By Gary Girotti, Vice President, Transportation Practice, Chainalytics LLC
Tuesday, March 15, 2011
I recently had the pleasure of attending the FMI-GMA Trading Partner Alliance Conference where much of the discussion focused on a topic of great passion for me: collaborative supply chain practices. My active participation in this area has provided several opportunities to study and implement collaborative processes; however, I think our industry has barely scratched the surface on the potential of collaboration. Most people tend to agree — and sheer intuition and logic support the idea — that better resource sharing would be more efficient. However, as I left the conference, it occurred to me that this ‘efficiency’ thinking may be the wrong way to continue the collaboration conversation.
To continue, the conversation needs to go deeper than efficiency to include objectives such as increasing market share and realizing corporate social responsibility goals. In doing so, the focus of collaboration becomes value creation. Value creation is a more compelling and strategic proposition; its goal is to deepen customer relationships and develop sustainable business processes. An efficiency perspective falls short by focusing only on resource utilization.
Our call, then, as supply chain leaders, to support value creation is to approach our collaborative initiatives as investments, as revenue pursuits. Such a top-line mentality will not only attract the attention and support of executives, but also strengthen the relationships you’ve built with your collaborative partners. Rather than expending time and effort divvying up the cost savings, you can focus on your investment strategy by asking questions like “How will we re-invest our freed-up working capital back into the relationship?”
As witnessed at the conference, there are a few companies who are asking the right questions. Kraft has found success in collaborative transportation initiatives with its retail customers by focusing the relationship on increased control and sustainability. Del Monte, whose recent supply chain transformation was enabled by collaborative information sharing with retail partners, has focused on the mutual benefit of increased customer service levels. In both instances, the underlying strategy is an emphasis on growing the relationship, which ultimately leads to increased revenue and market share.
If more companies were to adhere to this value creation perspective, I am confident participation would increase, especially from retailers, who arguably should be driving this initiative. I also believe well-articulated solutions would develop, making the business case for collaboration even more compelling. Then, we can look ahead to the next new collaboration conversation!