What Is Collaborative Sourcing?
Collaborative sourcing is a procurement method by which companies can engage with each other to enhance the effectiveness and add value within the supply chain. With the common goal of achieving more through working collaboratively than if they had worked independently.
What Is Collaborative Relationship?
Collaboration is based around sharing needs, expertise, experience, resources, risk and overheads to promote cost reduction, added value and innovation.
Collaboration will not reach its potential unless all parties within the contract or project agree to share.
The risk associated with the project or procurement has to be shared in order for optimum mitigation to be prepared.
Pooling knowledge and experience is part of the sharing required for collaborative relationships and procurement to generate the best outcomes.
Resources such as time, skills and money should be pooled. Collaboration relies on trust and open communication and honest feedback and as such these key areas should be shared in the relationships.
Finally the costs associated with the project, research, development, specification creation or contract management should also be shared to show willingness create and maintain collaborative relations.
(Source: Jarvis-Grove, 2020)
Who Benefits Most from Collaborative Supply Chain Relationships
Through procurement or their organisation forming a collaborative relationship or working on collaborative procurement the benefits can be vast. Through open communication and strong team work ideas can be increased, time to market reduced and the overall expenditure significantly reduced without compromising on quality.
The objectives and goals can be shared, the results jointly embraced and the risks and challenges distributed to ease the pressure on one party.
Collaborative procurement can also achieve economies of scale through pooling requirements to obtain a lower cost. By using the combined buying power of several organisations, greater efficiencies can be achieved. Buying groups and co-operatives are champions of this form of collaborative procurement and in doing so obtain lower costs for their members and stakeholders.
Contracts can be collaborative to show a commitment to long term working relationships. Best practice methods can be shared and adopted by all parties along with the adoption of technological developments and new systems or working such as EDI.
Standardisation of component parts can occur as well as rationalisation of supplier data bases or process which contributes towards the benefit of increased efficiencies, reduces costs, enhanced processes and ethical and sustainable outcomes.
Benefits such as shared contract management by collectively monitoring performance in the way of KPIs will be achieved through collaborative procurement and ultimately all parties within the collaboration will have a common vision, mission and shared goals.
Why Is Collaboration so Important in Supply Chains Today?
With supply chains becoming ever more complex there is increased demand for collaborative working and for these relationships to deliver successful outcomes. This requires professionals to focus on the skills required to lead and manage these collaborations and change effectively.
We are also seeing a new era of collaboration with a rise of interorganisational collaboration across supply chains to combine scale, knowledge, skills and resources. In this scenario multiple organisations all come together to address challenges, deliver value and create efficiencies across the supply chain. This was particularly prevalent during the 2020 Coronavirus pandemic where multiple organisations, some competitors collaborated with the focus on designing, manufacturing and delivering 8,000 ventilators to the NHS in record time to support hospitals during the pandemic.
David Hawkins, from ICW in Supply Management (April 2020) stated “change is a certainty” and will take on an even greater pace where organisations will need increased flexibility and agility to survive and grow.
We now live in VUCA (Vulnerable, Uncertain, Complex and Ambiguous) times, a term derived from the US military in 1987, and there is a need to find effective solutions and opportunities to meet these challenges. Collaboration is a way of doing this through:
- Enhancing the collective performance in terms of value (total cost)
- More effective risk management
- Collective ownership for quality and timely delivery/execution
- Supportive environment for innovation
- Collective ethos that supports ethical, sustainable, and responsible business.
(Source: Loseby, 2020)
Creating More Resilience Through Collaboration
Global and complex business environments need to have lean and global yet flexible operations, and therefore by nature are ever more vulnerable to supply chain disruptions, as highlighted throughout the global pandemic in 2020. This is why building supply chain resilience, a concept that reduces the impact of a disruption by proactively identifying strategies that allow the supply chain to react while recovering to its original or an even better functional state (Jüttner and Maklan, 2011), is of increasing interest to organisations.
Identifying, managing and mitigating risk should be a key priority therefore, it is of vital importance that a supply chain considers its adaptive capacity to respond to disruption and risk and become more resilient.
7 Step Process to Collaboration
The collaboration cycle can be applied to procurement across both direct and indirect categories and outlines the thought process when considering whether collaboration is right for your organisation. As well as once the benefits begin to be realised and how they can then be optimised, accelerated, or improved to augment value delivery.
Deciding when and where to collaborate is a key decision point too and using the Kraljic Matrix, to position products is a way of doing so. For example, if you were to consider areas where we need assurance of supply, looking to develop long term relationships or partnerships with joint innovation, you could consider both the strategic and bottleneck quadrants of the Kraljic Matrix as areas for collaboration.
As collaboration requires additional effort and greater skills, you should consider only those categories and projects/programmes that will benefit form that additional effort in terms of time and cost invested in collaboration.
Collaboration: Read the Full Guide
The Collaboration guidance from David L Loseby (FCIPS) on Collaboration as value enabler for procurement and supply chain, discusses the increased demand for collaboration given the growing complexity of global supply chains, skills required for effective collaboration and the benefits which can be realised as a result.
DOWNLOAD THE FULL GUIDE
Challenges of Collaboration
Whilst collaborative procurement, achieving and managing collaborative relationships is a positive aspect of working within a supply chain, there are challenges that could be faced on the way.
- Trust - Trust or lack of it is a challenge: building a high level of trust can take time.
- Power - Collaboration should be about being equal and sharing. However on the way to achieving such a working relationship, there could be power struggles. Individuals that have previously had higher levels of control than others may struggle to relinquish that power. This could lead to conflict which would need to be resolved quickly and effectively for the collaboration to develop.
