Reimagining Supply Chain Collaboration to Unlock Latent Potential

Michael Dell was once quoted as saying, “Collaboration equals Innovation.” Nothing can be more apt when we talk about Value Chain Collaboration and why it holds crucial importance in today’s times. Supply chain collaboration is a hot topic today and we have witnessed umpteen success stories where companies who have collaborated effectively across the supply chain and achieved dramatic reductions in inventories and costs, together with improvements in speed, service levels, and customer satisfaction. Even having known the significant impact it has on organizations and on the entire value chain, companies often fail in achieving the desired collaboration. Our Cover Story this time attempts at uncovering those challenges while our subject matter experts offer us some great insights into harnessing perfect synergies to ultimately drive all-encompassing growth... 

As per Deloitte’s 2023 Global Chief Procurement Officer (CPO) Survey, 69% of CPOs indicated that enhancing risk management and developing resilient supply chain is a top organizational priority, while 61% believed that increasing supplier collaboration is their top strategy to deliver value. Supply chain collaboration is key to building an agile and responsive supply chain that can withstand unforeseen challenges. By working together, supply chain partners can gain visibility into each other’s networks, identify, manage, and mitigate risks proactively, develop contingency plans, and innovate to adapt to changing market conditions.

Collaboration has always existed within supply chains of an organization through communication and information exchange with suppliers, 3PL partners, distributors, etc. Traditionally, interactions between manufacturers and their suppliers would involve transactions such as issuing purchase orders or exchanging capacity and demand information. This information exchange was often siloed, not in real time, and sometimes inaccurate. Similar patterns of transactional and disconnected information exchange can happen with logistics partners, contract manufacturers, and other players. This way of working often leads to significant inefficiencies in the system and mistrust on both sides.

However, recent disruption events, regulatory trends, shift in supply dynamics, and changing consumer expectations have compelled organizations to move away from traditional collaboration to a win-win collaboration approach characterized by a trust and commitment to build resilient supply chains. The current complexity of supply networks also necessitates pushing the frontiers of collaboration beyond tier 1 suppliers to include other supply chain partners such as sub-tier suppliers, contract manufacturers, and logistics service providers.

BENEFITS OF COLLABORATION

Bob Pearson, in his book, Pre-Commerce, stressed that when collaboration is genuine, we are capable of creating solutions that would have never occurred otherwise. When you no longer wonder about where an idea came from, forget about time zones and know that you have accessed the best thinking from anywhere on the planet every time, then you are truly leveraging collaboration. Taking his thoughts further, an interesting study on this topic highlighted pertinent benefits of collaboration. These include:

Improved Supply Chain Visibility: Through a deeper understanding of each other, buyers and suppliers can mutually benefit from improved performance across the supply chain. The collaborative networks provide insights into suppliers’ overall performance, stock ranges, and demand fluctuations. This helps to increase accuracy in demand forecasting and optimize stock management.

Cost Savings: Establishing and preserving relationships with key suppliers can eliminate many setup costs associated with setting up new deals. Relationships with suppliers go further than simply saving money- in addition they assist in creating smoother processes, decreasing availability/quality problems or delays which could have an effect on customer support.

Fostered Innovation: Leveraging supplier information and insights paves the way for developing marketplace-responsive merchandise. For innovation to work, there is a need to integrate cross-functional teams that, in turn, integrate business methods with operations—which calls for a broad network of interactions.

Strengthened Relationships: Long-term collaboration fosters mutual growth for both parties. Developing strong, trust-based partnerships encourages open communication, understanding of goals, and shared successes. Building trust takes time. Companies should start with small collaboration efforts and build momentum with time.

According to Tannistha Ganguly, Global Head, WMS (IT Delivery), Kimberly-Clark, there are many benefits of supplier & vendor collaboration. In today's business world it is no longer a 'Nice to Have' strategy but has become a 'Must Have' tactic. Most common benefits are greater cost savings, better risk management, improved efficiency in operations, higher customer satisfaction, etc. All of these in return add to market share and more revenue. The more integrated we are with our vendors, the better control we have on our supply chains. It allows us to view data in real-time, helping us to take faster decisions in times of emergencies and otherwise too. The chances of innovating together with our vendors, especially in key areas, increase if we are better integrated with them, sharing both information and risk. Collaboration can happen at a tactical level as well as at a more strategic level.

Seconding these views, Seema Mohanty, Global Supplier Manager, Bayer, added, “I see procurement not just as a function which buys on behalf of the organization. The procurement function is rather a vital interface between the external world of suppliers and internal stakeholders of the organization. And when there are multiple parties involved, collaboration becomes vital. Collaboration forms the bedrock of any human interaction and interface.”

