In the Press

"Expert Insight: Living Supply Chains"
Supply Chain Digest, May 8, 2007 - by Dr. John Gattorna

Supply Chain Collaboration: How Far Do You Go?

We often worry to much about the competition, and not the enemy within.

"Collaboration" is one of those concepts that is over-used in the supply chain vernacular. The reality is that for any product or service category in a given market, it is very likely that no more than 25% of customers at best will have truly collaborative buying values. By this I mean that they seek close relationships with their key suppliers; tend to single-source; are brand loyal; will share information freely; are price tolerant; and above all are very forgiving. In other words, the perfect customer profile. Yet what do many suppliers do? They ignore these genuine customers and relentlessly pursue the more demanding unpredictable customers who have none of the virtues listed above. Worse still, suppliers take advantage of their loyal customers by cross-subsidizing their more costly efforts in servicing demanding customers.

De-bunking Some Supply Chain Collaboration Myths

In the early years of 'Lean' manufacturing as introduced and practiced by Japanese manufacturers, it was taken for granted that suppliers would collaborate in the systematic effort to eradicate cost, rather than just move it up and down the chain. This was a given, and all the parties to these selective arrangements benefited.

However, as globalization evolved and supply chains became longer and more complex, something was lost in the translation. Today, while there are still supply chains where the parties collaborate, there are also many other supply chains where this is not the case. Indeed, the various generic types of supply chains co-exist in parallel to provide different supply experiences for customers in the same market.

In my book, Living Supply Chains, I make the distinction between those market situations where customers are genuinely collaborative, and those that are not. Why? Because you have to recognize which is which and deliver different value propositions via different network configurations. We are now operating in a world where nuances make the difference between success and failure, operationally and financially, and you ignore this reality at your peril. To avoid confusion, I have labeled those supply chains where true collaboration exists as ‘Continuous Replenishment’.

Truly Collaborative Supply Chain Configurations

The cultural value that is treasured above all others in a truly ‘collaborative supply chain is trust, which leads to close working relationships for mutual gain. Information is shared freely; long-term stability in the relationship is actively sought, and strategic partnerships are forged for mutual benefit. This is the ‘collaborative zone’, and it is a condition that inevitably takes time to achieve.

However, it is also a condition that depends almost wholly on the’ alignment’ of cultures between buyers and suppliers, rather than something more tangible. This is the part where many executives are either out of their depth or simply in denial. Why, because they either don’t understand or don’t want to delve into this abyss where all the forces of darkness exist, in their own organizations.

I have always said that this is the area we should be focusing on rather than getting carried away with Michael Porter’s competitive analysis. In reality there has been an unhealthy preoccupation with competitors, often to the point of paranoia, that has distracted executives from looking more deeply at the internal cultural capability of their own enterprises, where progress and greater understanding is going to bring greater returns for the time, effort, and money invested. We will not be able to go to the next level of supply chain performance until this mountain is climbed and conquered.

Next week, we’ll look at look at some of the keys to doing so.

Gattorna Says:

This is the part where many executives are either out of their depth or simply in denial. Why, because they either don’t understand or don’t want to delve into this abyss where all the forces of darkness exist, in their own organizations.

« Back to Press listing