Dynamic_Supply_Chain_Alignment_A_New_Business_Mode…_—-_2_Requisite_Collaboration_in_Enterprise_Supply_Chains.pdf
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‘Requisite’ Collaboration in Enterprise Supply Chains1
John Gattorna
‘Collaboration’isoneofthoseconceptsthatisoverusedandoverworkedin the supply chain vernacular. The reality is that for any product (or
service)categoryinagivenmarket,itisveryunlikelythatmorethan25percentofcustomersatbestwillhavetrulycollaborativebuyingvalues.BythisImeanthattheygenuinelyseekcloserelationshipswiththeirkeysuppliers;tendtosingle-source;arebrand-loyal;willshareinformationfreely;areprice-tolerant;and,aboveall,areforgivinginthewaytheytoleratefailures in supply. In other words, they have the perfect customer profile. Yet what do many suppliers do? They ignore these sometimes suffering customers astheyrelentlesslypursueothermoredemandingcustomerswhohavenoneofthevirtueslistedabove.Worsestill,supplierstakeadvantageoftheirloyalcustomersbyusingthemtocross-subsidizetheirmorecostlyeffortsinservicingdemandingcustomers.
deBunKinG some oF the myths
Intheearlyyearsof‘lean’manufacturing,asintroducedandpractisedbyJapanesemanufacturers,itwastakenforgrantedthatsupplierswouldcollaborateinthesystematicjointefforttoeradicatecost,ratherthanjustmove it up and down the chain. This was a given, and all the parties to these selective arrangements benefited. However, as globalization took hold and supply chains became longer and more complex, something was lost in the translation. Today, while there are still supply chains in which the parties collaborate,therearealsomanyothersupplychainsinwhichthisisnotthe case. Indeed, various generic types of supply chains coexist in parallel to provide different supply experiences for customers in the same market. In mybook,Living Supply Chains,2Imakethedistinctionbetweenthosemarketsituationswherecustomersaregenuinelycollaborativeandthosewheretheyarenot.Why?Becauseyouhavetorecognizewhichiswhichanddeliverdifferent ‘value propositions’ via different network configurations. We are now operating in a world where fine nuances make the difference between success and failure, operationally and financially, and you ignore this reality
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Gattorna, J., & Friends (2009). Dynamic supply chain alignment : A new business model for peak performance in enterprise supply chains across all geographies. Taylor & Francis Group.Created from apus on 2023-02-06 15:32:33.
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at your peril. To avoid confusion, I have labelled those supply chains where true collaboration exists as ‘continuous replenishment’.
truly ‘collaBoratiVe’ supply chain conFiGurations
The cultural value that is treasured above all others in a truly ‘collaborative’ supplychainistrust,whichinturnleadstocloseworkingrelationshipsformutualgain.Informationissharedfreely;long-termstabilityintherelationshipisactivelysought,andstrategicpartnershipsareforgedfor mutual benefit. This is the much sought-after‘collaborativezone’asdepictedinFigure1.1inthepreviouschapter(p.48),anditisaconditionthatinevitablytakestimeandpatiencetodevelopandnurture.
However,itisalsoaconditionthatdependsalmostwhollyonthe‘alignment’ofculturesbetweenbuyersandsuppliersinthechain,ratherthananythingmore tangible. This is the part where many executives are either out of their depthorsimplyindenialabout.Why?Becausetheyeitherdon’tunderstandor don’t want to delve into this abyss where all the ‘forces of darkness’ exist in their own organizations.Ihavealwayssaidthatthisistheareaweshouldbefocusingon,ratherthangettingcarriedawaywithPorter’scompetitiveanalysis.Inrealitytherehasbeenanunhealthypreoccupationwithcompetitorsandmonitoringcompetitionoverthelastfewdecades,oftentothe point of paranoia, and this has distracted executives from looking more deeplyattheinternalculturalcapabilityoftheirownenterprises,whereprogressandgreaterunderstandingisgoingtobringgreaterreturnsforthetime, effort and money invested. We will not be able to go to the next level of supplychainperformanceuntilthismountainisclimbedandconquered.
the uniQue suBculture oF ‘collaBoration’
The key is to identify which customers have truly collaborative values andtreatthemasaseparatesegmenttotheothersinyourcustomerbase.Unilever’sformerCEO,AnthonyBurgmansgotitrightwhenhesaid,ineffect,thatyou should only collaborate with those customers and (suppliers) who genuinely want to collaborate.3Fortherest,dowhateveryouhavetodo,butdon’twasteyourtimetryingtobecollaborative–itistoowastefulofresourcesandgoestotheheartofmyobservationthattoomanysuppliersareoverservicingsomecustomersandunderservicingothers,andhavenoideawhichiswhich!
‘Suppliers take advantage of their loyal customers by using
them to cross-subsidize their more costly efforts in servicing
demanding customers.’
Gattorna, J., & Friends (2009). Dynamic supply chain alignment : A new business model for peak performance in enterprise supply chains across all geographies. Taylor & Francis Group.Created from apus on 2023-02-06 15:32:33.
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Sohowdoweshapetheappropriateinternalculturetodrivecontinuousreplenishmentsupplychainstowardsthosecustomerswhogenuinelyseekacollaborativerelationship?Itinvolvesauniquecombinationofstandardresources,asfollows:
Setupaseriesofmultidisciplinaryaccount‘clusters’thatdedicatealltheir attention to specific clients, or groups of clients, who are clearly collaborativeinbothspiritandaction.
Selectpersonnelfortheseteamssuchthatthenetbiasineachteamisoneofempathyforcustomersandstabilityoftherelationship.
