Why is Supply Chain Collaboration important?

A common thread that runs across the world’s winning supply chains is their ability to build and manage relationships. By mastering the art of supply chain collaboration, these companies have been driving cost savings and process efficiencies.

But what does supply chain collaboration mean, and how does it fit into the present-day supply chain management? In an ideal world, everyone involved in sourcing raw materials, turning them into goods and distributing them would collaborate. That would be one of the best ways to ensure cost-effectiveness and reliability. However, to date, what remains an exception is the degree of collaboration. 

Does Supply Chain Collaboration make a difference?

Not a long time ago, supply chains were mostly vertically oriented. The entire supply chain fell under the direct control of a single enterprise. This essentially meant that one company took care of all the processes right from sourcing the raw materials, manufacturing products, distributing them to sales and marketing.

Rarely will we come across such examples today. Modern-day supply chains are dynamic and decentralised. It’s common to find dozens of enterprises involved in a single supply chain, all playing different roles at different stages in the supply chain. As businesses grow more interdependent with no single entity having absolute control over everything, collaboration remains the only way to unite the supply chain. 

Industry studies have shown that effective collaborations really do make a difference for companies. A McKinsey survey involving over 100 large organisations across sectors showed that companies that regularly collaborated with their suppliers demonstrated lower operating costs, more growth and increased profitability as against their peers. 

However, the idea of operating with a collaborative approach is yet to mature. In many instances, supply chains comprise a combination of companies. While some proactively try to improve supply chain collaboration, the rest stick to the more traditional supplier/buyer relationships. 

The emergence of a Culture of Collaboration 

Today we are witnessing the emergence of a new culture- one that emphasises collaboration. However, even to date, collaborating with third parties is not quite that simple. It requires trust and the ability to arrive at mutually beneficial, aligned goals. 

The first step is to define the purpose behind the collaboration. What follows is determining what needs to be done to meet that purpose. 

This new culture requires supply chain leaders to share risks and rewards. Besides, various state of the art tech capabilities are aiding this progress by making integration and automation of multiple workflows more effortless than ever before. 

Building long term momentum  

Collaboration requires buyers and suppliers to look beyond transactional or adversarial relationships. These projects demand time and efforts until the point they start yielding results. 

Moreover, some collaborative efforts require a shift in approach from a cost-based system to a value-based approach; and it’s not easy to come by. 

L’Oreal, a cosmetic company, uses a collaborative approach to further innovation. The company has effectively established a mutually beneficial process through a long-term commitment and open dialogues about company goals. 

For instance, in its annual ‘Cherry Pack’ exhibition, they invite their suppliers to develop packaging solutions based on specific consumer trends. These are the trends the company will be working on in time ahead. L’Oreal allows suppliers to access their ideas and, in return, further packaging innovation. What can’t be overlooked is the trust-based forum that the company creates. 

Five steps to successful supply chain collaboration:
  1. Identify stakeholders with whom there’s scope for collaborative opportunities. 
  2. Determine the end goal and develop a case that rewards both parties.
  3. Develop a methodology to track progress and measure the success of the collaboration. More structured the approach, better the tracking of the results. 
  4. Invest in the infrastructure and resources required to support the project, especially a management framework. 
  5. Encourage a culture of knowledge sharing, effective communication and transparency.

In conclusion

Supplier collaboration has gone beyond mere nice-to-have ages ago. Simultaneously, it is neither quick nor straightforward. The question that remains is whether it’s worthwhile? And the answer will always be a firm “YES.”

To learn more about how GoComet’s supply chain software can enable you to collaborate better and build a resilient business, reach us here