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Supply Chain

5 Benefits of Supply Chain Collaboration

5 Benefits of Supply Chain Collaboration In 2018


Supply Chain Management focuses on managing the flow of materials and services needed to make a product, and then deliver it to customers. It is a critical part of an overall company strategy to meet customer demand for a product. Supply chain management is most commonly divided into two parts: The first involves the choice of suppliers for the goods and services needed to create the product. The second is to develop processes with suppliers for pricing, delivery, and payment.

It is at this point that the potential for, and perhaps today the necessity of, supply chain "incoming" collaboration comes into play as supply chain management teams must manage inventory, verify shipments, authorize payments and transfer ownership of goods. Next, supply chain management managers schedule production, testing, and packaging. Finally, the SCM manager is responsible for the delivery logistics of the product to fill the customer's needs. This process provides an opportunity for "outgoing" collaboration.

Supply chain collaboration was initially thought of as the relationship between distributors and retailers. It has now been extended to include vendors, suppliers and food and beverage producers. Successful supply chain collaboration means that two or more companies are working jointly to share information, develop joint plans based on that shared information, and consequently execute their businesses with greater success than when acting independently. Such collaboration often is never attained within a company let alone between companies.

A model for supply chain collaboration is included in Collaborative Planning, Forecasting and Replenishment (CPFR). This that is considered by many to be the standard for direct material planning and fulfillment through collaboration. CPFR is intended to eliminate uncertainty in demand and supply by exchange of information, including demand signals, forecasts, inventory, and transportation with chain partners. Integrated information systems assist in collaborative forecasting and replenishment processes, increased sales, and reduced inventory and cycle time. Successful partners exhibit mutual trust, and believe that both sides profit equally when both supplier and customer are responsible for optimizing inventory by keeping it as low as possible.

 

Top 5 reasons to optimize your company's supply chain collaboration are:

1. Improved Product & Material Flow

Time-to-customer is a crucial indicator of product flow efficiency. The less time it takes for goods to reach the customer, the more efficient the product flow. However, there are many other factors to consider such as the quality of the materials or goods that reach customers, the supply and demand balance, shipment options and costs, and inventories. Effective supply chain management enables companies to improve product flow through accurate demand and sales forecasting. It also helps improve inventory management to arrest the bullwhip effect that increasingly impacts organizations further down the supply chain, and avoid underproduction. Supply chain collaboration also minimizes delays and allows full traceability and visibility into the movements of goods from the supplier and distributor to the retailer.

 

2. Enhanced financial flow

Another pain point for supply chain players is how to improve cash flow in the value chain, which involves “thousands of invoices and payments in a given year”. The unpredictability and variability of financial inflows and outflows can add more complexity to the inherently complex supply chain financial flow. Implementing supply chain management can help companies address all these cash flow challenges, allowing them to carefully evaluate their current processes, identify the weakest links that slow down and hamper financial flow, and determine the right solutions to address the problems.

 

3. Seamless information flow

Companies with effective supply chain collaboration can remove the bottlenecks to supply chain information flow. It can help them evaluate the quality of information sharing, then implement solutions to best fill the gaps. Supply chain collaboration helps design effective best practices to facilitate different types of supply chain information that usually come in different formats and structures. Supply chain collaboration also enables accurate, timely, complete, and relevant information flow to avoid missed opportunities and possible risks. Effective and seamless information flow addresses information distortion and miscommunication and promotes enhanced collaboration and relationship value among supply chain stakeholders. It also helps improve visibility into all transactions, and accelerate generation of supply chain insights through past reports creation.

 

4. Collaboration Increases Share of Wallet

In a tight economy, new accounts can be increasingly difficult to secure, even in emerging markets. As a result, distributors and suppliers are increasingly targeting their sales efforts to existing retailers, and can only succeed if they add value above and beyond their competitors. While price is important, competing on price alone often leads to fickle customers who, a year after of doing business with you, will leave to find cheaper pastures.

 

5. Data-Driven Supply Chain Management

To maximize the potential of Supply chain collaboration, however, companies should embrace a data-driven approach because data is at the core of every supply chain transaction and is fundamental to product, information, and financial flow optimization. A data-driven approach to Supply chain collaboration enables seamless integration of business elements, schema-on-read approach to data management, and real-time data transparency.

 

Conclusion

Even new product development and commercialization should be a process in which suppliers and customers collaborate to reduce time to market. With today's shorter product life cycles, the new products must be developed and launched with ever-shorter time schedules to remain competitive. In the product development and commercialization process, customer needs must be known, materials and suppliers must be identified and through collaboration integrated into the best supply chain flow for the combination of product and market.

For large businesses, there is Supply chain collaboration software that supports CPFR standards. For enterprises that have invested time, resources, and money over years in Enterprise Resource Planning (ERP) projects to standardize their internal operations, their systems often lack the functionality, scalability and security needed to address collaboration within a multi-enterprise supply chain. However, Software-as-a-Service (SaaS) hosts can provide an attractive solution.

Successful supply chain collaboration isn’t an easy accomplishment, but it is worthwhile if the initiative is full thought out and pursued jointly through planning, communication, and monitoring. Supply chain collaboration can help to optimize your operations while providing you with cost savings, improved customer and supplier relationships and a more complete view of inventory data.

 

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