If you’re new to the supply chain arena, there will inevitably be terms and concepts with which you are not familiar. Some of them can be a little confusing too, until you put in some research effort to better understand them, since their names alone may not reveal their contextual relevance to supply chain.
One such concept is supply chain collaboration, a somewhat overused term that has come to mean different things to different people. By taking a few moments to read this post though, you’ll understand precisely what is meant by supply chain collaboration and how it fits into 21st century supply chain management.
What is Supply Chain Collaboration?
It might be best to begin by letting you know what supply chain collaboration is not:
- Supply chain collaboration is not a fancy term for knowledge sharing, although it does require multiple organisations in a supply chain to make intelligence available to one another.
- Supply chain collaboration does not mean systems integration, even though integrating IT platforms with partners certainly makes collaboration more practical.
So what is supply chain collaboration, really? In a nutshell, it’s what happens when two or more discrete organisations work closely together to meet shared objectives. These objectives are typically focused on cost reduction, customer service improvement, or raising specific aspects of supply chain performance.
Who is Involved in Supply Chain Collaboration?
Quite simply, any two or more companies dependent on one another to supply an end-customer should be prepared to collaborate. For example:
- A retailer might collaborate with a wholesaler or manufacturer from which it purchases goods
- A manufacturer might collaborate with a raw materials supplier to add value for its end-customers
- A raw materials supplier might collaborate with one or more transport companies to generate service and cost benefits for its largest manufacturing customers
In an ideal world, every agency involved in turning raw materials into goods, selling them, and distributing them to business customers or consumers would collaborate, thus maximising supply chain cost-effectiveness and reliability. As yet though, that degree of collaboration is more likely to be the exception than the rule.
Why is Supply Chain Collaboration Important?
There was a time when supply chains were, in the main, vertically oriented. A single company might have owned the processes of raw material sourcing, manufacturing, distribution, sales, and marketing, with the entire supply chain falling under the direct control of that one enterprise.
The same is rarely true today. Most supply chains are decentralised, sometimes involving dozens of companies, all playing different roles in the demand/supply cycle. With no single entity having complete control of materials, resources, strategy, or service quality, collaboration is the only way to unify the supply chain.
However the concept of supply chain collaboration is not yet mature. In many cases, supply chains still comprise a mix of companies, some of which collaborate with one another, while others maintain traditional supplier/buyer relationships.
How is Supply Chain Collaboration Evolving?
As more organisations recognise the need to collaborate, a whole new culture is evolving. This is why collaboration has become such a familiar buzzword in the supply chain world. But true collaboration is not an easy state to arrive at. Boundaries of mistrust must be broken down and conflicting objectives must somehow be transformed into aligned goals.
Steady progress is being made though, aided by web technology that helps companies share information, systems integration for seamless supply chain handoffs, and perhaps most importantly, by the fearlessness of pioneering organisations.
These brave leaders in supply chain collaboration are neither afraid to share supply chain risks or too self-serving to share the rewards. They show us how collaborative supply chains thrive and prosper, ensuring that the concept continues to gain acceptance and popularity.
Extend your Supply Chain Collaboration Knowledge
Supply chain collaboration is likely to be important in your future, so if you’d like to learn more about this and other concepts you might not yet be familiar with, my book “What is Supply Chain Management?” will be an invaluable addition to your personal library.
Packed with tips, insights, and advice for those new to the supply chain profession, “What is Supply Chain Management?” is available to purchase here at Supply Chain Secrets Books and comes with a wealth of free bonus items to enrich your supply chain study and research.