Collaboration is urgently needed

In the Netherlands, supply chain collaboration has been a hot topic for years, both in the media and at conferences. The topic feels like a kind of common ‘charity’ that no one can be against. Until it has to become concrete. Because despite those years of attention and millions of subsidies, supply chain collaboration is making slow progress in practice. Remarkable for such a small country, because given the limited space and short lines, you would expect otherwise. Why is such collaboration slow to materialise?

In terms of content, according to ‘the scholars’, there are two types of supply chain collaboration: vertical and horizontal. Vertical collaboration involves two parties in the same supply chain, i.e. customers or suppliers. Examples include vendor managed inventory (VMI), joint planning, category management and consolidation of inbound flows. Horizontal collaboration plays between parties from different supply chains. This often refers to manufacturing companies (partially) combining their logistics operations. This does not happen often and the number of examples is limited (e.g. Unilever and Kimberly Clarke). What is often forgotten here is that logistics service providers do realise those logistics combinations. However, because they manage their customers separately, it is – wrongly – not qualified as collaboration.

Role of senior management decisive

Achieving supply chain collaboration is proving difficult. I myself have been a co-initiator of logistics collaboration between different business units in the same multinational, and it is a small miracle that this has succeeded. I have also established collaboration with a number of logistics service providers for delivery of small food shipments. In both cases, the role of senior management was decisive. In these initiatives, the problem appeared to be that the incumbent senior manager was an advocate of collaboration (‘We compete on the shelf and not in the truck’), but the successor was not (‘We are not going to help the competitor with cheaper logistics’).

Another ‘bump’ was making the necessary agreements on operational matters, especially their standardisation. Adjustments such as order cut-off times were annoying to the participating organisations. Then, all kinds of commercial and legal matters also had to be agreed and recorded. It means you have to sacrifice flexibility as a company to make collaboration possible. And many managers don’t like that, including supply chain managers. Sharing competitively sensitive data is also a bottleneck for many companies. Hence, it is not surprising that supply chain collaboration comes about only sparsely.

Other context

So, in order to get that collaboration done anyway, in recent years the (long-term) presence of an inspired senior management team was the main condition. A number of external developments are now heading towards companies, which put the choice for collaboration in a different context. Staff shortages, electrification, sustainability and digitalisation will require substantial investments and are going to increase supply chain costs. To keep a grip on supply chain volatility, techniques like joint planning and VMI will no longer be optional. In short, supply chain collaboration is difficult to achieve, but it is becoming more necessary than ever for supply chains to continue to function well. Will you also commit to this charity?

Lex Kop, independent supply chain consultant, sparring partner and project manager