Expert Insight: Living Supply Chains
  By Dr. John Gattorna  
  June 20 , 2007  
  Supply Chain Collaboration: How Far Do You Go? (Part 2)  

The Unique Sub-Culture of Collaboration, Plus Keys to Making Collaboration Work

Gattorna Says:
The key collaboration success is actually simple: identify which customers have truly collaborative values, and treat them as a separate segment to the rest in your customer base. 

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In part one of this column, we looked at some myths about supply chain collaboration, and presented a model for truly collaborative supply chain configuration (see Supply Chain Collaboration: How Far Do You Go?)

The key collaboration success is actually simple: identify which customers have truly collaborative values, and treat them as a separate segment to the rest in your customer base. Unilever’s former CEO, Anthony Burgmans, got it right when he said, in effect, that you should only collaborate with those customers and (suppliers) who genuinely want to collaborate. For the rest, you do whatever you have to do, but don’t waste your time trying to be collaborative- it is too wasteful on resources, and goes to the heart of my observation that too many suppliers are over-servicing some customers, and under-servicing others, and have no idea which is which!

So how do we shape the appropriate internal culture to drive continuous replenishment supply chains towards those customers who genuinely seek a collaborative relationship? It involves a unique combination of our standard resources as follows:

  • Set up a series of Account Management teams that dedicate all their attention to specific clients or groups of clients.
  • Select personnel for these teams such that the net bias in each team is one of empathy for customers and the stability of the relationship.
  • Put standard Customer Account Management processes in place.
  • Underpin these processes with selected technologies such as Customer Relationship Management (CRM); Vendor Managed Inventory (VMI); and other customer-friendly application systems. This is the right place to use such systems; they are not as effective in other situations where customers do not display collaborative values.
  • Develop 2 or 3 Key Performance Indicators (KPIs) that will help you keep key customer (or supplier) relationships on track, e.g., length of time the customer has been buying from you; the share you have of the customers spend in a particular product category; and similar.  KPIs such as forecast accuracy and Delivery-in-Full-on-Time-Error-Free (DIFOTEF) are simply taken for granted in this type of relationship.
  • Incentives for internal staff should focus on schemes that encourage participation and sharing within the serving team- there is little place for individualism in this sub-culture.
  • Job designs have to be consistent with the incentives and involve a lot of discussion and consensus- fortunately there is the time available for a lengthy process with this type of customer because they, themselves, don’t like quick action and surprises.
  • There is a lot of personal face-to-face communications within Account teams.
  • The focus of most training is on team-building.
  • The personnel recruited to Account teams are carefully selected on the basis of the ‘Feeling’ component in their respective Myer Briggs Type Indicator (MBTI).
  • Leadership of the Account teams should be quite traditional in that everything is done by the book, and stability of the relationship is regarded as paramount.

In other words, the internal teams who service collaborative customers, across all disciplines, have to ideally reflect the same values as the customers they serve.

‘Requisite' collaboration is a more accurate descriptor.

So ‘collaboration’ is a condition that is definitely not for everyone. I prefer to think in terms of ‘requisite’ collaboration, i.e., where you collaborate as much as, or as little as a particular customer wants or deserves. In this way you avoid a lot of costly over-servicing. Once you have identified the truly collaborative customers in your marketplace you can take a minimalist approach to contracts, and focus more on non-binding Memoranda of Understanding (MoU’s) that provide guidance for engaging each other but, in the end, rely on trust.

And it works. Research I did in Asia Pacific in 2003 clearly showed an inverse correlation between the performance of 3PLs in situations where they were locked into rigid and complex contractual arrangements.

So too, as we move beyond traditional buyer-seller relationships and 3PL style supplier relationships to more complex new supply chain business models (such as 4PLs), it is going to be vital that the partners selected to join supply chain consortiums and joint ventures are culturally aligned from the outset.

A Technique to Consolidate Collaborative Relationships

One technique that I have developed over the years to help foster collaborative relationships is ‘Strategic Partnering.' This is a process I have written about at length in Living Supply Chains, and involves developing enduring corporate relationships based on understanding and shared knowledge. The process takes its name from developing and maintaining a strategic ‘fit’ between the goals, capabilities, and market opportunities of both organizations involved in a particular situation. The two parties commit to a unique but not necessarily exclusive relationship- that is the key.

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