Friday 28th Oct 2016 - Logistics Manager

How not to fail

If collaboration is easy, why are there so many failures? So what works, and what doesn’t? Malory Davies asks the questions.

It’s almost a cliché – collaboration will make your business better. The trouble is that all too often collaborative projects fail to meet the expectations of the parties involved. And, even successful collaborations might rely on one of the partners operating in a sub-optimal way to make it work. It is not a process to be entered into lightly.

Meeting demand efficiently comes down to ensuring that products and services are backed-up by robust and reliable supply networks. But Matt Smith, head of procurement at Office Depot UK & Ireland, points out that although strong relationships may already exist with core suppliers, it is vital that businesses develop equally firm links with new wholesale providers to properly streamline buying and delivery processes.

“Control is at the heart of making sure these systems come to bear and for new suppliers especially, it is essential that service levels are understood from the outset. More established relationships allow for this to be delegated to a key account manager. However, the nature of taking on new suppliers means this has to be micro-managed for a limited period to ensure that what’s promised is followed through. However, those worth their salt will rapidly seek to prove their capabilities by demonstrating that they are able to independently manage their responsibilities without regular input or management,” he says.

“However, it is a two-way street – business owners seeking to delegate aspects of the supply chain relationship to external partners must ensure that they properly familiarise account managers with the way their existing network operates – achieving this helps to streamline processes and ensure conflict is kept to a minimum. This means devising clear service levels that reflect the needs of both providers/resellers and end users.

“The day-to-day control and management of supply chain matters should be a two-way system that properly challenges suppliers to step up and add value. However, the best laid plans can easily go off course, so it’s well worth looking at internal networks and procedures to ensure last minute problems can be dealt with quickly. Failing to plan means planning to fail – therefore look at the capabilities of suppliers collectively and if any cross over, ensure that if one vendor fails, another can deliver in its place,” says Smith.

Hugh Williams, managing director of Hughenden Consulting, points out that the areas that most readily lend themselves to supply chain collaboration are those, like brokering orders between buyers and sellers, that are highly transactional and involve data exchange.

“When rules are already established and there is little need for negotiation or judgement, then collaboration becomes very easy. This is why, for example, the electronic marketplace e2open is such a successful ‘end-to-end’ collaborative exchange.

“The most difficult are internal cross-functional initiatives like sales and operations planning. In these initiatives, it’s often the case that one functional group has to operate in a sub-optimal way to achieve a higher level, collaborative goal. For example, procurement may have to sacrifice obtaining a discount on components to meet a greater goal of achieving a lean supply chain by carrying low levels of inventory. That’s why these initiatives require strong leadership, smart KPI setting and a culture of trust and flexibility. These all depend on people skills rather than technical solutions.”

Tim Fawkes, managing director of 3T Logistics, says: “In my experience, the hardest part of collaboration is agreeing the commercial share of savings between two collaborating companies. It can also be tricky ensuring that goals are aligned between two companies with potentially quite different objectives. In addition, while supply chain collaboration between two competitors potentially offers the most opportunity for an effective alliance, it can often be the most emotionally challenging for either party to accept. For collaboration to really succeed, it is essential to ensure compatibility of products, service levels and equipment.

Of course, there is a personal element to any collaboration. Kirsty Braines, supply chain collaboration specialist at Oliver Wight, points out that the most important factor in good relationships is trust. “You have to earn trust in business – there has to be a clear understanding of expectations and you must avoid ambiguity.”

Fawkes agrees: “Trust is a key element to collaboration. This is achieved by building strong personal relationships. There must also be clarity around the details of the collaboration; this should be agreed, written down and shared to cover all scenarios and avoid possible disputes later on.”

The temptation initially is to treat a collaborative arrangement like a contract, says Braines, highlighting the problems of trying to define a collaborative arrangement in a legal contract. Involving lawyers can be very painful and it can take years to get there.

While, most collaborative arrangements would not stand up in court, but very often what you need is an environment to share, she says.

As supply chains have become more extended, cultural factors play an increasingly important role. There are distinct differences between the way business is done in Asia and in Europe or America, she points out.

Collaborative relationships work when there is clearly a win-win situation, says Braines. It is going to be challenging if you are less important to your intended partner than it is to you. A relationship driven by one party in not likely to be successful.

Hugh Williams highlights an experience he had at an industry conference he was chairing last year. “I witnessed first hand the importance of building personal relationships when it comes to collaboration and also how far we still have to go. One of our sessions was filled with people representing 3PLs and manufacturers. When I asked them to split into two teams, the 3PL people moved to one side of the room and the manufacturing people moved to the other. They physically separated without even planning it! A heated debate ensued with the manufacturers complaining that 3PLs were not being proactive or creative enough in coming up with innovative solutions and the 3PLs defended themselves by pointing out that their margins were constantly being squeezed and they had no resources left for innovation. So for supply chain collaboration efforts to succeed it’s imperative that people be able to air these issues, find common ground and work together on constructive, actionable solutions. Technology can help, but only once the people issues and ground rules have been resolved.”

