Supply Chain Collaboration— The Ultimate Guide of 2023

Stepsto a Successful Collaboration

Here are the following steps to make a successful collaboration:

1. Collaborate in your area of strength

Companies often use collaboration as a way to fill the gaps in their capability. However, the most successful collaborations are built on strengths and not on weaknesses, 

For example, a manufacturer wanting to collaborate with a major retailer to improve its own forecasting approach will have nothing to gain from accessing the retailer’s point-of-sale data unless it has the capacity to make use of that data. 

 2. Turning lose-win to win-win situations

Some collaboration creates value for both parties but the benefit only falls more to one partner than to another. Rather than not collaborating at all, smart companies can make collaboration work by agreeing on a more sophisticated benefit-sharing model. 

This sophisticated benefit-sharing model can come in any form such as discounts or price increases to fairly share increased margins or cost reductions or they can negotiate compensation in other parts of the collaboration.

 3. Select partners based on their capability

The biggest potential partner might not be the best one for you. Many companies collaborate with their largest suppliers or customers as they assume they can give them the best value. 

However, this idea turns out to be untrue. Collaboration may be effective for a small partner as it may invest more time and effort in the program than a large one that has dozens of similar initiatives already on its back. 

 4. Invest in the right things

One of the top reasons why collaboration does not work is the lack of resources. Companies usually underestimate the requirements necessary to make collaboration work. 

In order to have successful collaboration, companies must devote extra resources to their collaborations, particularly in the early stages of the relationship. 

It must begin with the top executives of the organization defining the vision for collaborative efforts and allocating resources to support it. 

 5. Collaborate for the long term

What will complete a successful collaboration is stamina. It may take a lot of time and effort to overcome the initial problems and make the collaboration work. However, both parties must need to realize that collaboration must be built in an appropriate long-term perspective into their goals and expectations. 

Thus, both parties must understand each other’s long-term objectives and know initiatives they can work together in the coming years. This kind of mindset helps companies to break the short-term project mentality that limits the true benefit of collaboration. 

Examples of Collaborative Effortsby Huge Companies

Here are some examples of collaborative efforts done by well-known companies:

1. L’Oréal’s communication and trust approach

L’Oréal follows a communication and trust approach to encourage collaborative innovation. By openly communicating to its partners its goals and long-term commitments, it has been able to establish an effective development process. 

L’Oréal’s annual exhibition offers suppliers a rundown of the consumer trends that it will work on and then ask them to develop packaging solutions that suit these trends. Thus, the exhibition allows L’Oréal to create a trust-based forum for suppliers to present their ideas and products in development. 

2. P&G’s value-sharing model

The number one reason why suppliers and buyers take part in collaborative projects is due to shared value. Thus, why procurement professionals consider it the most important dimension of their collaboration efforts. 

P&G used a wide range of commercial models to partner with suppliers across the entire research & development chain. Its value-sharing model involves shared fun pools for the co-development of products and licensing agreements for commercialization. 

The flexibility to employ different approaches allowed it to tap into supplier innovation without the necessity of overinvestment in the development of deep partnerships with every potential collaborator. 

3. Toyota’s defined target approach

Toyota is a prominent example of supplier collaboration through its clearly defined targets and supplier performance metrics. These are built into contracts that hold suppliers responsible for continuous improvement in cost, quality, and delivery performance. 

Toyota governs supplier relationships through a steering committee to define the scope and objectives of the collaboration. It also reviews the progress of the collaboration and takes action to resolve issues that may rise. 

In Conclusion

In today’s ever-changing supply chain world, disruptions can have significant impacts, as seen during the pandemic. To improve resilience, working together is the key to success. The companies that we put up as an example like L’Oréal, P&G, and Toyota showed us how working together can make a big difference. They share ideas, share benefits, and set clear goals.

As things keep changing, teamwork becomes more important. Thus, in the world of supply chains, working together is what will drive growth in companies.