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Supply Chain

4 Key Cost-Saving Benefits of Adopting Supply Chain Collaboration in 2018

4 Key Cost-Saving Benefits of Adopting Supply Chain Collaboration in 2018

Supply Chain Collaboration is defined as two or more independent companies that work together to plan and execute supply chain operations. It can offer its partners significant benefits and benefits. It has become known as a collaborative strategy when one or more companies or business units work together to create mutual benefits. There are two main types of cooperation in the supply chain: vertical collaboration and horizontal collaboration. Vertical Collaboration is a collaboration in which two or more organizations at different levels or supply chain stages share their responsibilities, resources and performance information to serve relatively similar end customers. Horizontal collaboration is an inter-organizational relationship between two or more companies at the same level or level of the supply chain to facilitate simpler work and cooperation in order to achieve a common goal.

 In today's highly volatile business environment, the concepts driving growth in corporate earnings continue to evolve. With requests for low delivery costs conflicting with the need to provide products practically overnight, cooperation techniques are an absolute necessity. The current watchword for this cooperation is supply chain collaboration. The term itself implies a high level of peer-to-peer cooperation at all levels of the supply chain. The question then becomes: how is this level of cooperation developing?

Traditionally, cooperation between the different levels of the supply chain has been minimal. Secrecy was considered an essential element to maximize the profit potential for each link in the chain. Efficiency, however, suffered a lot when there were no loyal cooperation efforts. Therefore, cooperation in the supply chain can not succeed without a high degree of trust and cooperation among all members of the chain. The logical conclusion is that successful collaboration efforts require a cultural transformation of the business.

Generations of business cultures that require secrecy and independent actions to maximize profits simply do not work in collaborative processes in the supply chain. While it can not be denied that every link in the chain should generate value for shareholders, the awareness that these benefits can be improved through collaborative B2B relationships is a new paradigm that management must explore to increase efficiency. The implication is that all management levels must buy into the concept. Furthermore, a trust relationship must be established with business partners working together in joint efforts.

 Trust is not always easy to produce. In certain circumstances, relationships are achievable from the beginning. In other cases, external support may be needed to ensure that collaboration in the supply chain works cost-effectively. There are many reasons for relational difficulties. In cases where traditional competitive forces create distrust or personal conflicts arise between the people involved in the chain, the use of external consultants can be useful.

Obviously, all business partners must pursue common goals. In other words, if a channel partner does not fully cooperate with the overall vision, then it will almost certainly be difficult. Using an external advisor to mediate problems can help reduce differences. In some cases, systemic projects must be adequate to ensure that all parties understand the win-win goals of relationships. Once the parties understand the potential to increase the value of the company, it is possible to recognize the true potential of the collaboration. The resulting reports, even if moderated by external consultants, can really improve the benefits for all parties involved in supply chain collaboration.


Below are 4 cost-saving benefits of supply chain collaboration


1. Continuity of supply:

The supply chain risk management process has improved as the supplier is able to plan effectively for the future. Being in a very competitive market, there is always a risk that the supplier will not survive, especially if he has liquidity problems. The collaborative approach, however, means that the supplier must be able to plan for the future and know which market share he can maintain or even expand with reasonable accuracy.


2. Improved stability:

Stability within the supply chain can not be overestimated. Any supply chain that is unstable will have inventory, fail to meet sudden demand peaks, and ultimately fail to provide good service to the customer. Thus, supply chain collaboration helps to stabilize the supply chain in a way that was barely imaginable in the Western world just a few years ago, although this stability has long since been achieved in the Japanese automotive industry.


3. A mutually beneficial relationship:

While in the past the relationship between supplier and customer was counterproductive, the supplier was often considered to be completely expendable. The supplier knew they were viewed that way, so they had no interest in reacting flexibly; they knew they could be replaced within a few days. Now they could be replaced, but both parties acknowledge that there is a common interest in the two working together.


4. Flexibility:

The closer the cooperation between suppliers and customers, the better the supply chain can reach possible peak or lowest values. The flexibility of the approach can actually make a big difference to the customer. They will be able to accept new contracts with little progress, or they will be able to withstand periods of low demand simply by working in close relationship with their suppliers.




The complexity of the supply chain network grows with advances in technology, which consists of strategies and best practices for integrating and coordinating all functions, activities, transactions and people throughout the value chain - companies will be able to handle increasing complexity.

Supply chain collaboration helps networked companies deliver products and services to their customers. This system allows business owners to plan, design, implement, and monitor related activities to improve the company's performance. Supply chain management systems often require time and money to be implemented. However, many companies invest in these systems because of their advantages.

 The reduction of errors and the time savings within the supply chain means that the supplier is able to lower the cost of the delivered goods, which is beneficial for the customer but also helps the supplier stay afloat and remain competitive. Collaboration can be a good driver for cost reduction.

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