Collaboration: More Than Just Technology
Forward-thinking companies now realize that how effectively they collaborate with their trading partners - both up and down the supply chain - will determine their overall business success. But what is true supply chain collaboration? And how do you successfully execute a collaborative partnership that benefits all parties?
This article will examine these pivotal questions, paying particular attention to the non-technical factors involved in a successful collaboration. The author will draw on insights and observations into company success stories as well as the findings from a new study on supply chain collaboration from the University of Tennessee.
The article's underlying message for supply chain professionals is an important one: Make sure you get the best technology available to help build your supply chain alliances. But remember, if you overlook the non-technical side of the collaboration equation - particularly the people part - even the best-in-class solution will fall well short of its potential.
It's widely acknowledged today that the ability to collaborate with your trading partners up and down the supply chain has become a core business competency. How well you collaboratively manage the process of moving goods from sourcing through point of consumption in large part determines your success in the marketplace.
Without question, technology is a critical component of collaboration. The ability to exchange data among the supply chain partners and to gain visibility over product movement is fundamental to supply chain superiority.
A wealth of new technology exists to help companies in their collaborative efforts. Numerous supply chain software solutions available today promise to give trading partners instant connectivity and product visibility across the pipeline. And recently, a spate of Internet-enabled solutions have been introduced that claim to accomplish the same end - sometimes at a considerably lower cost. Going forward, these solutions will represent a key part of the collaboration mix for any successful company.
But there's a caveat that needs to be voiced here. Many companies - and the supply chain professionals within them - have become enamored with the promise of the new technology. But in all too many cases, technology is viewed as an end unto itself. If you can just get that latest software package up and running, the thinking goes, you can effectively collaborate up and down the supply chain.
The perception that the latest software package or collaboration program is a silver bullet fails to take into account a hard reality. Namely, successful supply chain collaboration also depends on other factors not related directly to technology. Many are people related. If these other enablers are not in place, even the best-conceived supply chain collaboration initiative will falter.
Practitioner Insights into Collaboration
Supply chain professionals have long suspected that true collaboration involves more than just having the latest technology in place. Now, there's solid research to support that intuitive belief. It comes in the form of a practitioner-based study designed to identify the enablers, impediments, and benefits of supply chain collaboration. The study was directed by John T. Mentzer, a professor of logistics at the University of Tennessee and current president of the Council of Logistics Management. FedEx Corporation and Supply Chain Management Review co-sponsored the research.
The bottom line of this research effort is that supply chain collaboration can deliver a host of competitive benefits if the right enablers are in place and if the obstacles (both internal and external to the organization) can be overcome. Somewhat surprisingly, these enablers and impediments have more to do with management style and interpersonal relationships than with technology.
The research was conducted in mid-2000 among 20 supply chain professionals from a range of industries and business sectors. The University of Tennessee research team conducted both one-on-one interviews and focus groups. A number of actual supplier-customer pairs participated in the focus sessions.
To set the baseline for the study participants, the research team set for this simple definition: Collaboration in the supply chain means that all companies are working together toward common objectives; the process is characterized by the sharing of information, knowledge, risk, and profits. Some of the participants interviewed likened collaboration to a crew race in which all of the members need to act in unison for the benefit of the common good. You need to pay careful attention to picking your supply chain "crew," they added, noting that that it's unwise and impractical to attempt to collaborate with everybody.
A List of Enablers
In identifying the enablers that need to be in place for supply chain collaboration, the executives surveyed did note that technology was a critical prerequisite. But the main emphasis was placed on more personal factors. Examples of the key collaboration enablers identified included the following:
- Common interest and clear expectations. All parties need to have a stake in the collaboration's outcome to ensure long-term commitment. All parties also need to understand what is expected of them and the others in the relationship.
- Openness and trust. For a relationship to work, the partners must openly discuss their practices and processes. Sometimes this means sharing information traditionally considered propriety.
- Recognizing who and what are important. Not all partners and supply chain activities are created equal. Choose the ones that will deliver the greatest benefit.
- Leadership. Without a champion to move collaboration forward, nothing significant will ever be accomplished.
- Cooperation, not punishment. When things go wrong in a relationship, punitive actions seldom make them better. The right approach is to jointly solve the problem.
- Benefit sharing. In a true relationship, the partners need to share both the pain and the gain.