She elaborated, “In today’s world, one cannot operate in isolation. Let me take an example of sustainability. Sustainability is more than just a buzzword these days. It has become a vital parameter of differentiation between companies today and will become a necessity for everyone tomorrow. If a company takes a target of Net Zero, then they cannot attain it unless their suppliers also attain the same in their operations. In this context, Scope 3 emissions are becoming more and more important than ever before and there comes in collaboration between multiple partners.” So, as a procurement professional, one has to negotiate not just on the cost and delivery timelines, but also know about emissions and their corresponding carbon footprint. Sustainability as a focus area is relatively new and everyone has to learn from each other. Different industries and different players in those industries are at varying maturity levels. So, it is imperative that there needs to be lots of knowledge sharing with respect to sustainability practices, not just among suppliers and customers, but also among competitors as well. Procurement has a major onus here to make collaboration happen.

BARRIERS TO COLLABORATION

According to McKinsey, several factors make supplier collaboration challenging. Projects may require significant time and management effort before they generate value, leading companies to prioritize simpler, faster initiatives, even if they are worth less. Collaboration requires a change in mind-sets among buyers and suppliers, who may be used to more transactional or even adversarial relationships. And most collaborative efforts need intensive, cross-functional involvement from both sides, a marked change to the normal working methods at many companies. This change from a cost-based to a value-based way of thinking requires a paradigm shift that is often difficult to come by.

The actual value generated by collaborating can also be difficult to quantify, especially when companies are also pursuing more conventional procurement and supply-chain improvement strategies with the same suppliers, or when they are simultaneously updating product designs and production processes. And even when companies have the will to pursue greater levels of supplier collaboration, leaders often admit that they don’t have the skill, lacking the structures they need to design great supplier-collaboration programs, and being short of staff with the capabilities to run them. After all, what great supplier collaboration necessitates is much more than the mere application of a process or framework—it requires the buy-in and long-term commitment of leaders and decision makers.

According to Seema Mohanty, when multiple parties are involved in collaborating for an end goal, the main challenges can be placed under two heads: Different performance parameters for different parties; and Lack of trust between the different parties. Therefore, whenever different parties get together to collaborate, the final expected outcome should be made clear from the beginning. This then needs to be translated into what it means for each party involved. ‘What success looks like for each party’ should be discussed and agreed upon from the beginning. Conflicting success parameters for different parties, if any, should be identified and addressed from the beginning. This would help keep future challenges at bay and would also lay the foundation for a trustful collaboration. Open and fair communication on successes, failures and challenges would help build trust over time and would keep all parties motivated.

For Nikhil Puri, Vice President – Direct Purchase, Yokohama Off-Highway Tires, some of the challenges that the corporate face are

1. Lack of effective communication: Communication is the pillar when it comes to collaboration. Communication that works in corporates may not work while collaborating. Communication has to be open and transparent.
2. Purpose misalignment: More often than not, the purpose is not clear when starting to collaborate. Clear goals should be defined before starting the collaboration.
3. Assignment of tasks: When collaboration is started, roles and responsibilities have to be clearly defined amongst the stakeholders. There should not be any overlap nor there should be any conflict which may result in derailing the collaboration.
4. Too many initiatives at once: Corporates tend to achieve more once the collaboration is initiated. This can lead to digression from core objective. Main 2-3 themes should be selected and more can be added once some of these themes are at the point of conclusion.
5. Lack of dedicated workflow: Corporates may have the best workflows when they are interacting internally but once they start to collaborate, it may happen that the workflow gets intertwined and may result in potential disputes. A clear workflow has to be established before even starting the collaboration.
6. Work Culture differences: Corporates can have procedures, defined set ups but the party with whom they are collaborating may not be much structured. These procedures may hamper the speed at which the partner works. Work culture should be clearly defined and Dos & Don’t should be compiled and agreed to avoid any disputes.

CROSS-SECTORAL COLLABORATION TO IMPROVE EFFICIENCY

“Collaboration across sectors can lead to remarkable efficiency gains by leveraging diverse expertise and resources. For instance, a manufacturing firm partnering with a technology company can integrate advanced analytics and IoT solutions into their supply chain, optimizing production schedules, and reducing downtime. By focusing on shared goals, such as reducing carbon footprints or improving time-to-market, companies can pool resources, share best practices, and innovate together. Cross-sector collaborations break down silos, leading to streamlined processes, cost savings, and more agile responses to market demands. However, the challenge is to identify cross sectoral relevance in the supply chain. Product compatibility is a must,” highlights Arif Siddiqui, Founder & MD, Coign Consulting.

