With China emerging as a manufacturing superpower at the same time as the European Union began to flex its collective strength, the past several decades has seen supply chains become increasingly more sophisticated and complex.
Any enterprise with serious global ambitions realized that to compete globally meant they needed to effectively source globally. With the complexity brought on by rapidly expanding supply chain networks, expanding global markets for finished products, and facilities around the world supporting those growing markets, it has become absolutely essential to the optimal performance of supply chains that all involved parties are completely committed to frictionless supply chain collaboration.
Levels of Collaboration
Effective collaboration with supply chain partners requires that your organization share valuable information in real time. You are trying to create, through near-transparent communication, a network of collaborators to act as an extension of your efforts to get the right product to the right customer in the right market at the exact time they want and need it. Sounds simple, right?
What kinds of collaboration are we talking about? According to Supply Chain Digest, there are three general levels of supply chain collaboration.
Level 1: Transaction integration. This involves the automation of business processes and transactions, using EDI, the Internet, or proprietary tools. At the execution level, you and your partners exchange transactional data such as:
- Purchase orders, work orders and sales orders
- POS information
- Credit and debit notes
Level 2: Supply chain management information sharing. EDI, the Internet, or proprietary tools are used at this level to give partners information that helps them make the best decisions. Types of information being shared include:
- Production or component forecasts
- Production and transportation plans and capacities
- Bills of material (BOMs)
- Product descriptions
- Prices and promotions
- Product and material availability
- Service levels
- Contract terms, such as supply capacity, inventory, and services
Level 3: Strategic collaboration. At this level you and your partners are taking part in joint planning, process redesign, as well as sharing some level of risk and reward. You will be making collaborative decisions on issues like:
- Improving the accuracy of forecasts
- Strengthening strategic supply chain relationships and profitability
- Enhancing sales and operations planning
- Accelerating and managing demand plans, direct material procurement and fulfillment throughout the supply chain
- Resolving critical supply chain events
- Production capacities
- Production facility and fulfillment network expansion
- Pricing plans
Benefits of Supply Chain Collaboration
“Knowledge is power,” as they say, and in the case of supply chain collaboration, sharing of information leads to enhanced knowledge across the chain that allows you to achieve:
- Lower inventory levels and higher inventory turns
- Lower transportation and warehousing costs
- Lower out-of-stock levels
- Shorter lead times
- Improved customer service metrics
- Visibility into customer demand and supplier performance
- Earlier and quicker decision-making
Transparency and collaboration can be difficult to execute, but well worth the effort when you consider the potential reduction in risk and costs, and improvement in customer satisfaction and loyalty. A recent survey of roughly 1,000 supply chain executives found that organizations that engaged with suppliers at any of the levels described above were 38% more likely to achieve or surpass their expectations and have their initiatives result in cost reductions. (2012 survey by Deloitte, in conjunction with ASQ, Institute for Supply Management, and Corporate Responsibility Officer Association)
Supply Technologies’ single ERP system allows effective, efficient collaboration to whatever level the customer is comfortable with. Our system has the flexibility to allow everyone, at every location across the globe, to understand what is happening when and where, in real time, via an easy-to-navigate dashboard. The platform is able to manage massive amounts of current inventory specifics and has the power to analyze past activities, anticipate future needs through “what if” modeling, understand and plan replenishment cycles, manage accounting functions, track productivity and collaborate throughout the entire supply management process. The system also has the transparency and interoperability to integrate completely with customers’ systems, even if it is a patchwork of legacy systems.
If you are losing sleep because you cannot get the idea out of your head that your supply chain has not achieved the level of system-wide collaboration necessary to provide your enterprise the best combination of cost control, quality delivery, and customer satisfaction and loyalty, do yourself a favor and talk to someone who spends every day making supply chain perform better. And if you do not know who to call, call me or one of my associates. I am sure we can help.