In 2004, Mark Barratt wrote his classic work “Understanding the meaning of collaboration in the supply chain” on supply chain collaboration. Barratt presents his vision of collaboration and the factors involved in its success. It offers wise lessons that are still held today and collaboration in city logistics.
Companies systematically work on improving the efficiency of their supply chains. To succeed in supply chain collaboration, it is crucial to understand why collaboration is necessary, with which parties it is possible, and which activities it involves. Unfortunately, many supply chain initiatives have only resulted in a shift of costs or inventory when viewed across the entire chain. That, of course, is not the intention. So, what are Barratt’s lessons?
Vertical and Horizontal Collaboration
There are two different forms of supply chain collaboration: vertical and horizontal. Vertical collaboration involves working with suppliers, internal collaboration, or collaboration with customers. Horizontal collaboration can involve competitors or other organizations operating at the same level. Internal collaboration is a prerequisite for any form of external collaboration.
Modern theory also recognizes network collaboration, which combines vertical and horizontal forms. CB Logistics (Centraal Boekhuis) is an example of this.
Selective Collaboration
According to Barratt, it is not possible to collaborate with everyone. Companies must realize that collaboration places high demands on the organization. Therefore, companies should focus on a few strong relationships rather than trying to collaborate with everyone. The benefits of collaboration include economies of scale leading to lower costs per product, greater purchasing power, and reduced demand uncertainty. Problems in collaboration often stem from a lack of trust, fear of power abuse, an unfair distribution of benefits, and a lack of continuity, Barratt notes.
Collaboration is not only about developing close information-sharing relationships at the operational level, but it must also be implemented at the tactical and strategic levels of the organization. If processes are not integrated at these levels, the benefits of integration will remain limited.
The Elements of Collaboration
Barratt identifies several elements of collaboration: strategic elements, collaboration design, and cultural aspects.
Strategic Elements
- The business case: What strategic advantages can be shared? This forms the basis for management commitment and the resources allocated to collaboration.
- Participants’ strategies: How do they view their product-market combination—through operational excellence, product or brand leadership, or customer intimacy? The supply chain strategy determines the focus and attention given to supply chain management within the companies.
- Intra-organizational support: This is needed in two forms: initial and ongoing support from senior management and gaining support from other parts of the organization, such as procurement, product development, and production.
- Supporting technology: The technological infrastructure necessary for collaboration.
Designing the Collaboration
When designing the collaboration, the following aspects are essential:
- Cross-functional activities: It has been shown that boundaries within or between organizations limit the flow of information and the development of trust between partners.
- Process alignment: Collaborative initiatives require support and commitment from senior management. Since collaboration in the supply chain requires a process focus, many functional boundaries must be crossed, and management support is needed to overcome “functional friction.”
- Joint decision-making: A good example is forecasting. Most companies currently forecast in isolation — in other words, they develop forecasts based on customer orders and their own historical data. These forecasts are primarily statistical. If the actual situation in the entire supply chain is considered, this often results in volatile demand fluctuations (the bullwhip effect).
- Supply chain metrics.
Culture
One of the most important supporting elements of collaboration is a collaborative culture.
Most existing corporate cultures cannot support collaboration, either internally or externally. Functional thinking is widespread and reinforced by organizational structures and performance measures that are aligned with functional activities rather than supply chain processes.
A culture focused on collaboration includes trust, reciprocity, information sharing, openness, and communication. A classic report is SYLONET (from 2003), which discusses the distribution of the benefits and drawbacks of collaboration.
Change Management
Developing collaborative partnerships requires significant changes — internally, externally, strategically, tactically, and operationally. Programs must be implemented to support collaborative initiatives; otherwise, internal resistance may prevent collaboration from succeeding. Many employees will be asked to change their ways of working, and collaboration may feel foreign to many if they are not used to sharing information with colleagues, customers, and suppliers or even making joint decisions.
Source: