Myths of supply chain collaboration

There is a great deal of noise around collaboration right now, so perhaps it is time to explode a few myths regarding collaboration and examine what does, and does not, work.

- Collaboration is a strategy.
It is not a strategy per se but it can add value to a strategy.

The only sense in which a company can adopt horizontal collaboration as a strategy would be tactically or as a guiding principle.

Collaboration is the output of a culture based on trust and openness, where individual requirements are overall met better in concert with others than by striving to make it on one's own capabilities/resources.

Collaboration is dangerous and could lead to a fine of ten per cent of revenue under EU anti-competition law.
Provided companies adopt horizontal collaboration based on sharing of assets or non commercially sensitive information with a view to reducing overall costs, reducing congestion, improving customer service, then they will not fall foul of the EU anti-competition authorities.

Using an independent, trusted third party such as ELUPEG to hold and analyse confidential or commercially sensitive data for evaluating collaboration potential without risk is a well tried and proven process.

- Companies with inefficient supply chains will benefit from collaboration the most.
Wrong. We have categorically proven that companies which have the most efficient supply chains get more from horizontal collaboration as they know their costs to the last cent.

Indeed such efficient companies have squeezed out all the costs possible internally and need to look outside the business for future big savings.

They have overcome the problem of internal collaboration, have secured significant benefits from vertical collaboration with suppliers and customers and most importantly have the time and senior management endorsement which is vital to making horizontal collaboration work.

- Companies always fall out over how to share the savings.
We would not say this never happens but by benchmarking the respective supply chain costs of each collaborating party before commencing the project and agreeing on a "fair formula" for distribution of savings this can be avoided.

It is also interesting to note that "reinvesting" some of the first savings to drive deeper collaboration can ultimately lead to even better results. ELUPEG can facilitate any of these services if required.

- Businesses and products change and hence any strategic investment in horizontal collaboration is doomed to end in tears.

This is definitely one for the nay-sayers. If you treat the collaboration project as you would any other significant investment and include the costs of winding up the collaboration and replacing it with an alternative solution you will soon see if the benefits outweigh the risks, if they don't you will not proceed as you would with any investment opportunity.

This is not "planning to fail" but recognition of the real business world and means only really viable projects get implemented. Agreeing the arrangements for sharing the benefits, and for ending the collaborative operation before the operation starts is just as important as is the methodology for dispute resolution. In this way, with agreement on the difficult issues, the venture stands a far greater We have categorically proven that companies which have the most efficient supply chains get more from horizontal collaboration.chance of success and management will not sit there worried about how to deal with future changes.

- Collaboration leads to loss of control and reduction in customer service.
In fact, if done properly, the opposite can be true. Collaboration enables more economic and more frequent shipments which can increase delivery frequency to customers.

For retailers this is precisely what they are looking for. For suppliers the benefits of higher on shelf availability or in stock availability can lead to less lost sales.

- Collaboration - the way forward.
In spite of the dual benefit of cost and carbon footprint reductions, horizontal collaboration has very little traction in the market place.

Collaboration takes work. It is not like flipping a switch. It's the work, not talking, which will make collaboration happen.

The next ELUPEG conference entitled "Exploding the myths of horizontal collaboration in the supply chain" and incorporating "The great Antwerp collaboration debate" will be in Antwerp, Belgium hosted by Coca-Cola Enterprises. For more information, go to www.elupeg.com