Industry leaders focused on the critical issues of creating and managing effective supply chain partner networks at the latest Supply Chain Standard Round Table, sponsored by Wesupply.
‘Partnering’, and perhaps to a lesser extent ‘collaboration’ have been hot or at least luke-warm topics of supply chain discussion for the best part of twenty years – vertically, with initiatives such as the CBI /DTI Partnership sourcing movement of the ‘90s; horizontally with lobby and self-help groups such as ELUPEG. But, asked chairman Malory Davies, given that there exists a whole range of common problems across organisations, why is partnering or collaboration not taken up? Is it, he asked, that people don’t know where or how to start?, or are their simple communication problems for which new network tools (such as those offered by Wesupply) could be the answer? Are the initial start-up costs of close collaboration prohibitive, and so could ‘Software as a Service’ be the answer? And perhaps above all, how do you embed partnering as a core business process, rather than as the personal whim of a couple of senior executives?
Jane Ansell of Pepsi (see below for full accreditations) said the she had “seen examples where partnering works really well; but then someone moves on and the arrangement fails. The backing by personalities doesn’t really work, which implies that we need to enable links that aren’t related to individual people”.
She explained: “A process that says ‘check factor x at this time’ is fine and it happens; whereas a process that says ‘talk to Joe’ is only fine if Joe is there”. But, she added, there are difficulties in ensuring that both ends are compatible in receiving whatever form of data is sent, and ensuring that can add complexity to what could be a very simple process.
Vivien Ryan from IBM agreed that partnering shouldn’t be just about people. “It should relate to particular processes or requirements – something as bald as ‘getting visibility of the supply chain’. Can you identify the core processes that are going to be improved – if partnering isn’t going to improve a core process, then you don’t do it”.
“Human beings”, suggested Simon Williams, “aren’t the greatest brains when it comes to dealing with data. So the type of data transferred between partners is important – there is an argument for keeping it to the simplest, lowest common denominator stuff. Otherwise there is a risk that the ‘value chain’ actually stops at the point where data is shared!”
Clive Geldard from Solving International took a network view. “You need to understand your trading partner network and how collaboration can fit in. This might range from the purely transactional (probably automated), to collaboration around, for example, event management [product launches, promotions etc]; or through to a more strategic relationship around innovation or new product development. It’s important to understand which bits you are trying to collaborate on – only then can you assess the business case for putting the effort in to partnering”.
Williams, though, queried whether partnering was all about competitive advantage, “or is it something that everyone should be doing just to take a lot of noise out of the system?” Philip Hanson recalled IBM’s early e-business experience whereby “There were some stunning partnering deals that would have saved a fortune – but conformance was only around 15 per cent”. This prompted the chairman to ask whether the problem was simply that users of partnering arrangements are simply unable to use the information provided?
Williams recalled that when Sainsbury started partnering (“at the beginning of the Internet age – which was supposed to be the ‘next big thing’ but nobody believed that, or could see the end-game”), there were typically three-way agreements [supplier, shipper and retailer] but “if one party didn’t ‘see it’, then things fell down. Everything was still recorded in the system, but in actuality there were two systems, automated and manual. Unless people understand their roles, collaboration will fall down”.
Simon Bowes from Wesupply said: “Technology is just the enabler. People feel pushed down the route of ‘collaboration means buying some technology’ but is it more like a marriage? You need to go to the pictures together, prove out the relationship first. It shouldn’t be ‘we need to do some collaboration’ – you need to start small, work on small projects, simple data communications, find out if you are compatible for a bigger relationship”. After all, he said, people do this today, all the time, but they are doing it manually or over the phone – we need to understand how to get systems to start to work together, and then we can try to spot the opportunities for bigger collaborations – and those opportunities won’t always exist!”.
“Horses for courses”, agreed Frank Peplinski of Electrocomponents. “There are different levels of relationship with different suppliers. We’ve got 1200, we don’t do the same things with the big ones as we do with the small ones, but we win out if we can make both sorts more visible to us in the long run”. Bowes added that, if you are your supplier’s only route to market, they are likely to be much more amenable to collaboration.
Ansell also pointed out that the same goes for partnering with customers. “Pepsi can’t do the level of collaboration we achieve with the top six with everyone. We can’t go to every corner store and say ‘we’re going to help you with your shelf layout’. WE have to understand what we are going to get out of it – collaboration has to be for a purpose that both sides benefit from. You have to be clear from the start what both sides are doing, who is going to provide the resources, how you can both simplify processes by adding systems. But you have to start small”. Geldard agreed that partnering could be positively disruptive if it isn’t thought out or it is applied to an inappropriate relationship. “You have to admit and recognise an incompatibility early in the relationship – that’s a very mature thing to do, and it leaves you the capacity to apply partnering where it can do some good”.
