More strategic supply chain collaboration is where companies are headed in the next decade. Suppliers and end-users will not only share data but also work together to streamline the supply chain. Consider these examples of collaboration: Massachusetts-based Bose Corp. has given its cabinetry and electronics suppliers the authority to spend its money whenever they need to order more parts. Meanwhile, at New York-based NexPress Solutions LLC, "smart" digital printing presses can detect when they are running low on spare parts, toner and ink and go online to purchase the required supplies. Such arrangements illustrate a more seamless supply chain, but it will take a while before most companies can switch to this model.

Information sharing is a prerequisite to collaboration, but companies still have a long way to go from there. "Companies are going to have to go beyond that and change roles and responsibilities (in the supply chain) in order to optimize the supply chain," says Scott Elliff, president and CEO of Virginia-based Capital Consulting & Management Inc. (CCMI). "Sharing data is nice. It is a good start. But it is a misperception to think that information sharing constitutes collaboration. That doesn't take collaboration far enough. You need to use information in the supply chain to change the decision-making process and to get people involved on a proactive basis in order to capitalize on opportunities—not just prevent problems." In short, companies not only have to share data but also strategic business initiatives to achieve true collaboration.

Companies are already making some headway into true collaboration with the integrated supply channel, which has been flourishing. In fact, integrated supply is expected to grow up to 25% in 2002, says a recent report by Chicago-based management consultant firm Frank Lynn & Associates, Inc. Chairman and founder Frank Lynn defines this supply model as an outsourcing arrangement between end-user and supplier. They form a long-term partnership whereby the supplier takes charge of the procurement and delivery of MRO (maintenance, repair and operations) products for the end-user. More and more companies are entering into these relationships as reflected by the industry's 18% growth rate last year, during which the integrated supply market reached $12 billion. "The 2001 growth rate was astounding, since it occurred in an MRO market that was down 7-10%," says Lynn.

Several factors are driving the trend towards supply chain collaboration. For one, companies are beginning to realize that "there is not a whole lot that you can do to improve the supply chain that doesn't involve collaborating with each other," says C. John Langley Jr., professor of supply chain management at Georgia Institute of Technology, Atlanta. Companies simply cannot afford to disregard this trend. "The benefits—and the consequences—are too great to ignore," says Langley. "The future of supply chain leverage lies in integration excellence, channel excellence and network excellence—not functional or process excellence." Another trend driver is the mounting complexity of the manufacturing process. In response, analysts say, suppliers, end-users and retailers must work together to improve delivery time, forecast accuracy, order fulfillment, cycle time and inventory turnover.

There are several barriers to supply chain collaboration, however. The first is cost. Companies are often reluctant to spend on the technologies required by full collaboration. Another concern is trust. Businesses are wary about divulging information to others. "Most companies don't want to share information that creates a (market) differentiation for them unless it is with a partner that they can truly trust," says Gerald McNerney, senior analyst of supply chain services, AMR. While the creation of trading and e-business standards is helping to alleviate the trust issue, significant relationship management challenges remain—such as building a rewarding partnership. "Companies have to move beyond that 'this is what I said' attitude and give their most strategic partners a reason why collaboration is important," says Karen Peterson, vice president and supply chain research director at Connecticut-based research firm Gartner, Inc. "They need to create win-win relationships."

The transition to true supply chain collaboration will not be easy, analysts say, but it is a necessity. "Companies that fail to reengineer their rigid supply chain structures will suffer," says Peterson. "You will need to do it (move toward full collaboration) so that you don't have a disadvantage." In addition, companies must realize that collaboration is not a quick fix, but requires a long-term commitment. "It is people, process and technology working together," says Jim Kowalski, group vice president of Manugistics. "Supply chain collaboration can drive significant benefits, but it requires trust—and ownership—by all parties."

Sources: Still Alive…and Growing
Richard Trombly
Industrial Distribution, Oct. 1, 2002
http://www.manufacturing.net/ind/index.asp?layout=articleCurrentWeb&articleid=CA245317

Supply Chain Collaboration
Mike Verespej
Frontline Solutions, Sept. 1, 2002
http://www.frontlinetoday.com/frontline/article/articleDetail.jsp?id=30728