- Culture - Different cultures, backgrounds, organisational structures or working methods could result in a setback on the journey to collaboration. Understanding and respecting all opinion, traditions, religions and beliefs is paramount for success within the development of a collaborative procurement opportunity.
- Control - Control relates to which party or individual has the final say in key decisions. This links closely to power and some difficult conversations may have to take place to decide which party or individual has the control within a project or relationship should a decision need making.
- Planning - Poor planning can cause collaboration to fail. All parties have their responsibilities and roles and should take them seriously, meeting all deadlines to ensure the whole collaboration process can be effective.
- Resources - Without enough resources collaborative procurement could fail. Enough resources should be available from all parties to ensure that the shared objectives, goals and visions are achievable.
- Indecisiveness - Decision makers are key to productive collaboration and as such indecisiveness should not occur. Decisions need to be made in a professional and timely manner to keep collaborative operations moving.
- Communication - The final step on the model is communication. Without effective communication collaboration will not work. Communication can be a challenge if things are not shared with the cross-functional team, if concerns are not raised or feedback delivered. Communication may be the last step on the model but it is probably the most important challenge within collaboration. If communication is not happening in a two-way form, collaboration will neither occur nor succeed.
8 Tips for Success
- Willingness and a “want” to collaborate
- Clear and demonstrable benefits
- Effective and proactive sponsorship
- In for the long term
- Clear scope and clarity of how the collaboration (partnership) will work: The who and how each party gets the share of the benefits
- Absolute transparency
- Unquestionable trust (organisational and individual)
- Effective listening and communication by all parties
Upskill Your Team to Become Effective Collaborators
The following six techniques as cited by by Professor Francesca Gino: Cracking the code of sustained collaboration – six new tools for training people to work together in the Harvard Business Review (2019) are designed to be mutually supportive and independent too. Advocating a balanced approach and showing respect for others ensures that the collaboration fosters enthusiasm, respect, openness as well as being motivational.
6 Effective Techniques from Professor Francesca Gino:
- Teach people to listen not talk
- Train people to practice empathy
- Make people more comfortable with feedback
- Teach people to lead and follow
- Speak with clarity and avoid abstractions
- Train people to have win-win interactions
Sector Comparisons to Collaborate
There are some sectors more likely to collaborate than others, as shown in the diagram below.
(Source: Loseby, 2020)
Vertical and Horizontal Collaboration
“Vertical and Horizontal supply chain integration are two such strategies that enable companies to manage their organisations and their relationships with other companies in the same supply chain and value chain.”
(Source: Hill & Jones, 2012)
The following benefits are typical of vertical and horizontal integration by improving supply chain processes and performance through value-added investment and activities:
- Cost savings
- Higher profits
- Greater efficiency
- Customer satisfaction
(Source: Stonebraker & Liao, 2003)
CIPS Collaborative Working Tools
- Trust - For a collaborative relationship or collaborative procurement to be successful there must be trust within the relationship and willingness from all parties to both trust and be trusted. This model has four quadrants which are based on the outcome on the two axes. The horizontal axis represents the level of belief in capabilities and competences and the vertical axis shows the belief that is held in the other party.
- Optimum Collaboration - This model shows that when the buying organisation or the procurement professional and the supplier or the supplying organisation both offer ideas, visions and resources the result is optimum collaboration.
- Cross-Functional Teams - Collaboration requires cross-functional working. This model shows how in a collaborative situation functions within an organisation and suppliers external to the company can come together to form cross-functional/organisational teams.
- Drivers For Collaboration - The main objective for collaboration is the opportunity to reduce costs, pay less and achieve more. Drivers for collaboration also include several other key elements. This model shows how if all the drivers between parties wishing to achieve collaboration are achieved the results can be significant.
- Collaboration Promotes - This model demonstrates how, when working collaboratively, various factors are promoted. These factors include team work and cross-functional team development.
- Benefits Of Collaborative Procurement – This model outlines some of the benefits of collaborative working relationships.
- Sharing In collaboration – Collaboration will not reach its potential unless all parties within the contract or project agree to share and this model shows how resources such as time, skills and money should be pooled.
- Economies Of Scale - This model demonstrates that through collaboration, and coming together with needs as well as resources, the price paid for a product or service can be significantly reduced if volume is increased.
- Collaborative Buying Groups - Collaborative procurement can also take the form of collective buying. This model shows how by pooling volumes/quantities the prices that can be achieved in a collaborative style are more favourable than individuals or individual organisations buying alone. This style of buying promotes economies of scale.
- Challenges Of Collaboration - The model represents a staircase – each step showing a challenge that could be faced on the way to reaching the top.
- Managing Collaborative Relationships - This model shows seven stages involved in the creation and management of collaborative relationships.
- 7 Step Collaboration Process – this tool enables you to consider the complete cycle as well as once the benefits begin to be realised.
- Attributes of Team Effectiveness – the table shows the positive and negative attributes of a person or team when collaborating.
- Factors Affecting Collaboration in Supply Chains – the table details the factors affecting collaboration in supply chain.
- Sector Comparisons to Collaborate – the diagram shows the sectors more likely and less likely to collaborate.
- Supply Chain Resilience – the table highlights the context in which chain resilience can be considered in a number of contexts.
- ISO 440001 – this tool enables partners to effectively share knowledge, skills, and resources to meet mutually defined objectives and to provide additional areas of value creation.
CIPS members can download the CIPS Collaborative Working Tools to use in your organisation along with the guidance notes will full explanations of all of the tools listed and how to use each tool effectively.
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