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‘Requisite’ Collaboration in Enterprise Supply Chains1

John Gattorna

‘Collaboration’ is one of those concepts that is overused and overworked in the supply chain vernacular. The reality is that for any product (or

service) category in a given market, it is very unlikely that more than 25 per cent of customers at best will have truly collaborative buying values. By this I mean that they genuinely seek close relationships with their key suppliers; tend to single-source; are brand-loyal; will share information freely; are price-tolerant; and, above all, are forgiving in the way they tolerate failures in supply. In other words, they have the perfect customer profile. Yet what do many suppliers do? They ignore these sometimes suffering customers as they relentlessly pursue other more demanding customers who have none of the virtues listed above. Worse still, suppliers take advantage of their loyal customers by using them to cross-subsidize their more costly efforts in servicing demanding customers.

deBunKinG some oF the myths

In the early years of ‘lean’ manufacturing, as introduced and practised by Japanese manufacturers, it was taken for granted that suppliers would collaborate in the systematic joint effort to eradicate cost, rather than just move 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, there are also many other supply chains in which this is not the case. Indeed, various generic types of supply chains coexist in parallel to provide different supply experiences for customers in the same market. In my book, Living Supply Chains,2 I make the distinction between those market situations where customers are genuinely collaborative and those where they are not. Why? Because you have to recognize which is which and deliver different ‘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

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’ supply chain is trust, which in turn leads to close working relationships for mutual gain. Information is shared freely; long-term stability in the relationship is actively sought, and strategic partnerships are forged for mutual benefit. This is the much sought-after ‘collaborative zone’ as depicted in Figure 1.1 in the previous chapter (p. 48), and it is a condition that inevitably takes time and patience to develop and nurture.

However, it is also a condition that depends almost wholly on the ‘alignment’ of cultures between buyers and suppliers in the chain, rather than anything more tangible. This is the part where many executives are either out of their depth or simply in denial about. Why? Because they either don’t understand or don’t want to delve into this abyss where all the ‘forces of darkness’ exist in their own organizations. I have always said that this is the area we should be focusing on, rather than getting carried away with Porter’s competitive analysis. In reality there has been an unhealthy preoccupation with competitors and monitoring competition over the last few decades, often to the point of paranoia, and this has distracted executives from looking more deeply at the internal cultural capability of their own enterprises, where progress and greater understanding is going to bring greater returns for the time, effort and money invested. We will not be able to go to the next level of supply chain performance until this mountain is climbed and conquered.

the uniQue suBculture oF ‘collaBoration’

The key is to identify which customers have truly collaborative values and treat them as a separate segment to the others in your customer base. Unilever’s former CEO, Anthony Burgmans got it right when he said, in effect, that you should only collaborate with those customers and (suppliers) who genuinely want to collaborate.3 For the rest, do whatever you have to do, but don’t waste your time trying to be collaborative – it is too wasteful of resources and goes to the heart of my observation that too many suppliers are overservicing some customers and underservicing others, and have no idea which is which!

‘Suppliers take advantage of their loyal customers by using

them to cross-subsidize their more costly efforts in servicing

demanding customers.’

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So how do we shape the appropriate internal culture to drive continuous replenishment supply chains towards those customers who genuinely seek a collaborative relationship? It involves a unique combination of standard resources, as follows:

Set up a series of multidisciplinary account ‘clusters’ that dedicate all their attention to specific clients, or groups of clients, who are clearly collaborative in both spirit and action.

Select personnel for these teams such that the net bias in each team is one of empathy for customers and stability of the relationship.

Put standard customer account management processes in place.

Underpin these processes with selected technologies such as Customer Relationship Management (CRM), Vendor Managed Inventory (VMI) and other customer-friendly point applications. This is the right place to use such systems, but be warned that they are not as effective in other situations where customers do not display genuine collaborative values.

Develop two or three Key Performance Indicators (KPIs) that will help you keep key customers’ (or suppliers’) relationships on track: for example, length of time the customer has been buying from you; the share of the customer’s wallet in a particular product category. 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 that encourage participation and sharing within the serving team – there is little place for individual egos in this subculture.

Make job designs consistent with the incentives and involve a lot of discussion and consensus – fortunately there is always time available for a lengthy process with this type of customer because they don’t like quick action and surprises.

Ensure that there is a lot of personal face-to-face communications within the account clusters.

Focus most of the training on team-building.

Carefully select the personnel recruited to account clusters on the basis of the ‘Feeling’ (or F) dimension in their Myer Briggs Type Indicator (MBTI).

Use a leadership style in the account clusters that is typically quite traditional in that everything is done by the book and stability of the relationship is regarded as paramount.

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t In other words, the internal clusters that service collaborative customers, across all disciplines, have to ideally reflect the same values as the customers that they serve.

‘reQuisite’ collaBoration: a more accurate descriptor

So ‘collaboration’ is a condition that is definitely not for everyone. I prefer to think in terms of ‘requisite’ collaboration – that is, collaborating as much or as little as a particular customer wants or deserves. In this way you avoid a lot of costly overservicing. Once you have identified the truly collaborative customers in your marketplace you can take a minimalist approach to contracts and focus more on non-binding Memoranda of Understanding (MoUs) that provide guidance for engaging each other, but ultimately always rely on trust. And it works. Research I led in the Asia–Pacific region in 2003 clearly showed an inverse correlation between the performances of 3PLs in situations where they were locked into rigid and complex contractual arrangements.4

As we move beyond traditional buyer–seller relationships and 3PL-style supplier relationships to more complex new supply chain business models (such as 4PLs), it is going to be vital that the partners selected to join supply chain consortiums and joint ventures are culturally aligned from the outset.

a techniQue to consolidate collaBoratiVe relationships

One technique that I have developed over the years to help foster collaborative relationships is ‘strategic partnering’. This is a process I have written about at length in Living Supply Chains,5 and involves developing enduring corporate relationships based on understanding and shared knowledge. The process takes its name from developing and maintaining a strategic ‘fit’ between the goals, capabilities and market opportunities of both buyer and seller organizations involved in a particular situation. 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.’

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notes

1 Adapted from an article, ‘Collaboration in supply chains – the myth and the reality’ in Supply Chain Asia, (March/April 2008), 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

Research Consortium, for the Logistics Association of Australia, 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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