A New Perspective: Collaboration Across the Supply Chain

Collaboration Within the Supply Chain

During or immediately after a crisis, “rethinking” is a common refrain. It’s time for reflection and adapting to the new reality. But does that also apply to the supply chain? And how can IT contribute?

Alistar explores the possibilities of collaboration, sustainability, and ethics in the supply chain. And yes, there’s still a lot to be gained in the field of finance by thinking outside the box!

A New Era in Logistics

Collaboration in the supply chain is not a matter of “putting economic interests aside for the time being.” In fact, collaboration in the supply chain is a powerful tool for reducing costs. In addition, research shows that employees perceive this form of collaboration as more enjoyable and sustainable.  

According to Jan Rotmans (professor at Erasmus University Rotterdam), we are not living in an era of change, but in a change of era, and society is shifting toward a decentralized, bottom-up network society. He believes this transition is irreversible. It involves a fundamental shift in the way we think, organize, and act. Technology is essential to this process, but personal transformation, patience, and trust are particularly important. Does this also apply to the supply chain? 

Yes, the need for collaboration across the supply chain became painfully clear this year due to the Suez Canal blockage. Every day that the Suez Canal was blocked, $9 billion worth of goods was delayed. An ad hoc ‘Suez Coordination Group’ was established—a consultative body to support terminals in handling the delayed container ships.

These discussions led to more efficient use of the existing infrastructure outside the terminals—something that could have been achieved much earlier through supply chain collaboration. Due to a lack of communication among the parties involved, the consequences are still being felt.

Long-Term Thinking in the Supply Chain

If supply chain collaboration is such a powerful tool, why isn’t it used more often and more effectively in the supply chain? The answer is: short-term thinking and a lack of trust.

Companies have often lost sight of their true mission, even though it’s prominently displayed on their websites. They often focus primarily on maximizing profits. They do this by “squeezing” suppliers on the procurement side and compromising on quality on the production side.

In the short term, this may yield the desired financial results, but when companies focus on their mission, it ensures greater continuity in the long term. Logically, this also benefits the bottom line.

Striving for Customer Excellence Throughout the Supply Chain

In the supply chain involving suppliers, manufacturers, wholesalers, and retailers, there are conflicting interests, and coordination among autonomous organizations is a challenge. Even within a single company, it is often difficult to align the internal supply chain (purchasing and sales).

Creating a shared sense of loss, gain, and risk requires a different form of communication: a culture of openness, transparency, and mutual trust. The parties involved make themselves vulnerable so that any problems are widely shared and resolved together. 

According to Jack van der Veen (professor of Supply Chain Management at Nyenrode), Operational Excellence is no longer applicable in the supply chain, and we should instead strive for Customer Excellence. The underlying principle here is that the supply chain is always customer-focused. But how does that work?

Chain Collaboration in Practice

Working on the basis of trust is an absolute prerequisite for supply chain collaboration. In addition, concepts such as ‘fair,’ ‘honest,’ ‘transparent,’ and ‘open’ play a major role. But supply chain leadership is also needed: authority rather than power, and information sharing must be facilitated.
 
Sharing information through digitization (Supply Chain Portal) creates a win-win situation in long-term relationships, particularly through learning effects that enable continuous process improvement. This approach also helps reduce waste (costs and effort). 

Under traditional arrangements, the contractor must carry out the client’s assignment, and both parties pursue their own interests. Because there is an information asymmetry (the contractor has the most knowledge and information), the contractor has the advantage and can make decisions that shift the risk to the client, without the client being able to fully understand the implications.

To prevent this, the client can put the work out to bid to get the best deal, draw up contracts that set out all the terms, and implement contract management to monitor the contractor and ensure compliance with the agreements. 

In the context of long-term supply chain collaboration, these measures are less necessary. Of course, agreements must be made, but through transparency and a shared (customer-focused) goal, the parties—which are not the same but are equal—can achieve greater efficiency.

A concrete example is a manufacturer that uses a supply chain portal to provide both its suppliers and regular customers (wholesalers) with insight into its logistics processes. This supply chain collaboration leads to improved efficiency for all parties and a greater focus on serving retailers and/or consumers faster and better. A true win-win-win situation.