Putstandardcustomeraccountmanagementprocessesinplace.
UnderpintheseprocesseswithselectedtechnologiessuchasCustomerRelationship Management (CRM), Vendor Managed Inventory(VMI) and other customer-friendly point applications. This is the rightplacetousesuchsystems,butbewarnedthattheyarenotaseffectiveinothersituationswherecustomersdonotdisplaygenuinecollaborativevalues.
Develop twoor threeKeyPerformance Indicators (KPIs) thatwillhelpyoukeepkeycustomers’(orsuppliers’)relationshipsontrack:for example, length of time the customer has been buying from you; theshareofthecustomer’swalletinaparticularproductcategory.Other KPIs such as forecast accuracy and Delivery-In-Full-On-Time-Error-Free (DIFOTEF) are simply taken for granted in this type of relationship.
Ensure that incentives for internal staff focus on schemes thatencourageparticipationandsharingwithintheservingteam–thereislittleplaceforindividualegosinthissubculture.
Makejobdesignsconsistentwiththeincentivesandinvolvealotofdiscussionandconsensus–fortunatelythereisalwaystimeavailableforalengthyprocesswiththistypeofcustomerbecausetheydon’tlikequickactionandsurprises.
Ensure that there is a lotofpersonal face-to-face communicationswithintheaccountclusters.
Focusmostofthetrainingonteam-building.
Carefully select thepersonnel recruited to account clusters on thebasis of the ‘Feeling’ (or F) dimension in their Myer Briggs Type Indicator (MBTI).
Usealeadershipstyleintheaccountclustersthatistypicallyquitetraditionalinthateverythingisdonebythebookandstabilityoftherelationshipisregardedasparamount.
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Gattorna, J., & Friends (2009). Dynamic supply chain alignment : A new business model for peak performance in enterprise supply chains across all geographies. Taylor & Francis Group.Created from apus on 2023-02-06 15:32:33.
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tInotherwords,theinternalclustersthatservicecollaborativecustomers,across all disciplines, have to ideally reflect the same values as the customers thattheyserve.
‘reQuisite’ collaBoration: a more accurate descriptor
So ‘collaboration’ is a condition that is definitely not for everyone. I prefer tothinkintermsof‘requisite’collaboration–thatis,collaboratingasmuchoraslittleasaparticularcustomerwantsordeserves.Inthiswayyouavoidalotofcostlyoverservicing.Onceyouhave identified the truly collaborative customersinyourmarketplaceyoucantakeaminimalistapproachtocontractsandfocusmoreonnon-bindingMemorandaofUnderstanding(MoUs)thatprovideguidanceforengagingeachother,butultimatelyalwaysrelyon trust. And it works. Research I led in the Asia–Pacific region in 2003 clearlyshowedaninversecorrelationbetweentheperformancesof3PLsin situations where they were locked into rigid and complex contractual arrangements.4
Aswemovebeyondtraditionalbuyer–sellerrelationshipsand3PL-stylesupplier relationships to more complex new supply chain business models (suchas4PLs),itisgoingtobevitalthatthepartnersselectedtojoinsupplychainconsortiumsandjointventuresareculturallyalignedfromtheoutset.
a techniQue to consolidate collaBoratiVe relationships
OnetechniquethatIhavedevelopedovertheyearstohelpfostercollaborative relationships is ‘strategic partnering’. This is a process I have writtenaboutatlengthinLiving Supply Chains,5andinvolvesdevelopingenduringcorporaterelationshipsbasedonunderstandingandsharedknowledge. The process takes its name from developing and maintaining a strategic ‘fit’ between the goals, capabilities and market opportunities of bothbuyerandsellerorganizationsinvolvedinaparticularsituation.The two parties commit to a unique, but not necessarily exclusive, relationship that is key to success, and it works!
‘Not every buyer–seller combination is ready for a collaborative relationship.’
Gattorna, J., & Friends (2009). Dynamic supply chain alignment : A new business model for peak performance in enterprise supply chains across all geographies. Taylor & Francis Group.Created from apus on 2023-02-06 15:32:33.
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notes
1 Adaptedfromanarticle,‘Collaborationinsupplychains–themythandthereality’inSupply Chain Asia,(March/April2008),pp.16–17.
2 J.L.Gattorna,Living Supply Chains, FT Prentice Hall, Harlow, 2006.3 Anthony Burgmans, speaking at the 6th ECR Conference, Edinburgh,
2001.4 ‘Characteristics, strategies, and trends for 3PL/4PL in Australia’, Alpha
ResearchConsortium,fortheLogisticsAssociationofAustralia,2003.5 See Appendix 5C, ‘Strategic partnering’ technique, in J.L. Gattorna, Living
Supply Chains,op. cit.,pp.308–312.
ALIgNmENt INSIghtS
Not every buyer–seller combination is ready for a collaborative relationship. Remember Burgmans’ words: only collaborate with those who want to collaborate.
Where you do choose to collaborate, you need a special type of supply chain configuration – the continuous replenishment supply chain.
The new mantra for business, even in hostile competitive situations, should be to ‘compete in the market, but cooperate in the supply chain’. This is a best-of-both-worlds strategy.
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Gattorna, J., & Friends (2009). Dynamic supply chain alignment : A new business model for peak performance in enterprise supply chains across all geographies. Taylor & Francis Group.Created from apus on 2023-02-06 15:32:33.
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Gattorna, J., & Friends (2009). Dynamic supply chain alignment : A new business model for peak performance in enterprise supply chains across all geographies. Taylor & Francis Group.Created from apus on 2023-02-06 15:32:33.
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