Expert Insight: The Executive View
  By Gene Tyndall  
  March 19 , 2007  
  The Lack of Progress in Supply Chain Collaboration - Why?  
  Optimization is good, but too many companies ignore the benefits of collaboration  
Tyndall Says:
Why do the collaboration business cases not seem compelling to many companies, despite the evidence of successful results?

What do you say? Send us your comments here

Reports from the 2007 National Retail Federation Conference in January indicate that – at least from a technology perspective – the “academy award” for the “Best Technology Finally Becoming Mainstream” would go to Optimization, with Point-of-Sale (POS) winning the “best supporting award.” 

As most are aware, the NRF is the largest conference of Retail executives and suppliers of the Year, held annually in New York.

Nominated often, but failing to win, are RFID and Collaboration, due to their lack of implementation traction and compelling business cases.  It is rewarding that Optimization has won this year, as it is finally being recognized as a productive means to determine the best solutions to quantifiable problems – and Retailers are employing more cross-functional teams and advanced tools to find the best solutions to questions such as: the optimal number of stores in a trading area, and their best locations;  and, questions of store formats, product line mix, and the myriad of replenishment and other supply chain operations issues that best fit into optimization models.

Enough has been written and discussed about the RFID challenge – namely, the difficulties in developing an ROI that is compelling, inasmuch as the costs of large-scale implementation still often outweigh the perceived benefits.  This challenge will, I believe, work its way out over the next few years, as costs come down, and we determine better ways to exploit the volumes of data collected from automatic identification of containers, pallets, boxes, and items, throughout the supply chain.

What is worthy of discussion and further debate now, however, is the continuing lack of progress in Collaboration.  Similar to “visibility”, the term collaboration has been on our minds for over a decade, as we supply chain leaders recognize its powerful value, if done effectively, to improve supply chain performance, in each and every industry.  In Retail and Consumer Goods, the industry initiatives for ECR, and CPFR, identified enormous savings potential in supply chains.  While some progress has been made, and advanced computer-based tools now exist; much more needs to be done.  The VICS program continues to work toward this goal.

Yet in other industries, very little progress has been made.  The “continuous  process of sharing, partnering, connecting, and aligning to improve supply chain performance,.for win-win benefits” – which is what Collaboration really is – is stalled, at best.  The challenges have mostly been cited:  trust; cultural differences; organizational barriers; unsustained executive commitment and involvement; technology differences; and others.

In addition, the “why, with whom, for what, when, and where” questions persist.  Moreover, performance metrics, and terms and conditions, stifle many attempts even when an initiative gets started.

In assisting and advising many clients in getting collaborative initiatives going over the years, I have learned and faced these challenges and barriers first hand. Yes, these are not easily overcome; it takes hard work and sustained commitments.  But, it is really all about people, leadership, commitment, and methods.  If these critical three are enabled, then Collaboration can be built, continued, improved, and yield win-win benefits.

Company leaders have to decide to do it; people in their companies have to want to do it, and be rewarded for doing it right; all parties have to stay committed for a long time; and, the right methods have to be employed to enable it to succeed.  Too much to ask?  Why?

Why are the business cases not compelling?  There continues to be excessive inventories in every supply chain pipeline.  Companies still produce more than they can sell, or the wrong products at the wrong place at the wrong time.  Demand forecasts continue to be wrong most often. Returns continue to grow.  Transportation continues to include unnecessary routes or loads.  The list goes on.  Why can’t we get the business cases right?

Companies invest $billions in supply chain visibility, yet wonder what to do with the real-time information.  They have spent funds and years to develop “optimal supply chain plans”, only to see them obsolete because trading partners had different plans.  Now, they invest in supply chain execution, only to see problems of synchronization because trading partners are not aligned well enough.

It is not only a problem among trading partners. Internal gaps still exist in the Sales and Operations Planning (S&OP) process.  Again, while we know that Sales and Operations should collaborate on what to produce, where, and when, the process is rarely streamlined and effective. Why?  Just as with trading partners, it is people, leadership, commitments, and methods that are constraining and limiting success.

Perhaps the Japanese business models include the ultimate answers.  Interlocking Boards can also translate into common goals and objectives.  But, Toyota and Honda have proven that close-knit supplier networks can be adapted to North American companies to manage costs, improve quality, develop innovative new products and processes faster than competitors, and achieve win-win continuous improvements.  Why can’t others?

Effective Collaboration can be planned, tested, and implemented.  There are positive examples in effect.  When the leaders, people, and commitments are in place and in agreement, and the right methods are employed, powerful value is created in the supply chain.  We just need to get it right, not give up on it, and fix it when it goes off course.

Agree or disgree with our expert's perspective? What would you add? Let us know your thoughts for publication in the SCDigest newsletter Feedback section, and on the web site. Upon request, comments will be posted with the respondents name or company withheld.

  Send an Email