[From iSource Business, September 2001] As companies expand globally, supply chains are becoming increasingly complex because of the multiple partners, participants and locations involved. Within a supply chain, it's not uncommon for an order to be filled from several supplier locations worldwide and then travel by sea or air, rail and truck to a final destination, perhaps even merged in-transit along the way.
In today's increasingly harried, competitive environment, manufacturers cannot afford to have a product in-transit in the supply chain. Instead, the product must flow directly toward and in sync with the source of the demand. To keep step with this competitive and intense pace, effective supply chain partners understand that collaboration with each other is the only alternative.
In my view, the most important key to successful collaboration is accurate, real-time data sharing, which is just as important as the product's physical delivery. However, employing that data is the tricky part. In the transportation industry, most carriers and shippers use data tools with different formats and types of information. Those different types of information travel at different speeds, utilize different technologies and are aggregated for different purposes, which represents the greatest single challenge to a successful global supply chain: the synchronization of data and the facilitation of collaborative decision making through technology integration among all supply chain participants. Resolving this issue requires technological and managerial leadership. How can companies meet this challenge?
Historically, a supply chain has been sequentially operated. Supply chains began by sourcing suppliers, with manufacturers either vertically controlling their own production or setting the design criteria with suppliers, who were typically in control of capacity decisions and other production capability factors. The process then moved to the planning stage where decisions were made about how much to purchase, a number that was often based on limited information regarding customer demand and was seldom shared with suppliers. Finally, manufacturers processed the information and made the product. However, any ensuing customer feedback was generally limited and not shared within the seller's organization, let alone with suppliers.
Now the Internet enables so much more. It has created the ability to collaborate more effectively across company lines and out to key business partners. When a company seeks to optimize its supply chain across customer-supplier relationships and the product cycle, it's a competitive opportunity (see "Stop. Collaborate and Listen" on page 32 of the September 2001 issue of iSource Business), which makes collaboration and information visibility the keys to success. In essence, the technology is available for companies to collaborate right now, and it should be taken advantage of.
No Easy Task
But the collaborative process is not always easy. No company can completely and effectively control its entire supply chain, and some still have difficulties collaborating internally, let alone with suppliers and customers. Nevertheless, there are certain steps any reasonably well-integrated company can take to achieve a collaborative supply chain.
First, companies need to commit to new business processes. Collaboration will not be effective if partners do not operate within a process structure. Leadership is needed within the companies to:
- Establish a single point of contact for each customer
- Nurture the collaborative process
- Assess progress and concerns
In addition to having process integration, participants must have clear objectives regarding core processes and desired results, with short- and long-term goals. Open collaboration is the business model for future global supply chain optimization, and, for it to be a success, it requires sharing sensitive information, such as product development plans, production schedules and sales forecasts. Unfortunately, there are many companies that are reluctant to share those types of information.
Another way companies can ramp up supply chain collaboration is by finding methods that allow information to be synchronized so data can be moved across the supply chain quickly, effortlessly and with the appropriate safeguards. Additionally, participants must align their business processes, integrate information technology (IT) infrastructures and assure the compatibility of strategic methodologies. These steps require significant leadership commitment across collaborative partners, however the results of a fully integrated global supply chain speed of information, improved quality and processes, and a value-added, customer-driven process offer very real competitive advantages.
Assuming a company is committed to taking the steps necessary for a truly collaborative supply chain, it's critical to employ the best enabling technology. Traditionally, suppliers, carriers, manufacturers and e-business solutions providers have used established technologies, such as electronic data interchange (EDI) to streamline moving goods from point A to point B. This method, while efficient and accurate, is expensive, inflexible and time-consuming when collecting data, thus slowing down or even preventing a truly collaborative process. Although EDI will continue to be an important route to a standard file format, XML (Extensible Markup Language) is proving to be a more effective e-commerce format. It's compatible with real-time tools and is cheaper to set up and use, which encourages more members of the supply chain to participate. Eventually, companies will move beyond established systems to find new technologies that will enable real-time visibility and collaboration across all global supply chain participants.
As technology matures, so does the overall supply chain management process. It's rapidly changing from segmented, sequential planning and execution to concurrent planning and execution. Supply chain management, visibility and decision support systems, from companies like i2 Technologies, Manugistics, Optum and others, help supply chains become proactive so companies can assess various scenarios and respond to changes in customer needs, supplier availability and other factors. Also, the information has to be synchronized in each company's internal systems, including sales, order management and order allocation, which allows one department to act on another's information.
Collaboration, visibility and speed are critical components to unlocking the potential of any company's supply chain. The results of genuine collaboration with ready access to real-time data are enhanced value, lowered costs and a more efficient and responsive supply chain. To achieve this, the collaborative model takes committed leadership, strategic planning and leading-edge technology. While supply chain collaboration among enterprises is still in its infancy, the model is becoming more feasible, particularly as IT enhancements and attention to relationship management facilitate the timely implementation of flexible, collaborative partnerships. This collaboration of data sharing will provide the tremendous efficiencies companies need in order to remain competitive in the global economy.
Five Steps to Effective Supply Chain Collaboration
1. Commit to new business processes
2. Have clear objectives regarding core processes and desired results, with short- and long-term goals
3. Be prepared to share sensitive information, such as product development plans, production schedules and sales forecasts
4. Develop methods to synchronize information so data can move across the supply chain quickly, effortlessly and with appropriate safeguards
5. Align business processes with business partners, integrate IT infrastructures and assure compatibility of strategic methodologies