Future progress on collaboration relies on honing the creativity of supply chain professionals to realise the potential that exists outside traditional activities; to venture into the dark side – co-opetition.
Collaboration between active partners within a supply chain is seen as an essential step to creating competitive advantage. Working together, sharing information and close dialogue can bring significant efficiencies and cost savings for supply chain partners. This sounds simple enough, but what happens when the collaborating parties are competitors? How can this possibly work?
The inherent competitive nature of business throws up a series of, principally, psychological barriers to exploiting a rich seam of efficiency improvement for supply chains, the collaboration between competing companies. There are many instances where such collaborations make sense and the rewards can be great, but there are critical issues to consider and a new, enlightened way of thinking is required.
Richard Wilding, professor of supply chain strategy at Cranfield School of Management, is emphatic in his belief that business “has got to break into Co-opetition” – the concept of competitors coming together to collaborate in areas that do not offer competitive advantage. “You need a different level of relationship maturity between businesses, so that they can understand that there are certain instances when they work together and other times when they are competitors. And that requires a whole new set of skills and training for people,” he says.
“In supply chain we train people very well in inventory management and hard technical supply chain IQ skills, but with EQ – relational intelligence – we are very poor at developing those skills in people,” he says. “The qualifier for a supply chain director is the technical intelligence of how to manage a supply chain – the winner is the relational intelligence and it is that skill set that is becoming increasingly important.”
Wilding is of the view that this opens up a wider question relating to where our future supply chain directors are going to come from. “Are they going to come from supply chain management degrees or will they come from other disciplines?”
According to Colin Maund, chairman of Achilles Group, a company that builds collaborative communities for managing supplier information, “Everyone is facing the same problems of recession, supplier instability, and greater regulation of business – which is driving more concerns about suppliers. So how do you afford it all? I think companies are going to have to start looking at business models that are a radical shift from the present models,” he says.
“Traditionally, companies have been loath to collaborate with competitors, apart from against common ‘enemies’ like government. Also, they have been prepared to work together in areas like science or on standards to make sure their industries are looked after, but they haven’t been prepared to look at collaboration much beyond that,” he says. “I think companies are starting to have to look at collaboration with competitors as a way of reducing costs. That’s the next stage of the business development model.”
“We have already seen companies outsource their activities to others in an effort to reduce costs, we have seen them move down the road of greater and greater efficiency methods – lean supply chains etc – but the next stage for them – where it’s economically sensible and non competitive – is to collaborate with competitors for their mutual advantage,” explains Maund.
However, how can companies share risk and rewards on these collaborations? Maund believes that companies have to be innovative about defining the areas where they truly compete and the areas where collaboration is sensible and possible. He says, “The first thing is to do a value chain analysis or value engineering, and ask, “where do we add value as a company, where is it absolutely against our interests, long term or short term, to work with others?’” But, he adds a word of caution: “It’s important to understand these boundaries as potentially, a company could undermine its own competitive advantage.”
Maund believes people need to have a different way of thinking when it comes to collaborative opportunities. “You have got to start rethinking fundamentals,” he says. “Most companies, especially large companies, tend to think they are an island at sea – it’s them, their suppliers and their customers.”
Maund highlights the natural level of suspicion that needs to be overcome in competitive collaboration. “If a competitor phones you up and asks you “would you like to work together?” your immediate reaction is what are they up to? So to get past that is an important step.”
The hi-tech sector is making advances towards closer collaboration on logistics activity – in particular, within the mobile phone market. Unipart Technology Logistics (UTL) is in the process of bringing together some of the biggest names in the mobile phone business at a new “telecoms superhub” where it is hoped synergies may be found for future “co-opetition”.
Nicola Couse, commercial director at UTL, sees a great potential for competitive collaboration that delivers economies of scale for the benefit of all parties concerned. “We are working with several key clients on creating a “telecoms superhub”. We will be providing forward and reverse logistics processes for Vodafone and Three, with purely reverse logistics operations for – among others – Virgin Mobile, all from the same site.” While Couse sees the potential for collaboration through bringing these companies together under one roof, she is under no illusion that the task of moving to collaboration over sharing resources on certain tasks will be easy.
“At the moment we are bringing these companies together on one site where they will be sharing some areas of management,” she says. It is envisaged that once a few mile stones have been hit, closer collaboration could take place.
“At the very basic transactional level, a repair is a repair and a pick-pack-ship is a pick-pack-ship. So collaboration works well when the transaction is the same for everyone,” Couse says. “In many instances the phone model is the same – differing, of course, on branding – however, beyond the basic transactional repair process we are quite clear that retaining service advantages for all of our clients in the processes that either follow base repair and/or reduce the need for future repair is critical.”
“All the advantages are around scale and flexibility,” says Couse. “If you have a big team you can flex the team across various areas, you can invest more on automation because you have the scale, and whereas on their own they wouldn’t necessarily justify it, together they do.”
However, there is a big question: At what point should collaboration stop? “The front end is what’s really important, the service to the customer, and it’s here that we provide differentiation, giving customers bespoke options, which is key to brand perception for the end user. For Couse the issue is in understanding where each party wants to collaborate and where they do not. “There are always going to be commercial sensitivities and therefore we have to be mindful of those sensitivities and be aware of the boundaries,” she says. “It’s best if it’s an open dialogue where all parties are talking to each other at supply chain director level to establish the parameters that we are working within.” Adding, “Fundamentally we want to offer our clients the best service we can, at the lowest possible cost, and we are confident this is a way to achieve it.”
Transport is an area where collaboration would appear to be an obvious winner. In 2002 the European Logistics Users Providers & Enablers Group – or ELUPEG as it is more succinctly known – was set up to foster logistics collaboration. Prof Alan Waller, chairman of ELUPEG and VP for supply chain innovation at Solving International, explains that the group was set up to reduce transport without undermining efficiency, diminishing customer service or disrupting supply chains. He says, “Horizontal collaboration is a very powerful way of doing that.”
“Companies like Kimberly Clark, Kellogg’s and some of the logistics service providers have started to embrace collaborative techniques and have demonstrated that they work. It’s a practical agenda which ticks all the boxes – it increases customer service, reduces costs, improves asset utilisation, reduces congestion, reduces carbon footprints and increases sustainability,” he says.
So, to what degree are companies collaborating on transport? “It’s still the exception rather than the rule,” he says. “And many businesses don’t regard it as worthwhile even trying to do it because they think it’s too difficult and fraught with potential problems – but that attitude is changing.”
Logistics services companies would appear to be in a strong position to orchestrate such collaborative arrangements, but Waller says, in the past, 3PLs have been reluctant to get involved, believing that in the short term they might lose contracts. However, he says now companies like Kuhne & Nagel and DHL have started to promote collaboration as part of their portfolio.
But there are barriers. “One barrier is finding the right partner,” says Waller. “It’s quite difficult. Not just finding a partner where the economic benefits are there, but also where this is a good cultural fit.” He goes on to explain: “The chemistry and the culture are absolutely critical – often it’s the point where the match fails. You have to be face-to-face – this is not a paper exercise.”