Everybody knows the motto “Supply chains compete, not companies”. Some even use “networks” instead of “supply chains”. We agree with this because it is not sufficient to focus only on internal efficiency of your company. It’s clear one should also focus on their supply chain partners But why don’t we see more integrated supply chain partners nowadays? What is the reason that we don’t hear much about collaboration initiatives, such as CPFR, anymore? What will actually be the future of collaborative supply chains? Let’s investigate these questions further.
Where it all started
It is quite a while ago that many companies started to look more extensively into collaborative ways of working between each other. Maybe the most famous model developed is the Collaborative Planning, Forecasting and Replenishment (CPFR) model. CPFR was originally designed to share more data with operating partners throughout the supply chain. Hereby, new insights could be developed and planning, forecasting and replenishment could be improved. Increased and more streamlined sharing of information and data throughout the supply chain, impacting ways of working of both buyers and suppliers; it all sounds amazing. However, the cases of successful implementation are scarce and failures are numerous. Many said that forecasts shared were not reliable enough and the costs necessary to run the collaboration were not always covered by the gains. But maybe the most important reason was the lack of integration of software. Dedicated, non-cloud based systems that were harsh to connect to each other, formed a strong base for the problems. Obviously, this model is no longer of interest for companies nowadays.
So what now?
There has been an important shift in IT; companies moved into the cloud and connecting them is almost a standard capability. An even stronger way of collaboration arises, gaining attention in an high pace. This new way of collaborative business intensifies the joint operations between the different parties. Driven by increased globalization and interdependencies between companies in a supply chain, the need for collaboration increases fast. Building on earlier established agreements, companies start to develop platforms together. These platforms allow for more Data Driven Insights, which is becoming more important, due to Big Data and the consequences for supply chain visibility and data analytics.
These new platforms are not only “booming” and “cool”, but have an increased probability of succeeding. Basically, companies establish a partnership for Big Data within the supply chain.
From our experience with various customers, we see that new and innovative ways to collaborate are emerging:
- Data is the new oil of this era. Therefore, it starts with combining different data sets into one data base, such as data from suppliers (i.e. Nielsen data), retailers (i.e. Point of Sale data), and external data (i.e. weather information)
- Who would analyze the data by themselves nowadays? The best data analytics providers of the world offer state-of-the-art and ready-to-use models and algorithms that are easily accessible to create valuable insights and highly accurate forecasts.
- Databases are preferably managed by an independent party so that sensitive information is not accessible for others, but only relevant and agreed insights are shared.
As these insights/forecasts are “online” available for all partners in the chain, you could do innovative things, e.g.:
- The suppliers and retailer can receive forecast based on the same data-set; or
- The suppliers can directly deliver promotions to the stores and skip the warehouse.
- Besides CPFR related topics, you can also use the platform for nearly all business topics, such as assortment planning, pricing and product-life cycle management.
Another benefit is that funding of such a platform can be more creative:
- Lower fee if one partner has lower margin than the others;
- Lower fee if one partner is critical in succeeding as a supply chain as a whole;
- Connect more partners to reduce the total costs;
- Connect even with partners of other supply chains to reduce the costs.
This is why it is future proof
These platforms are more likely to be implemented successfully than the more traditional collaboration types like CPFR. This is mainly because of two reasons. First, there is a higher focus on (state of the art) data analytics and insights, rather than on (integrating) processes. This allows for more value creation, an easier implementation, and more flexibility (i.e. a retailer can easily change its suppliers). Last but not least, these kind of platforms also increase the possibility of an integral positive business case, because the costs are lower and the costs can be allocated more creatively to partners in order to achieve a successful collaboration on supply chain level.