I was recently reminded of the game ‘Where’s Waldo’ when thinking
of the complexity of global supply chains. As a child, many an afternoon was
spent poring over the double-page spread illustration trying to find Waldo, who
was hidden in the complexity. ‘Where’s Waldo’ today has evolved to an online
game with many other targets for readers to find, as well as several different
levels of the game, so even playing ‘Where’s Waldo’ today is not only more
challenging, but also requires innovative thinking and technical competency.
Similarly, global B2B supply chains today are a lot more involved than the
vertical manufacturing and logistics operations of yesteryear. And the role of
supply chain manager has evolved far beyond simply cutting costs. Supply chain
managers are now on the front lines of the rapidly evolving digital networked
economy, and they are instrumental in helping create immediate value for the company and its
customers.
Consequently, they are more dependent on their network of trading partners,
who are effectively an extension of the organization itself. This has made collaboration
and visibility more critical, yet all the more complex. To maximize their own
potential, therefore, businesses need to know how to make the most of that network.
In a recent study conducted by The Economist
Intelligence Unit on how companies collaborate with their trading partnersthree findings
jumped out:
- 93% of the respondents stated that they derived value from collaboration
- Yet only 39% have institutionalized collaboration with trading partners
- And, the #1 selection criteria when looking for potential partners is their technology
capability
The study finds that businesses are indeed collaborating, but they
are investing more in people than enabling technology. And while organizations
recognize the importance of collaboration and technology, there wasn’t much
evidence that they are pursuing innovation in the way they collaborate.
So if supply chain collaboration drives such significant benefits,
why haven’t companies truly embraced collaboration with their trading partners?
Some of the findings in the study indicate that:
- Collaboration poses its own risks, with respondents identifying reputational damage as the gravest risk. For a more
detailed overview of the four types of risks and how to manage these, view this video by Deloitte risk expert, Henry Ristuccia - Companies are often uncomfortable sharing information with trading partners and it is important to note that both information and technology play crucial roles in trading partner collaboration
- Collaborating with trading partners is not viewed as a focal point for innovation
Companies can, however, mitigate the risks inherent to working with
third parties by adopting innovative approaches to collaboration. Caterpillar,
the industrial equipment manufacturer, is seen as an expert in this field. In
the wake of the economic downturn, Caterpillar expected demand to grow rapidly.
However, it also predicted that some of its key suppliers would struggle to
find the working capital required to ramp up production to meet that demand as
it grew. The company therefore introduced a number of measures to reduce the
capital required by its suppliers, especially the small and medium businesses
among them. It standardized its payment terms and offered suppliers the chance
to receive early payment in exchange for discounts, and helped suppliers access
a supply chain finance initiative by the US government. These measures were
designed to help Caterpillar’s suppliers pursue their own objectives—namely sell more
products—in a way that clearly boosted its own cause.
Information sharing provides great value to all parties by extending
situational awareness. It also goes a long way to engender trust between
trading partners, and trust is essential for valuable collaboration. In fact,
many forward-thinking organizations are beginning to understand that trading
partners possess knowledge about technology, processes, or market trends and
insights they can no longer ignore. Instead of simply viewing suppliers as
order-takers, progressive companies are taking new steps to tap into their
expertise. While this type of collaboration often allows companies to do things
better, it also allows them to do different things and be more innovative.
As consumers, we use personal networks like Facebook, Twitter and Amazon.com
that help us learn, share and shop with more ease. Business networks provide an
equally easy way for companies to link and coordinate a virtual ‘extraprise’ of
partners into a shared community executing improved and coordinated processes
in a more informed way than in the past.
Without the right commitment to solutions and skills, it is simply not possible to extend collaboration to a broad base
of trading partners. The winning formula for supply chain collaboration is
clearly a combination of agile business processes, technology that provides for connectivity and
insights, and proactive engagement of your supply base. Investing in collaboration and running businesses more
effectively today, can only help companies prepare more successfully for tomorrow.