Collaboration Between Supply Chain Partners - Article Example

SUPPLY CHAIN MANAGEMENT CASE STUDY By Introduction Supply chain management is the active administration of supply chain activities with the aim of maximizing customer value and attaining a sustainable competitive advantage. According to Soni et al. (2013), supply chain management constitutes “the complete, strategic coordination of the conventional business functions and the approaches across these business functions within an organization and across businesses within the supply chain, with the aim of developing the long-standing performance of the individual organizations and the supply chain all together.” Supply chain management has taken a key role in the performance of companies and has drawn serious research interest. An extensive review of available literature exposes a substantial spurt in research both in theory and practice of supply chain management by integrating the roles of distribution management and Supply Management. This integration has lead to the notion of extended enterprise and the supply chain is now marked as the mutual supply chain across the borders of various firms to maximize the value across the whole supply chain. Several articles on the subject of the theory and practice of SCM have been written and published in recent years, but the idea is still undergoing substantial debate and development. This paper presents an analysis of the article titled “Stop Fearing Collaboration and Start Reaping Its Rewards” written by Dustin Mattison, that was published in the Business Examiner (Wednesday, February 17, 2010). The author, a market analyst, discusses several concepts related to the theory and practice of supply chain management. This report employs relevant theories and concepts of SCM to evaluate the views presented in the article, including a set of essential recommendations relating to both practices and theoretical concerns. “Stop Fearing Collaboration and Start Reaping Its Rewards” Today’s marketplace is characterized by numerous demands which necessitate supply chain collaboration. Some of these include: tracking and reporting of orders across various carriers and vendors; joint visibility for trading partners; tailored services and content for clients; collaborative planning with vendors, distributors, suppliers and design partners; flexible logistics choices to guarantee timely accomplishment of tasks; and real-time commitments for production, design, inventory and transport capacity (Blanchard 2006). According to the article, innovation is one of the many benefits that companies reap from supply chain collaboration. However, the author asserts that most firms have grown suspicious of collaboration due to lack of trust among parties. Supply chain collaboration has many other advantages such as increased revenue, reduced inventory, lower costs of warehousing, better allocation of promotional budgets, reduced costs of order management, higher forecast accuracy, fewer cases of stock-out, lower material acquisition costs, improved customer service, lower freight costs, more efficient use of human resources, reduced depreciation and quicker more reliable delivery. The author recommends that companies should embrace supply chain collaboration since supply chain operations are usually carried out in partnership with other parties. By understanding the benefits and value of supply chain collaboration, firms can realize supply chain innovations through partnerships with like-minded organizations. Reduced product life cycles raise the pressure on companies to create new products, which in turn strains budgets and causes significant stress on a firm’s research and development function. Likewise, the rising competitive global supply chains put great pressures on supply chain managers to innovate and improve both customer service levels and cost efficiencies. Both new product development and new process development are costly and risky. However, supply chain collaboration remains the most innovative way of developing processes that add value to customers and reduce costs. The most efficient and profitable supply chains have supplier-buyer relationships founded on value and steady delivery of this value. Value can be measured by services, timely delivery, quality, returns management or a combination of these factors. Value drives buyers to increase their volumes of purchase from suppliers, which benefits the suppliers and negatively affects the competitors. The increased collaboration between supply chain partners enhances efficiencies (Blanchard 2006). For a firm to achieve successful supply chain collaboration, the first step is to collaborate internally and help its partners in working together. This could also be achieved by starting small and focusing on the objectives of the collaboration throughout the partnership. Since technology forms an integral part of supply chain solutions, companies should work on advancing their information technology capacity only to an extent manageable by the collaborative partners. A firm can also put in place an inclusive metrics program that allows it to monitor the performance of its partners (Soni & Kodali 2011). Lastly, human resource must be included as part of the collaboration as systems do not replace people hence the company must have competent, highly-experienced professionals. This makes supply chain more challengeable and successful. Most corporate executives may view the idea of collaboration as a great challenge, and pressure from customers is still a key driver for the industry (Soni & Kodali 2011). This is because customers can access more product information via social media and the internet. This round the clock access increases scrutiny and the risk of negative publicity. Consequently, it is becoming increasingly important for firms to clearly comprehend their supply chain and work towards embracing supply chain collaboration (Wisner et al. 2009). Besides lack of trust, supply chain collaboration faces many other challenges. First, some companies do not fully believe in the concept of collaboration, but instead view the practice as a means of exporting jobs to lower-cost economies, which may be true in some cases. The author proposes that this challenge can be overcome through proper development of intellectual property and good management of the networks in order to retain them. Dustin encourages firms to view supply chain collaboration as a way of creating higher-value jobs while allocating jobs that require less professional skills to external markets in which people benefit from the opportunity. This has proven to be a challenge because the practice necessitates sophisticated and complex choreography of order flows, managed assets, information and financial flows. Trust is the first step towards supply chain collaboration, and Dustin uses the case of social networking to demonstrate this notion, stating that the evolution of social networking has facilitated trust among parties. Also, it is not easy to connect all parties in a supply chain because most supply chain visibility solutions are inclined towards tier-one partners who require very complex and elaborate information technology and professional skill to establish. However, Dustin sees an opportunity in this area, proposing that the connections are achievable if firms focus on the key areas having the greatest impact on supply chain operating costs; the inventory and the