A greenfield operation can of course offer advantages. Ryan recalled setting up a supply chain operation in 90 days flat, whereby collaboration as in ‘you will do…we will do…’ was set down in the terms of business from the outset. She said “Get the fundamental standard processes right, and then bring in the enabling technology. It is perfectly fair to insist on mandatory processes, based on a flexible technology. Mandating EDI for a sandwich shop is not fair! But if you can get those process building blocks right, and fairly based on reasonably accessible technology, so that you have the connectivity to all, then you can build further collaboration on top of that”.
Peplinski noted also that there are cultural quirks. In the UK, he suggested I is possible at least to some extent to ‘impose’ collaborative methods – that is not always or everywhere the case. Williams agreed. “You can’t force collaboration on people – it didn’t work at Sainsbury. But you can build on cultures – extend the team, make supply chain part of the team, build trust, share the pains and gains.
“Also”, he continued, “most supply chains have heroes and villains. There are suppliers to whom you say ‘thank you for the service, how did you do it?’; there may be others who didn’t actually know they were bad performers – which may be because they don’t want to be on board, or perhaps because no-one has told them. And there are apparently poor suppliers where it turns out your own ordering was wrong”.
Culturally, Geldard noted, “Eastern Europe for example doesn’t have the same cultural baggage and legacy assets – emerging markets generally have much more willingness to adopt the latest and most simple ways and ‘leapfrog’ our rather satic procedures”.
Given the above, the chairman asked, what is the proper role of technology in partnering and collaboration? Ryan said “Technology has it’s place – in the right industry, and where the right communications and relationships exist: so that might suggest particularly the retail trade where the mutual dependencies are greatest. But equally, collaboration may not depend on technology at all. I’ve worked on a National Grid collaboration with contractors such as Balfour Beattie – there was a standard model throughout the country for making this work, but it wasn’t about technologies, it was about working through people.
“Technology can be a big issue – technologies that don’t work together and then people beat each other up over it. Technology is a good enabler if it is flexible, easy to use, and it is prepared to support everyone that wants to join in”. To which Peplinski added that the cost barrier to entry has to be reasonable vis-à-vis the level of trade.
Which led naturally to the concept of ‘software as a service’. Bowes admitted that Wesupply “loves to work with big companies”, but also that “small companies can behave like multi-million organisations: suddenly they are compliant with what their big customers want. An out-sourced service lets you say ‘I’m a sandwich expert, not an electronic trading expert’ but still be in there.
“The internet is unlocking a lot of stifled demand, from traders who have good personal relationships but have felt that the capital requirement is just too expensive for them to build on that. But the relationship does have to come first – easier access to information then helps reinforce it”. Ryan agreed that it was a question of allowing “the guys on EDI and the guys on a web portal to share information; you can look like a big plc even if you are working from home!”
Hanson suggested that the technology also helps in other ways – making it possible to have real, even partnering relationships with second and third tier suppliers (or customers) with whom you don’t have any straight transactional relationship. “It can be a great way of building these relationships, without undermining your relationship with your first tier suppliers”.
But in all this, where is the return on investment, Williams asked. “Small firms are battered by cash flow, because people don’t pay their bills. Having ‘everything electronic’ is fine, but then you find big companies not paying their bills on time because someone has done something manually. That itself is a good reason for smaller firms to want to collaborate at the transactional level”.
And Ryan warned “the transactional has to come first. After that, we can do something with the information that forms the basis for true collaboration. The biggest killer of SMEs is the big guys not allowing them to trade because they can’t do it EDI. But small businesses grow into big businesses and we have to allow that to happen”. Peplinski agreed. “As small companies grow, they have to have partners and systems that can help them scale both in their volumes and in their range of business processes”.
So the conclusions? First, it is undoubtedly true that partnering/collaboration is good, but there has to be some measurable business case that works for both parties (so it’s not like some elements of the eco-agenda – which can be equally touchy-feely, but address externalities and really do require everyone to play the same game).
Second, the relationship has to come first, needs to be business rather than personal, and embedded in both organisations’ cultures.
And third, the technology, especially ‘on-demand’, is increasingly accessible. Trading partners of all technical capabilities can now successfully participate in collaborative processes via a simple connection to an On-Demand service, but good technology is not a solution to a bad relationship. Get the relationship right and the results can be spectacular.
Round the Table were:
Simon Bowes, Wesupply
Jane Ansell, Supply Chain Development Manager, Pepsi
Clive Geldard, Director, Solving International
Frank Peplinski, General Manager Supply Chain, Electrocomponents
Simon Williams, Retail Supply Chain Specialist
Philip Hanson, Principal Industrial Fellow, Institute of Manufacturing, Cambridge University
Vivien Ryan, Head of Procurement Consulting Practice, IBM
and Malory Davies, Editor, Supply Chain Standard/Logistics Manager