In addition, says Williams: “In certain industries, there are major cultural barriers to collaboration that extend beyond the company walls. During a supply chain conference I chaired for the pharmaceutical industry, it became clear that the very notion of collaboration was pretty alien. The whole ethos in the industry has been built up from a legacy of protecting intellectual property and actively not sharing. It is particularly challenging to drive collaboration in these types of industries.”

Third party logistics providers can play a key role in the supplier-retailer relationship. Dale Fiddy of NFT, highlights the point: “We worked with one key retail client to introduce new systems and procedures to improve delivery compliance from the supplier through to the RDCs and the destination retailer. This proactive development of supply chain efficiency links manufacturers and retailers more effectively as well as reducing food miles and has significantly increased accuracy throughout the chilled supply chain.

“Over a twelve-month period it has demonstrably reduced product returns by in excess of £500,000, minimising this waste stream and maximising on-shelf product availability,” he says.

But building relationships is not always easy and there is plenty of scope for mistakes. Williams says: “One of the most common mistakes when it comes to supply chain collaboration is, ironically, not making enough allowances for mistakes. Compared to other business functions like marketing and R&D, supply chain is a particularly conservative environment that doesn’t tend to tolerate failure. This culture explains why innovation is so slow in supply chain and why leaders need to rethink their approach and allow for more calculated risks and experimentation.”

And Tim Fawkes highlights the fact that lack of clarity will inevitably lead to problems somewhere along the process and within the relationship, so it is important to ensure that this is the foundation of any partnership.

“Failing to prepare for a variety of outcomes is another common mistake; this can be addressed through thorough scenario testing. The assumption that saving money is someone else’s responsibility, accompanied by the expectation that savings are easy to achieve. Collaborating companies are often prepared to accommodate, but not to compromise their processes,” he says.

Case Study: Enscite aims to boost collaboration

A new organisation, Enscite, which has been created to improve the performance of supply chain companies in the transport engineering sector has its official launch at Derby’s Roundhouse later this month.

Managing director Colin McKinnon says: “Enscite is positioned to work alongside companies within the supply chain to help make collaboration easier and more fruitful for all parties. We are specifically interested in helping overcome barriers that get in the way of win-win scenarios.

“One example is companies that potentially could become trusted suppliers to an industry/OEM/Tier1 etc but due to lack of intelligence there are often implicit barriers to entry around issues like quality control or procurement that puts off small firms. If we can work across the supply chain to raise awareness of these issues it would help new suppliers. This might result in a locally produced component/product being sourced from a local firm rather than a supplier from the other side of the world. This could, in theory, reduce supply chain risk (currency fluctuations, transport issues, natural hazards) and lower the carbon component (ie, sourced nearer to the final assembly point).

“Another ambition for Enscite is to help improve supply chain collaboration around sustainability and future growth, by bringing the supply chain together around developing new products or improving existing products. This will encourage more open innovation, as seen in other sectors, into the transport engineering sector. This comes down to trust and a willingness of the end producers to share their ambitions and plans with the supply chain to encourage co-creation of ideas and also to tap into the R&D and design resources of universities,” says McKinnon.

Enscite is a collaborative joint venture between four partners – Derby City Council, The University of Derby, Aston University, and Cranfield University. It offers a range of funded support services to SMEs operating within or wanting to access the aerospace, automotive and rail sectors.

Information systems: Technology to boost collaboration

Johnstone Supply, the wholesale distributor in the HVACR industry reckons it has seen continued improvements in its supply chain performance following an upgrade to version 8 of Logility Voyager Solutions platform.

“We have relied on Logility Voyager Solutions to help drive more accurate forecasts, align our inventory policies with service goals and streamline collaboration with our suppliers,” says Raymond Kernagis, vice president of supply chain. “With Version 8, Logility has turned into our one-stop source of information across the organisation. We are able to aggregate critical KPIs on our configurable home pages which allows us to focus on the activities that will drive the most value for Johnstone Supply and our customers.”

Following its initial implementation of Logility Voyager Solutions, Johnstone Supply realised improved communication with key stakeholders and increased its visibility across a complex supply chain that includes more than 370 locations. Moving forward, the supply chain team is turning to Voyager Solutions to help increase collaboration with its member stores, helping each location improve its planning capabilities for greater in-stock performance.

“The response from the team has been very positive,” says Kernagis. “We are just scratching the surface of the supply chain improvements Logility can help us achieve.”