is Prevalent in the Auto Industry
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Clarifying Supply Chain Relationships
Low Collaboration
High Collaboration
Buyer
Dominance
BuyerDominated
Arms-Length
BuyerDominated
Collaboration
Symmetrical ArmsLength
True Collaboration
Supplier
Dominance
SupplierDominated
Arms-Length
Supplier Dominated
Collaboration
Po
wer
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Clarifying Supply Chain Relationships
Variables That Define the SC Relationship• Formalization of the Relationship
• Intensity or Focus on the Relationship
• Frequency of Communication
• Standardization of the Data Being Shared
• Reciprocity Between Parties
Combination of these Variables Give Rise to Various Buyer-Supplier Relationships
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Clarifying Supply Chain Relationships
Information That Can Be Shared to Strengthen a Supply Chain Relationship• Inventory Levels
• Sales Data
• Order Status (Tracking)
• Sales Forecast
• Production/Delivery Schedules
• Performance Metrics
• Capacity Information
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Clarifying Supply Chain Relationships
Areas Where Power Can be Exercised1. Pricing Control
2. Inventory Control
3. Operations Control
4. Channel Structure
5. Information Control
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Clarifying Supply Chain Relationships
Relationship Profile Relationship Components
Collaborative –
Supplier Dominance
Supplier uses demand data to forecast, speculate, push products to buyer.
Collaborative –
Buyer Dominance
Forecast based on data, supplier makes product, delivers on signal from buyer
True Collaboration
Demand data shared through joint forecasting, decision making (time & size of delivery)
Arms Length
No data shared – production based on orders only
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Clarifying Supply Chain Relationships
Conclusion:
The Continual Globalization of Supply Chain Management Requires More Attention to Relationship Building and Maintenance to Address the Multitude of Communication and Logistics Issues That Are Now, and Will Continue to be, Critical to Successful Supply Chain Management.
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Clarifying Supply Chain Relationships
Review:• Defining Supply Chain Relationships
• Collaboration Details Review
• Real World Look at Supply Chain Relationships
• Review of Collaboration Levels & Power
• Information Sharing Within Supply Chain Management
• Ingredients of S C Relationships
• Conclusion