We have all heard about the benefits of collaborating with your supply chain partners. And yet, it is still something that most companies struggle to do effectively. To help, the University of Tennessee, Knoxville, which has one of the most well-respected supply chain programs in the United States, has released a white paper that details some of the best practices for supply chain collaboration.
"End-to-End Supply Chain Collaboration Best Practices" by The Global Supply Chain Institute at the University of Tennessee is based on interviews with 17 companies across eight industries that faculty members considered innovative in the area of collaboration. Based on those interviews, The Global Supply Chain Institute has identified seven collaboration best practices. These include:
1. Make collaboration a priority. Supply chain executives need to make effective collaboration a priority—internally as well as externally—and they need to communicate this priority through one-on-one discussions, leadership meetings, performance reviews, organizational information meetings, monthly scorecard reviews, and strategic action plans, according to the report.
2. Develop leaders that have experience across the entire supply chain. According to the report, in order for supply chain executives to effectively drive collaboration, they need to understand the entire supply chain from end to end. A company can develop that type of leadership by making sure its top talent participates in many different types of supply chain assignments and projects that span the supply chain —from working with their supplier's supplier to product consumption.
3. Create a collaboration culture. Collaboration can take a lot of open-front work and may require some major cultural shifts, according to the report. Leaders need to recognize that collaboration can go against the supply chain department's short-term goals and may require changes to the department's performance scorecard and metrics. To ensure that a collaborative atmosphere sticks, leaders need to model collaborative behavior in every visible activity from how they solve problems, to how they set pay and benefits, to how they behave during top-level sales and operations planning meetings, and who they invite on facility tours.
A collaborative culture can also be built by trusting your partners first instead of expecting them to earn that trust. In other words, believe that other disciplines, functions, and partners will do their job the right way until there is an issue. Then when there is an issue, work to fix the trust problem.
4. Create business and supply chain measures that are based on total value. Most companies' supply chain scorecards measure safety, cost, quality, reliability, and customer service. The University of Tennessee paper recommends that scorecards should also include a value assessment for inventory, quality, and responsiveness. It should also evaluate the value of time such as overall supply chain time, material cycle time, production cycle time, and new initiative launch timing. These measures should be developed in partnership with finance leadership and should rely on activity-based costing, according to the paper's authors.
5. Make sure everyone has the collaboration tools, systems, and data they need. To collaborate, partners need to have access to the same easy-to-understand data. This might require making sure everyone has access to the same data-sharing tools and agreeing on using the same definitions for particular measures. Additionally, partners will need systems and tools that enable collaboration. This may require not only having virtual tools, such as software systems and artificial intelligence, but also having established processes and procedures such as monthly reviews, project meeting structures, meeting spaces, and facility tours.
6. Develop a robust structure for creating external collaboration teams. Organizations can benefit from having a standard operating procedure for collaborating with external partners. Such a procedure might include using a segmentation process to determine what level of collaboration (if any) is required for each partner. (For example, organizations will collaborate more with strategic suppliers of high-cost materials or services than they would with suppliers of low-cost commodities.) Once the company has determined the level of collaboration, the procedure may require top-to-top meetings between partners to discuss how to align and approve the work. The next step may be to make sure the team has what it needs to do the work (such as proper staffing and facilities, confidentiality agreements, and budgets).
7. Have an effective sales and operations planning (S&OP) process. The paper argues that, "businesses with an effective S&OP process deliver better results than those without it." That's because when demand and supply integration is done correctly, all parts of the business focus on the benefit to the total enterprise as opposed to functional rewards or cultural systems.
While all of these seven practices are important, the paper stresses one key point: Companies should not pursue collaboration just for the sake of collaborating. Instead like all important supply chain initiatives, they must make sure that there is a clear return on the investment. In other words, the collaboration must create value.