When thinking about creating a collaborative supply chain, imagine that you are a conductor for an orchestra and are raising your arms, preparing the group to begin.

But when they group begins to play, you can’t make sense of the tune because each member of the orchestra is playing from a different sheet of music.

In this scenario, we learn that you have to do more than pull a group together and signal them to begin. You need to be prepared and make sure everyone is on the same page.

This is also true when in the process of a supply chain collaborative system selection or when implementing a collaborative supply chain: Having accurate information that can be viewed by all parties is ideal for good collaboration.

And for many organizations, an IT system may be exactly what they need to achieve a collaborative supply chain.

However, as with any IT systems-supported initiative that involves multiple viewpoints, there are risks that should be realistically formulated before casting the visibility and collaboration net wide for all to take part.

Before we take a look at the risks, let’s run through some core elements of the collaborative supply chain:

• Forecasts – Sales forecasts at the stocking unit and stocking location are valuable information for suppliers providing materials or finished goods. Visibility into the sales forecast is a great place to start. Ultimately, and depending on your own forecasting capabilities, involvement with suppliers in collaborative forecast updates is sure to yield future improvements in forecast accuracy.
• Sales History – This information is similar to forecasts in its value to suppliers. Sales history provides a basis for understanding how forecasts are developed and insight into past activity, which can further secure the supplier’s commitment to your forecast. Sources for sales history may be detailed point-of-sale data or may be a refined version that supports the forecasting process.
• Inventory on Hand – Visibility into inventory on hand provides yet another validation point for suppliers in understanding where their inventory lies within your supply chain. Understanding and managing inventory over time gives additional insight into typical product movement, which may not be evident in the sales forecast or sales history.
• Replenishment Needs – Communicating the replenishment needs to suppliers is central to any supply chain operation, and the need to collaborate in this area is ages old. Typically the transmission of the PO and the acknowledgement from the supplier are the key elements. Email, fax and paper-based operations are the lowest common denominator for many organizations, and moving toward electronic systems is often met with resistance. The more advanced offering that supports collaborative replenishment involves real-time communication of replenishment needs based on the supplier’s order quantity capabilities, followed by a timely acknowledgement that includes any adjustments and later provides an advanced ship notification which represents the shipment(s) that will arrive at your doorstep.

One important factor in acceptance of the meaningful collaborative supply chain is that the relevant, available information is accessible to the appropriate parties involved.

As an example, sending a supplier your sales forecast to a production scheduler via email is a positive step toward collaboration.

However, making that forecast available on a single platform that can be viewed by the supplier’s finance group, sales group, distribution center operations, and transportation providers ensures that they’re all referencing the same version and are planning or operating based on more than delayed or distilled information.

This type of open visibility and collaboration with the right channels is a tricky balance, but the downside of delayed point-to-point communications and related inaccuracies makes the more thoughtful balance worthwhile.

When opening up visibility to your suppliers and leveraging trading partners’ capabilities, there are also risks. These key risk factors include:

• Security of Information – Opening up to suppliers and logistics partners relies on IT systems that provide for data security. In addition, agreements to recognize the data as proprietary for parties involved in the collaborative process should be evaluated.
• Stability and Data Availability – Once the supply chain evolves into the collaborative model, reverting back to manual methods in the event of system downtime could be a considerable disruption. Ensuring system uptime and redundancy of processes is a must.
• Single Version of the Truth – Consolidating all of the elements of the collaborative relationship in a synchronized manner ensures suppliers and logistics partners are reading from the same sheet of music. The flip side of this in terms of multiple point-to-point communications can lead to chaos.

We’re interested in knowing your thoughts on these risks and benefits, as well as what you might be doing to further the collaborative supply chain. Looking forward to your input and comments.

- Matt

Photo credit: Monica Liu

I was doing some catch-up reading on a plane recently and came across a thought-provoking piece by Gartner, a top industry research firm. My mind started to wander after I read and thought about the firm’s 2009 special report, Hype Cycle for Supply Chain Management.

The comment from the report that really had my mind spinning was:

"The common characteristics from the traditional focus of supply chain have been around the portfolio of business processes that make up SCM (Supply Chain Management). ... However, the key learning that has recently come out of this era of economic volatility is the increasing value of information in a supply chain context (for example, the use of Six Sigma in the supply chain has highlighted to companies the need for data to support improvement efforts, as well as the general lack of readily available relevant information)."

I think the report is trying to say that if you want to run a good supply chain, you need to design good processes, and you also need good information about what is happening. Well, of course, that makes perfect sense.

But just in case you’re not into research speak, or if you’re new to the IT and supply chain software game, let me break it down for you.

The "portfolio of business processes that make up SCM" is just a fancy way to describe the variety of methods that you allow you to do the required things to move your product and information through the various steps in the supply chain.

The reference to the "increasing value of information in a supply chain context" just means that in good times and in bad times supply chain information is important. In volatile times – up or down – it is even more important.

When I saw the comment regarding the "general lack of readily available relevant information" it made me think: Do most companies have a good supply of irrelevant data? Probably so.

And the mention of Six Sigma suggested, to me, that without it, most folks wouldn’t know they needed data to support improvement efforts. Six Sigma is definitely a great strategy and objective. But you shouldn’t have to be a black belt to employ common sense or self-defense, should you?

In reflection of Gartner’s research, I came back to a recurring theme that I’ve found in many of my projects: It’s not brain surgery or rocket science; it’s mostly basic blocking and tackling.

So, having good information is not the answer - only the beginning of the answer. To have real value, the information must be able to be applied to processes that allow us to respond and make good decisions. It is not just about information. It is about good processes and good information working together.

You might say, "Well, OK, but what are good processes and good information?"

Good Supply Chain processes (Plan-Buy-Make-Move-Store-Sell) allow you to operate with a supply chain strategy that provides for great customer satisfaction at a minimal total delivered cost.

Good information consists of accurate supply chain visibility into supply and demand and the related costs. This includes knowing the answers to the following questions:

Supply (or Inventory) Data – How much do I have on hand? How much is in transit? When will it arrive so that I can ship to my customers? What method of transportation is utilized to get it here? How much is backordered? And what is needed/planned/forecasted for future periods?

Demand (or Customer Order/Shipping) Data – What have my customers already ordered? What do I plan to ship to my customers in the future? How much of it? When should they expect to get it, and by what method of transportation?

Supply Chain Costs - What are the costs as product moves through the "Plan" to the "Sell" processes (purchase price, transportation charges, customs, duty, taxes, etc.)?

This is it, simple. Why do folks try to make this so difficult? Let me know what you think.

David

Photo credit: mansionwb