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

Tags: inventory, collaborative supply chain