At first glance, collaboration in the supply chain, and between supply chains, looks like a no-brainer. Who could possibly be against an approach that maximises the use of capital resources, offers significant cost benefits, may address pinch-points in labour availability and generally ticks all the boxes on environmental and social responsibility?
It isn’t as though the concept of collaboration is particularly left field either. A recent meeting of the European Logistics Users Providers and Enablers Group (ELUPEG), that band of brothers and sisters dedicated to promoting collaboration, heard and saw at a recent meeting in Holland successful examples of collaboration in action. Successes cover a variety of business situations, from collaboration along the whole length of a single supply chain to collaboration between several separate suppliers to a manufacturer or retailer, to full-blown collaboration between multiple manufacturers or suppliers and multiple retailers.
Yet, possibly in part because of this diversity of models, the concept of collaboration remains a difficult sell in the boardroom. And even where collaborative approaches are successfully introduced they seem to be highly dependent on the personal commitment and enthusiasm of a few people.
And, sector by sector, reports from ELUPEG members have a depressing familiarity. ‘There are behavioural and organisational issues – we need to change behaviour, not just identify numbers’; ‘We didn’t get dedication and commitment from all the parties so the pilot was stopped’; ‘Logistics isn’t seen as core so while we have identified a wealth of opportunities we haven’t managed to get anything off the ground’; ‘Other projects are competing for attention so while there is tremendous potential there’s a reluctance to get on with it by all these busy people’ and so on.
Drill a bit deeper into the conversation and some of the reasons for this negativity become apparent. In the first place, the organisations best placed to drive and organise collaboration are often those least likely to benefit, at least in crude economic terms. For a major retailer or manufacturer who already has a pretty efficient supply operation and has plucked all the low hanging fruit, collaboration appears to introduce significant risk for relatively small gain. Indeed, such gains as there are may be more PR than economic – the ability for instance to demonstrate that a firm is doing something to combat road congestion or local environmental issues. Prospective partners among smaller suppliers or in other supply chains exposed to fewer competitive pressures may have much more to gain but understandably doubt what proportion of the gain they will see.
For 3PLs, who would in many ways be the natural promoters and coordinators of collaboration, the dilemma is yet more acute. Already on tight margins, they sweat the assets where they can through varieties of shared user operation, but each user contract is individual and generally not transparent to other users. A collaborative contract brings costs and prices into the open for everyone and there is an obvious fear that this will further erode margins. And above all, boards are unlikely to sanction significant investment when the benefit appears to flow largely to strangers.
How can we turn at least some of these negatives into positives, especially in times when the supply chain still does not enjoy the undivided attention of the boardroom? ELUPEG members offer some words of hope and wisdom. ‘Use the assets you already have to get started – make your own luck’; ‘Create baby steps that you can make happen yourself and that ease the way for the next, bigger, opportunity.’
In passing, it was generally recommended that one does not start with internal collaboration, for example between goods inwards and finished goods distribution. It might seem to be the most obvious and necessary starting point, but it is also the most politically fraught.
Many of the trends in the supply chain – rapid replenishment, a trend back to direct-to-store delivery, using more local suppliers – are militating against full truck loads and thus logistics effectiveness. There is a limit to how much longer this can be compensated for by cost-down pressures. One might reasonably expect retailers to start demanding collaborative operation.
But the keys to getting collaborative working off the ground and then entrenched in the culture are probably psychological rather than economic, and here it seems that the critical factor lies in not making the same pitch to all the potential partners. As we have seen, different partners will be looking for different benefits. Some may be looking for direct cost savings, some may want social or environmental kudos, others may be looking for a solution to a short or long-term resource problem. The collaborative pitch even for a single project has to be aligned with the needs of potential partners.
So collaboration is not the no-brainer we first supposed. In fact, it requires a considerable amount of thought and planning. But the benefits, if diverse, are real – even if you have to start small. As ELUPEG chairman Alan Waller says: ‘Just do it.’ (Actually, he said something rather less polite, but you get the drift.)
- Collaboration works, the benefits are real and the need is likely to become more rather than less pressing
- Start with small projects within your own authority. Create a collaboration culture that will ease bigger initiatives
- Tailor the pitch to the needs of each party