orders. Generally, successful sustainable supply chains are those that work collaboratively, in which both parties in the association work towards collaborative solutions and shared values. For instance, many British clothing retailers have implemented this method, diverting from established ethical audit programs to utilizing dedicated panels that develop and monitor collaboration programs and supplier outreach. The number of organizations embarking on supply chain collaboration initiatives in becoming increasingly high and most of these efforts are focused towards reduction of energy consumption and carbon footprint of the supply chain infrastructure. Also, most customers are going for suppliers that have the capacity to quickly and easily respond to their needs for this information. In addition, unwillingness among parties to share information, potential additional responsibilities, perception of lack of mutuality, mistrust regarding fairness of benefit, risks and costs among other factors also serve as barriers to successful supply chain collaboration. The author also identifies technology as a key component of supply chain management, affirming that supply chain visibility solutions should incorporate practical notification techniques that act as early warning systems to check and manage stock-outs and other activities that present supply chain disruption risks (“Stop Fearing Collaboration”). In order to improve supply chain performance, businesses need to put in place appropriate investments in processes and technology. Lack of investment and focus in these areas is a major barrier to the achievement of successful supply chain collaboration. As supply chain networks are becoming more and more complex, the demand for better and enhanced supply chain management technology solutions is crucial. These technologies have aided businesses to innovate, reduce operational costs, offer better services and meet the expectations of customers. The use of modern up to date business life cycle evaluation services, planning and optimizing systems and network designs has enabled firms to offer customers a transparent view of the complete supply chain (Gupta & Palsule-Desai 2011). These solutions guarantee that organizations have the most accurate data on products and processed which is readily available to the consumers. Company leaders that appropriately position themselves and take advantage of supply chain collaboration are able to discover many untapped opportunities in this collaboration. Therefore, firms have the opportunity of eventually learning how to achieve the right balance as they optimize their supply chain undertakings, collaborate with dealers, and eventually achieve successful supply chain collaboration. According to the author, supply chain management requires technologies that facilitate early detection of problems or delays in the supply chain, allowing the manager adequate time to respond to these challenges. This is because tier-one operations entail numerous orders, transactions and shipments going through the supply chain, making it almost impossible to monitor every detail. Such technology adds pro-activity and responsiveness in the supply chain. Supply chain technology is continuously evolving as organizations appreciate that today’s business environment requires a highly visible supply chain. General information technology trends such as big data and cloud have an impact on supply chain management. Some of the industry-specific IT trends in supply chain include big data, enhanced customer service levels over cost cutting, resurgence of contingency planning, execution moves prior to demand and supply planning and end-to-end partner communication and collaboration. These trends form the basis of the recommendations section of this report: 1) Big data: The process of putting together the data of different supply chain partners, transforming this data into useful information and responding appropriately requires a huge volume of data. By combining big data solutions and complex event processing solutions, companies are able to handle the enormous amounts of available data and convert it into executable actions. Therefore, firms should leverage this technology with supply chain visibility solutions to improve supply chain performance. 2) Partner Communication & Collaborative implementation As previously discussed, supply chain collaboration requires that all partners stay updated on the events taking place, the data behind such events and how to act collaboratively in responding to upcoming challenges. Companies have realized that cost shifting is unsustainable; instead, issues should be resolved in partnership as they arise. 3) Better customer service levels over cost reduction Most cost reduction measures utilized by companies have had a negative effect on customer service levels and customer satisfaction. As a result, companies should not only focus on cost reduction but also find ways of improving service levels in the supply chain. 4) Execution Before Demand & Supply Planning Effective supply chain management depends on proper demand and supply planning. However, most companies fail to execute demand and supply plans due to forecast errors, instead focusing on the execution stage. Abnormal supply chain events are common occurrences in SCM that bring about variations between the intended plans and actual events taking place. The ability of firms to respond timely and effectively to forecast errors is crucial to all supply chains and basically depends on end to end supply chain operations visibility during the transaction stage. Faced with the current economic downturn supply chain collaboration is of growing importance as an approach to competitive advantage through reducing costs and improving service levels.  Supply chain collaboration has been the topic of wide debate in academic literature, with most research focusing on the drivers for failure and success. This research has shown that in most cases, failure may occur within the collaboration leading to circumstances where neither party would benefit. However, despite the existence of guidelines that aid managers in starting and running collaborative initiatives, companies have failed to understand the potential benefits and impacts of supply chain collaboration due to lack of industrial case studies (Gupta & Palsule-Desai 2011). Highly collaborative initiatives remain expensive, resource intensive and their results are mostly unpredictable. Reference list Blanchard, D, 2006, Supply Chain Management Best Practices. Hoboken, John Wiley & Sons. http://public.eblib.com/EBLPublic/PublicView.do?ptiID=281850. Gupta, S., & Palsule-Desai, O. D, 2011, Sustainable supply chain management: Review and research opportunities. IIMB Management Review, 23(4), 234-245. Soni, G, & Kodali, R, 2011, A critical analysis of supply chain management content in empirical research. Business Process Management Journal, 17(2), 238-266. Soni, G, & Kodali, R, 2013, A critical review of supply chain management frameworks: proposed framework. Benchmarking: An International Journal, 20(2), 263-298. Stop Fearing Collaboration and Start Reaping Its Rewards. (n.d.). Examiner.com. Retrieved April 4, 2014, from http://www.examiner.com/article/stop-fearing-collaboration-and-start-reaping-its-rewards. Wisner, J. D., Tan, K.-C., & Leong, G. K, 2009, Principles of supply chain management: a balanced approach. Mason, OH, South-Western Cengage Learning. Read More