First Thoughts
  By Dan Gilmore - Editor-in-Chief  
  November 8, 2007  

Supply Chain Collaboration 2007 – Buy, Sell or Hold?

Gilmore Says:
My quick take: I still stand by my prediction that the two ends of the spectrum will tend to grow, and the middle will shrink. Not dramatically, but some. We’ll be watching closely.

What do you say? Send us your comments here

Every time I start to get cynical on supply chain collaboration, I run into a few things that help me change my mind again.

Why the frequent cynicism? A variety of reasons – for example, I think the term collaboration is way over used, watering the meaning down. Integrating business systems in some way may be a good thing for both sides, but doing so doesn’t make it collaboration. I may have told this story before, but a couple of years ago I had to stop a TMS vendor which was talking to me about new tools to “collaborate” with carriers through web-based tenders and acceptances. The implication, I said, was that somehow traditional carrier EDI wasn’t collaboration, but the second you put the process on the web, it was. Nonsense, of course.

Second, I don’t think in many respects we’ve made much real collaboration progress. In many industries, as SCDigest Executive View columnist Gene Tyndall recently noted, collaboration “is stalled, at best.” (See The Lack of Progress in Supply Chain Collaboration - Why?.)

In the consumer goods-to-retail sector, I just don’t think Collaborative Planning, Forecasting and Replenishment (CPFR) has really met expectations, which started all the way back in 1999. In fact, in a recent issue of the new CSCMP magazine Supply Chain Quarterly, analyst Rich Sherman asked “Why Has CPFR Failed to Scale?," arguing that “for CPFR to realize its global promise and improve overall industry performance, it will have to return to its roots. That means separating the processes for managing and shaping demand from the processes for replenishing product based on actual demand.”

To which Joe Andraski, someone I have a lot of respect for and who is president of VICS (the retail and consumer goods organization that promulgates the CPFR concept), responded that he did not “agree with the author's contention that CPFR has failed to scale. Scale does not mean conducting CPFR with 100 percent of companies' trading partners. Scale may mean collaborating with the 20 percent of trading partners that represent 80 percent of sales.”

Take your pick.

Back to the positive. I recently moderated a simply outstanding panel discussion on supply chain collaboration at the 2007 CSCMP Conference. I called it SCM Collaboration: Buy, Sell or Hold?, taking off on the common question asked of investment gurus on a particular stock. The idea: are you positive, negative, or in-between on the potential and reality of collaboration?

The panel featured Tom Dadmun, VP of Supply Chain at high tech company Adtran, Greg Kaiser, VP of Supply Chain Strategy at Hershey, Mike Slattery, Director Customer Service Operations at Campbell’s, and Nigel Jones, Director of Supply Chain for Fonterra of New Zealand, a co-op that is also the world’s largest dairy products exporter.

Getting to the end of the story, I would absolutely say our panelists were all “buyers” of collaboration – if it’s done right, as each of these companies appears to be doing.

Even though three of the four were in consumer goods-related industries, I was struck at the breadth of their thinking and practice of collaboration in general, which was only tangentially related to CPFR if at all.

Some examples:

  • Campbell’s has a retail customer that was moving to new automated distribution systems. The retailer contacted Campbell’s, requesting that it change a large number of its case pack configurations to make them more suited for the new system. In the end, Campbell’s and the retailer sat down and reviewed the opportunities and costs SKU by SKU. Where it made sense (Campbell’s could do with little or no cost impact), it did. Where it didn’t (negative impact on supply chain costs), they kept the current case pack, and that was just fine with the retailer. The key – jointly looking at total supply chain costs. Smart.
  • Much of Hershey’s volume comes in the Halloween season, and much of that is shipped in special displays that contain a lot less product for the cube than regular shipments. The result – very high transportation costs that cut into profits. Kaiser and his team looked at this, and came up with some ideas that could meet merchandising needs but lower transport and handling costs. They approached a major retailer with the program, which required some ordering and logistics changes on the retailer’s end as well. The retailer accepted the program, resulting in a strong positive impact to both sides.
  • As part of its supply chain transformation, Adtran needed new capabilities and services from its suppliers. It could have tried the “compliance” route, just issuing mandates. Instead, it offered a program through which vendors could become “advantaged” suppliers – with the potential to earn more Adtran business for reaching that status. It was a success. At a supplier meeting, Dadmun noted that the suppliers’ support had helped Adtran grow 24% that year – but then put up a chart showing the advantaged suppliers’ share of business with the company had grown even more, at 36%.
  • Fonterra and global logistics partner Maersk evolved a major logistics relationship into what is basically a joint venture, enabling the two companies really to operate as a single unit, not only driving efficiencies but opening new business opportunities for both.

I wish I had more room. I have only scratched the surface of the outstanding panel discussion. I also recently attended an excellent session of Dr. John Langley’s Supply Chain Executive Forum at Georgia Tech, where the theme of the two-day event was collaboration. More on that later.

My quick take on collaboration overall:

  • 75% of the battle is simple communication, which seems like it should be so easy but ends up being the barrier.
  • As Slattery said in Philadelphia, you need to focus on collaboration with companies that have both the willingness and the capacity to collaborate. It’s generally a waste of time pursuing collaborative opportunities if the partner is lacking in either.
  • Funny how a true win-win, as all four of these example were, seems to lead to more rapid adoption and ultimate success.

So, I too am a “buyer” of supply chain collaboration, but think this is a “stock picker’s market,” if that analogy makes sense.

What is your opinion on the state of supply chain collaboration? Do you have any successes to share? What are the real keys to success? Let us know your thoughts at the Feedback button below.

Let us know your thoughts at the feedback link below.

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