Discovering the Untapped Value of Supplier Collaboration

Lori Harner
August 5, 2020 | Updated: November 20, 2022

Planning can feel disjointed and disconnected

Collaboration across multiple tiers of supply is no longer a “nice to have” when it comes to advanced sourcing and procurement. In this timely article published by McKinsey and Co, Taking supplier collaboration to the next level, they take a deeper look into the value of network collaboration and stress the importance of why companies need to seek out innovation that helps their supply chain become more resilient through collaboration.

One example that was noted in the report reiterates the need for collaboration and innovation as it pertains to unlocking new sources of value. “Cosmetics company L’Oréal follows this approach to encourage collaborative innovation. Through open dialogs concerning company goals and long-term commitment, L’Oréal has been able to establish an effective co-development process.”

Furthermore, leveraging the power of a collaborative network and streamlined processes can help buyers and suppliers discover untapped value, moving beyond simply focusing on the price of the products and services they buy to implementing new sources of value such as new product introduction, improved customer loyalty and reduced risk.

According to McKinsey, to recognize this value companies require strategic alignment, cross-functional engagement, organizational governance, communication and trust, and value creation and sharing. Each of these five dimensions can benefit from the presence of an enabling infrastructure that can remove barriers by automating and streamlining the transfer, reconciliation and contextualization of real-time exchanges among all tiers of supply to ensure that businesses can unlock significant untapped opportunities.

Yet, many companies still rely on manually intensive processes. For most companies, supplier and channel collaboration means the exchange and reconciliation of countless spreadsheets, email exchanges and phone calls. Inefficient and error-prone, this approach places a huge burden on manufacturers and trading partners alike, making it hard to scale across multiple tiers of supply and realize the benefits.

Addressing the technology challenges to effective supply chain collaboration requires three key ingredients: an end to end view of the complete chain from raw material to end customer, access and connectivity to ecosystem networks and an open platform.

Adopting an end to end view of the supply chain offers opportunities for cross-pollination of best practices in partner collaboration

In the article aforementioned, McKinsey & Co highlight that strategic alignment benefits from adopting a joint business planning approach and undergoing frequent partner evaluation and recruitment to ensure continued strategic fit.

A collaborative high-level overall business planning approach supported by enabling software is not uncommon in the downstream supply chain. Companies use collaborative channel planning applications to agree with their channel partners the targets, resources and activities needed to reach the goals, and the measurements and KPIs to track execution and the incentives to reward achievement. Extending the use of such applications on the supply side may have merits in driving upstream collaboration. At the same time, collaborative forecasting is common practice in the upstream supply chain. Adopting collaborative forecasting downstream could tighten channel relationships and secure untapped value.

Similarly, structured mechanisms to assess, monitor and measure trading partner performance have been common practice in the upstream supply chain, for quite a while, and have helped companies align their supply base with their strategic goals. Applying such mechanisms in the channel could have the same beneficial effect.

Ownership of ecosystem networks at a technology level facilitates connectivity to and familiarity with the partners, a fundamental requirement for supply collaboration

Companies employ technology in their supply chain interactions. When the providers of that technology own large ecosystem networks (supply networks, logistics networks, channel partner networks) they are better able to help drive partner communication and trust, another important dimension of collaboration mentioned by McKinsey & Co. Connectivity and familiarity achieved through network ownership help companies develop empathy with their ecosystem and, as a result, achieve effective communication with and gain their partners’ trust. Manufacturing brands who look through their partners’ eyes find it easier to understand how to make collaboration work. By shifting perspectives while retaining the knowledge of their own business, manufacturers learn how their collaborative demands and actions are seen and impact suppliers or channel partners and are able to ensure value from the process for all parties.

An open platform technology infrastructure is essential to support business processes, which span both functional and organizational boundaries

In their article, McKinsey and Co also highlight the importance of cross-functional engagement. Particularly as collaboration drives business to reach outside their own four walls and the company has little, if any, influence over the technology in use by their channel, supply or logistics counterparts. An open platform is less encumbered by technology diversity and hence can ensure that the data required for collaborative processes flow freely across the relevant organizations, while access to ecosystem networks ensures availability of the data in the first place.

In a recent interview at the Virtual Supply Chain Summit, Michael Farlekas, e2open President and CEO, brought to life many of the points above, exemplifying how they can deliver value to manufacturers, suppliers and distribution partners alike.

The bottom line is to begin the journey of unlocking untapped value, companies need to start with effective collaboration that builds confidence with and between partners, creating a more stable supply network. The financial impacts are significant. Operating efficiencies and lower materials costs resulting from centralizing and streamlining sourcing activities raise profitability. e2open has the building blocks and innovation to enable a safe path for high supply chain performance. It begins with the world’s largest network to quickly connect to and collaborate with all of your supply partners around the world, digital automation which enables workflows with exception management provides step change in performance and massive scalability and flexible workflows, that support for every collaboration use case future-proofs deployments and provides on-going shared value to all parties.

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