To this, Tannistha Ganguly adds, “Cross-sectoral collaboration can be between two different companies coming together or it can be a collaborative effort between companies and other entities like governments and NGOs, etc., with a common shared goal. Normally, these entities will combine their resources to achieve a goal. A cross-sector collaboration happens when there is a common problem which several companies and entities need to solve for their own benefit, but the problem is too big for one to solve. That's a situation that encourages cross-sector collaboration. Few examples can be certain environment related problems such as how to reuse/recycle the plastic bottles after it is used by the end consumer; or how to educate the public in cybercrimes and financial crimes.” There are many such examples where industry and other entities have collaborated to achieve a shared goal. So, the first step will be to build a shared vision. Once that vision is ready, then build a focused group with measurable goals & milestones. Industry has various partnership models like Joint Projects or Joint Programs, which are used to execute such projects.

STARTUPS GOING EXTRA MILE TO GARNER VALUE OF COLLABORATION

According to Nikhil Puri, startups are ready to go that extra mile as their weakness is being complemented by the corporates. Corporates are more structured and have contingency plans in place. Startups can learn more from corporates and they can fast track their success. They can collaborate with corporates to do it ‘first time right’. Startups have to let go of their inhibitions and need not be intimated by the corporates.

Adds Tannistha Ganguly… “When we work with the startups, we look at the gaps that they can fill for our organization. Most organizations reach out to startups when they realize that they don’t have the desired in-house capability to address a particular concern, or they have cost constraints to partner with bigger IT services vendors. The motivation for startups is the repetitive business and the scale & exposure that they can get from established players. But it is the passion and the vision that these young startups bring to the table, whether they get the contract or not, that makes the corporations work with them. Such is the competitive streak that these young companies have and that is one of the most impressive facets about them for us to work with them. The scale that we bring to the table is what these startups aspire for. In a nutshell, this can be a win-win for both the companies if we can harness it well. It’s a great symbiotic relationship that can culminate into a greater success story for others to emulate. Agility and quick turnaround with a go-getter attitude is what encourages the corporations towards working with startups.”

OPPORTUNITY AREAS OF COLLABORATION

Startups and large corporations can create symbiotic relationships where each complements the other’s strengths. Arif Siddiqui avers that startups bring innovation, agility, and fresh perspectives, while large corporations offer scale, stability, and established market presence. In operations and supply chain, startups developing cutting-edge technologies or sustainable materials can collaborate with large corporations to pilot these innovations in real-world environments. These partnerships allow startups to scale rapidly while enabling corporates to remain competitive and innovative without bearing the entire risk of development.

Taking his insights further, Nikhil Puri asserts, “We have to identify the complementary skills. Startups are far more agile than the established firms. Having said that, startups lack experience. Can we actually complement those skills? Can an established organization embrace the risk-taking appetite of a startup? Honestly, startups have a nothing-to-lose attitude, but an established organization will always think twice-thrice about the probably contingency plans. If both the organizations can come together and start harnessing each other’s strengths, they can run a pilot project. They can see proof of concept, if it works well, then take it forward, but before we actually delve into this, we need support from the leadership. Established players come with the experience of risk mitigation strategies. They are well versed in contract management.

ROLE OF LEADERSHIP IN COLLABORATION

Leadership is pivotal in fostering a culture of collaboration, according to Arif Siddiqui. “True collaboration starts at the top, where leaders must champion transparency, trust, and shared objectives. The myth that collaboration dilutes authority or leads to loss of control needs to be dispelled. Instead, leadership should view collaboration as a strategic tool that enhances innovation, reduces risks, and accelerates growth. By setting clear expectations, encouraging open communication, and recognizing collaborative successes, leaders can create an environment where teams are motivated to work together across boundaries,” he states.

According to Nikhil Puri, there is a gap in cross-sectoral collaboration. The role of leadership holds immense influence to drive the change. The leadership must create a culture of collaboration because culture is always driven from the top. It can’t merely be just a problem statement. “Leaders empower cross-functional teams involved in procurement to make decisions and take ownership of projects. This promotes innovation and ensures diverse perspectives are considered. Leaders allocate adequate resources, including budget, technology, and personnel, to support collaborative initiatives in procurement. This demonstrates commitment and enables teams to execute effectively. Leaders need to articulate a clear vision and strategic objectives for procurement management. This includes aligning procurement goals with overall business objectives and growth targets. Leaders actively build relationships and foster trust between procurement teams and other departments such as finance, operations, and marketing. This enhances collaboration and reduces friction in achieving shared goals. Leaders have to lead by example. Their behavior, attitudes, and commitment to collaboration set the tone for the entire organization. By demonstrating a collaborative mindset themselves, leaders inspire others to follow suit and drive accelerated growth in procurement management through effective cross-sectional collaboration,” he elaborates.