Impediments to Success
Asked about the major impediments to collaboration, the supply chain executives were similarly expansive in their responses. One common thread running through the responses speaks to the natural resistance to change. Organizations - and the people working within those organizations - reach a certain comfort level in their work. A supply chain collaboration initiative disrupts that comfort level. It requires that people look at the good of the whole rather than just their individual departments or functional areas. It calls for a new level of openness - both internally and with outside partners - that once had been considered dangerous. Finally, collaboration demands a lot of extra effort.
Among the many specific impediments to collaboration cited were the following:
- Limited view of the supply chain. This is a legacy of the traditional silo organizational structure in which people thought only about their own functional area.
- Annual negotiation process. Annual negotiations consume time and energy, plus they are usually adversarial. There are better alternatives.
- Time investment. Collaboration takes time and a lot of hard work. To get people to make the necessary effort, they have to be clearly shown the expected benefits.
- Conventional accounting practices. These practices become impediments to collaboration when they focus on the traditional accounting role of determining the value for a single firm, rather than measuring cross-company values.
- Inadequate communications. When communication between supply chain partners is nonexistent or inadequate, the potential for problems increases exponentially.
- Inconsistency. Behavioral attitudes and operational execution must be consistent at all interfaces in the supply chain relationship.
- Betrayal. Lying, misleading, misrepresenting acting in a less-than-ethical manner may be the ultimate barriers to a successful collaborative relationship.
As anyone who has ever attempted to bring about organizational change will attest, these kinds of obstacles can prove formidable. But at the same time, they represent a golden opportunity for managers to demonstrate their leadership skills.
Benefits: Financial and More
Collaboration takes a lot of work on everybody's part - a sentiment echoed by virtually every supply chain executive that participated in the research. But the respondents were similarly united in the belief that if the organization aggressively puts the enablers in place and addresses the obstacles head on, it can succeed and begin to reap the benefits of collaboration.
The biggest anticipated benefits are financial. Specifically, the study participants pointed to increased sales, lower costs from reduced inventory, fewer personnel, improved customer service, better delivery through reduced cycle times, and increased speed to market of new products. The respondents also expected to see improvements within the organization, such as the breaking down of functional barriers and less "fire fighting." (For a summary of all the benefits of collaboration mentioned, see Figure 1.)
Figure 1 - The Benefits of Collaboration
The study participants emphasized that effective collaboration can take a huge amount of waste out of the pipeline. They also noted it allowed each trading partner to concentrate on its particular core competencies. Collaboration also was seen as positively impacting public image. When organizations work together, they usually are seen in a positive light - that is, they're striving for the good of all, not just looking out for themselves. The bottom-line of the financial-oriented benefits is expected to be improved returns, and increased shareholder value. And these benefits, in turn, translate to competitive advantage over other supply chains.
The study participants also expected certain non-financial benefits as a result of their collaborative efforts. They felt, for example, that as companies collaborate, trust and interdependence becomes stronger. With the increased trust comes an increased sharing of information, ideas, and technology. A higher level of sharing, in turn, encourages the supply chain partners to act increasingly as if they were one enterprise (the crew notion, once again), working toward the goals of the whole and not the parts. In short, one benefit seems to compound another.
The University of Tennessee study in no way suggests that technology is not an essential ingredient in successful supply chain collaboration. Rather, is says that technology is a wonderful enabler to collaboration. But it is just that - an enabler. Before real collaboration can happen, a culture change needs to take place. Openness must supplant secrecy. Trust must replace suspicion. "We win" (not "I win") must become the guiding philosophy. Technology, in and of itself, cannot help a company achieve any of these fundamental shifts.
For many organizations, the requisite culture change can be a wrenching experience. But it's a pain that must be endured if they are to partake in the bounty of benefits that supply chain collaboration can deliver.
Author's Note
A full report of the collaboration study discussed here appears in the September/October 2000 issue of Supply Chain Management Review. The article is titled "Collaboration: The Enablers, Impediments, and Benefits." By John T. Mentzer, James H. Foggin, and Susan L. Golicic. (See www.scmr.com.)
The Study Participants
Interviews for the supply chain collaboration study were conducted both one-on-one and in focus groups. The following companies participated: American National Can, Arco Aluminum, Becton Dickinson, Compaq, Daimler-Chrysler Corp., Dell, Donnelly Corporation, Fisher Scientific, Ford Motor Company, Gill Industries, Hewlett-Packard, IBM, The Limited, Merck, Micron Technology, OMI International, Proctor & Gamble, Siemens, and Thomson Consumer Electronics.
