The impact of collaborations in supply chains

Context:

The effects of collaborative planning, forecasting and replenishment in the performance of supply chains have been discussed in the literature. In this research paper, the researchers posit that these effects along with other collaborative factors influence the success of collaboration in supply chains. The objective of this paper is to uncover the impact of collaborative planning, collaborative decision making of supply chain partners and collaborative execution of all supply chain processes in the success of collaboration.

Results:

The results of the analysis confirm that the factors of collaboration impact the success of supply chains that will lead to future collaborations. Collaborative execution of supply chain plans will also have an impact on future collaborations.

Relevance:

Companies that are interested in supply chain collaborations can consider engaging in long-term collaboration depending on the success of current collaborations. This will help SC partners to make investment decisions particular to collaboration.

Reference:

Usha Ramanathan, Angappa Gunasekaran, (2014). Supply chain collaboration: Impact of success in long-term partnerships. International Journal of Production Economics, Elsevier. http://www.sciencedirect.com/science/article/pii/S0925527312002290

Expert opinions

The results of this research suggest that long-term collaboration influences the succes of companies. Still companies distance themselves from collaboration. Experts explain why some companies do not collaborate (anymore) and they explain why they should collaborate (again).

 

'Supply chain collaboration is a hot topic today—and no wonder: companies that collaborate effectively across the supply chain have enjoyed dramatic reductions in inventories and costs, together with improvements in speed, service levels, and customer satisfaction.

Collaboration between companies—joint initiatives that go beyond their normal course of day-to-day business, with the aim of delivering significant improvement over the long term—is particularly attractive for the consumer packaged goods (CPG) sector. With pricing under pressure from recession-scarred consumers, the temptation for retailers is to transfer the pain upstream to their suppliers by passing on price reductions and forcing them to bear an increasing share of costs. On the supply side, however, there is less and less room for manufacturers to absorb additional costs as volatile input prices put the squeeze on margins and the marketing investment required to differentiate branded products from private-label competitors continues to rise.

CPG players are looking at collaboration initiatives as a way out of the damaging spiral of antagonistic relationships. That’s one reason why collaboration efforts between manufacturers and their retailer customers have dramatically grown in popularity in recent years. That was clearly evidenced in the 2008 annual Customer and Channel Management (CCM) Survey, conducted by McKinsey & Company, Nielsen, and the Grocery Manufacturers Association, when chief executive officers in the CPG industry identified collaboration with partners as their highest strategic priority. In the 2010 edition of the same survey, more than 80 percent of the companies surveyed said they were involved in at least one collaboration initiative, and some were involved in as many as 10 such arrangements.' - Source: Luis Benavides, Verda De Eskinazis, and Daniel Swan

Long-term sustainability 

'The reality is that close relationships can often make the difference between long-term sustainability of the business and short-run dissolution.

At the University of Tennessee, our research shows that world class supply chains benefit in many ways from collaboration - even in times of severe economic stress. These benefits extend beyond improved efficiency and effectiveness to include helping all the supply chain members meet customer demands, grow markets, and increase competitive market share.

One of the greatest benefits from long-term supply chain collaboration (and one that consistently delights operationally oriented managers) are the cost savings that result from routinized procedures over the life of the relationship. When buyers and suppliers begin a relationship, there interactions often are fraught with inefficiencies and expensive organizational idiosyncrasies, adding to the cost of doing business in year one. In year two, however, procedures typically become more streamlined, kinks in IT are worked through, and interpersonal relationships between organizations become more efficient.' - Source: Matthey Myers

Profitable relationships 

'The longer the relationship, the more indirect costs—operational and otherwise— are reduced. These cost savings are shared by both buyers and sellers, increasing the benefits to both. They can also be passed on to customers in the form of lower prices, thereby increasing the supply chain’s position in the competitive landscape.

As supply chain relationships extend in time, it is critical to remember that, while both partners’ share of the benefit pie will grow, each share will not necessarily grow at the same rate. Too often, a lack of understanding around this point, has caused acrimony between the supply chain partners. And because of the unrealistic expectations of both parties, otherwise profitable relationships have deteriorated. ' - Source: Matthey Myers 

Luis Benavides, Verda De Eskinazis, and Daniel Swan: 'Consumer packaged goods companies can greatly improve their prospects for success by taking a thoughtful approach to the areas they select for collaboration, their choice of partners, and the way they implement their collaborations. Based on our experience, we have identified six essential steps summarized in the image below that can make the difference between a productive collaboration and a frustrating one.'

Six steps - McKinsey & Company 

 

References:

 

Edited by Eline Ammeraal

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