According to Seema Mohanty, everyone in the organization should be aligned to its overall vision and goals and how these translate back to their sphere of activities. I would then look at how empowered every individual in the organization is to take decisions in their sphere. A common myth is that there are just a few leaders in the organization who are capable enough to take decisions. Rather, everyone in the organization should be empowered enough to take decisions that relate to the work they do. And they should collaborate with each other, as necessary, to take these decisions. This would bring in effectiveness, efficiency and would keep people motivated.

LEVERAGING TECHNOLOGY TO COLLABORATE

Advancements in artificial intelligence (AI) and machine learning (ML) are taking supplier collaboration to the next level. According to Gartner, AI augmented supply chains can experience up to a 20% increase in forecasting accuracy over traditional approaches. Combining large datasets across the supply chain network and leveraging AI pattern recognition can help supply chain partners unlock deep insights around risk, demand volatility, and optimizing supply and logistics.

Beyond statistical forecasting, AI can help assess probable scenarios and improve decision optimization. It can also automate repetitive planning tasks and free up cross-functional teams to focus on higher judgment decisions with partners. The bottom line is that AI and ML will act as catalysts for enterprises on their path to predictive, leading-indicator supply chain strategies based on actionable intelligence that can be exchanged rapidly across the supply chain ecosystem.

Emphasizes Arif Siddiqui… “Technology is a powerful enabler of collaboration, but the hesitation often stems from concerns about compatibility, cost, and change management. To overcome these barriers, companies should start small, piloting integrations that offer quick wins and measurable benefits. Demonstrating success in these initial projects builds confidence and helps overcome resistance. Additionally, leadership should focus on selecting technologies that are scalable, flexible, and offer strong support and training. It’s also crucial to communicate the long-term benefits of integration, such as improved data visibility, predictive analytics, and enhanced decision-making capabilities. With the right approach, technology can transform collaboration from a challenge into a competitive advantage.”

Nikhil Puri adds that all the challenges that come across in collaboration like lack of communication, assignment of tasks, dedicated workflow can be leveraged through technology. This will help in seamless flow of collaboration. Technology will also enable transparency too in the collaboration. As the competitiveness has been increasing day by day, it is imperative that the Intellectual Property Rights (IPRs) are safeguarded at all the times. Before indulging in sharing data and information, it is imperative to sign a NDA (Non-Disclosure Agreement) with the respective stakeholders. Also, technology can be used to create barriers and restricted rights on data sharing.

To this, Tannistha Ganguly mentions that there are several technological capabilities that companies can employ to share data and information among their supply chain partners. Technologies can integrate both the suppliers and the customers within a company's scope. Cybersecurity protocols have also matured over the years which enable safe and secure rule-based data sharing between entities. Most large and medium companies invest heavily in their data security and risk management. Software vendors also keep making patches and upgrades so that security leakages are identified and stopped before any major harm can occur. So, investing in a good data security system will be a major step in ensuring that supply chain partners can share data confidently. Also, what data to be shared, how much information to be shared – these are data strategies which the business have to make based on their overall growth strategy. Today we have multiple technologies that can be used to share data seamlessly among supply chain partners. Some examples are Mulesoft, API, CPI, Kubernetes, Node.js, etc. But the choice of technology is the second step; building the data sharing strategy will be the first step.

AVOIDING COMMON PITFALLS WHEN EXECUTING SUPPLY CHAIN COLLABORATION

Effective supply chain collaboration is a transformative journey with multiple agile steps, constantly delivering value at each stage with many possibilities to improve. Some key considerations are listed below as per Deloitte study:

• The journey should be initiated with a clearly defined strategy. This includes identifying gaps in current processes followed by a comprehensive assessment of the technology landscape.
• “One” platform for all suppliers is key for successful collaboration. Such a platform should be able to collect data from multiple siloed systems; and Join, transform, curate, and create a contextualized data set for effective collaboration.
• Start with developing foundational capabilities to enhance operational visibility with critical suppliers (start small). Once foundational capabilities are established, they can be extended to other suppliers (scale rapidly).
• Onboarding of other supply chain partners, namely sub-tier suppliers, logistics service providers, etc., needs to be well-thought-out, as it can be challenging but rewarding.
• True collaboration requires stakeholder buy-in, which can be achieved through effective communication, change management, and the demonstration of value. The realization of value and the understanding of value are pivotal factors that drive adoption.
• Having a well-defined “playbook” can accelerate development and reduce overall implementation time. This comprehensive playbook should include functional and technical requirements, a robust governance framework that defines roles, responsibilities, decision-making processes, and a strategy for partner onboarding and organization change management, including “Why buy?” frameworks that help ease the process of internal and external stakeholder alignment.

In a nutshell, organizations of the future must be flexible, adaptable and able to respond to change using new innovations and collaborative techniques to achieve their strategic objectives.