01 November 2001
Collaborative partnering might add complexity to supply chains, but its advocates say it is the most effective way of coping at difficult times. Robin Parker outlines some of the obstacles
The Railtrack debacle and the terrorist attacks on the US are the latest blows to supply chains still suffering the fall-out from earlier crises such as foot and mouth and fuel shortages. But if there is one message that purchasers, logistics directors and suppliers have to take from such setbacks, it is that they are all in it together.
Many speakers at the annual Logistics Forum said collaboration is the only solution in uncertain times. As forecasts and lead times become more difficult to predict, supply chain management becomes more responsive and intensive.
But since buyers and suppliers need to be equally adept at reacting, collaboration should be thought of as an enabler rather than an added challenge.
The globalisation of business will make supply chains increasingly complex. But in structuring these deeper supply relationships, companies will have to be careful to encourage common processes rather than force this complexity on suppliers.
The main hurdle is knowing the depth of the collaborative process. "Information is power" is an overused mantra, but it is a central tenet of a contract with any third party. As with any such arrangement, establishing common goals up front is crucial.
Nobody wants to talk themselves out of their competitive place in the market - nor should they. The challenge is to devise ways of sharing processes that complement the battle for market share rather than add to it.
Martin Christopher, director of marketing and logistics at Cranfield University, used the example of the brewer Guinness, which is sharing distribution networks, and even some of its production capacity, with rivals in several of its emerging markets to considerable advantage. Arguably, however, the strength of the Guinness brand, and its aggressively targeted but niche customer base, enables the company to operate in a narrowly defined competitive field anyway.
Co-managed inventories are central to the collaborative model, particularly with emergency stockpiling reported across the US after terrorist attacks hit supply chains. As a forthcoming Cranfield study of vulnerability in the supply chain warns, stockpiling measures in isolation can stunt business growth in the longer term.
Logistics directors are coming round to the idea of sharing information on overlapping inventory. This has long been a feature of the airline sector and will prove to be a decisive factor in the industry's recovery. Only by liberating costs trapped within the supply chain, and the weight of the inventory that can slow it down, are businesses likely to be protected against vulnerability.
Whether a co-managed approach really is the solution remains open to question. Many speakers at the forum cited retail initiatives such as Tesco's Information Exchange, which gives suppliers to the supermarket access to their own point-of-sales data, as an indicator for future collaboration. But anecdotal evidence suggests that a more adversarial relationship still exists across the sector and it would need more robust change than this to persuade them that buyers do not wield all the power.
As with the debate over "lean" or "agile" processes, the ubiquity of the word "partnership" might have diluted its impact in discussions of the supply chain. But the dominance of the collaborative concept at industry forums suggests the logic of organising supply chains this way has still not entirely hit home.
Paradoxically, the path to complex collaborative partnerships is blocked most readily by basic internal processes. Several case studies suggest that corporate culture is the biggest threat to modernising supply chains. Escaping the inward-looking "silo" mentality and determining new ways of approaching suppliers, simplifying processes and forming long-term partnerships are crucial.
In a presentation on the launch of two new cars, a Group Lotus spokesman said that practices have improved and partnerships have begun to form only after these key concerns were addressed.
In each case, the message was clear: know your business inside out, but never lose sight of the bigger picture.