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Collaboration Between Competitors to Attain Customer Goals

Competition within the supply chain industry is fierce. Internal executives, third-party providers and industry consultants all have their own special sauce strategies to navigate the twists and turns of the supply chain. Touting a company's strength is important for shareholders and marketing efforts. But value can be generated by recognizing operational deficiencies, and seeking out partner companies with complementary competencies. By this initiative, both companies capture or retain the ultimate prize - the customer. Sometimes a company's best choice for a partner is the least expected or desired - a competitor.

Collaboration Between Competitors to Attain Customer Goals

Additional Value Can Come Through Collaboration With Competitors:  Corporate CEOs are recognizing the growing importance of collaboration among suppliers and service providers as a way to mitigate complexities, reduce transportation costs and gain market advantages.  In both roles as supplier and service provider, supply chain companies might heed the advice of their clients and build a framework for collaborative relationships.

But It Requires Structure and Clarity:  Our industry's biggest patron  - manufacturing - provides a perfect example of collaboration between competitors.  In 2011, BMW and Toyota (the manufacturer of Lexus) collaborated to create an environmentally friendly luxury vehicle.  They shared costs and knowledge for electric car battery research, and BMW supplied diesel engines to Toyota.  Author and research team leader Evan Rosen describes the process in his book, "The Culture of Collaboration." He writes, "Collaborating among competitors makes sense when the collaboration creates value for both parties, begins with structure and clarity, and involves non-differentiating processes."

Some of Us Already Engage: What if supply chain industry leaders were to take Rosen's findings and apply them to logistical operations?  Geography plays a substantial role in supply chain profitability.  Limited reach can be a weakness, but working with a competitor at a desirable location can benefit everyone involved.  For example, both a domestic original equipment manufacturer and their overseas contract manufacturer can see the value of keeping products closest to the source of use in the event that the product needs an upgrade or part replacement.  Though the overseas manufacturer may see a domestic re-manufacturing plant as a competitor, working together reduces transportation and administrative costs, keeping both companies profitable.  The shortened transportation time keeps the customer satisfaction high as wait time diminishes, hence the customer reaps the ultimate benefit.

Enough Ankle-biters Can Bring You Down: Weaknesses can emerge from a company's internal resources if they are not a core competency.  For example, a stand-alone electronics repair depot may not have the expertise to perform on-site repairs efficiently.  Conversely, a field service repair company may not have the high-level technical staff or expensive equipment to perform the necessary repair at component level.  By working together and complimenting one another's strengths both companies can serve the ultimate client and the customer benefits by not having to purchase new equipment or parts.

Once the value of collaborating has been determined, the next step is to find a potential partner with a history of integrity.  As Rosen states, the collaboration must begin with structure and clarity.  Defining parameters of information sharing must be at the foundation of the collaboration.  Big Data has become a crucial factor in effective decision making.  The ease and transparency of data sharing between the collaborators will optimize the relationship and provide a clear path for the end result - customer satisfaction.

Cooperation Has Its Limits:  The Harvard Business Review suggests these guidelines:  employees at all levels should be aware of which information is to be shared and which is to remain proprietary.  As they saying goes, "Good fences make good neighbors;" so do good contracts make for good collaborative agreements.  Proprietary information must remain so for the health of each company involved, but sharing pertinent information will facilitate the specific project.  The Review also advises that harmony is not the most important measure of success.  Gaining market share and keeping customer satisfaction high is the ultimate goal.  Expect some negotiation along the way.  Open communication is key.  Establish specific performance requirements with incremental reviews to assure both companies are on the page and pace.

Stay Out of the Deep End of the Pool:  Another step in choosing the right partner is recognizing that the size and market power of both partners should be modest compared to industry leaders.  Both partners must recognize they are mutually dependent on each other for completion of a certain project or initiative.  If the collaboration is long term, neither party will risk antagonizing the other.

And Focus on Core Competencies:  Lastly, the collaboration should involve non-differentiating processes.  According to Rosen, these are typically behind-the-scene processes that are not normally part of the company's product perception.  A supply chain manager may realize that internal staff cannot handle the amount and complexity of product returns.  Outsourcing this process to a third-party provider remains seamless to the ultimate customer.     The consumer only knows that it returns the product to the retailer.  Behind the scenes, however, the products move from warehouse to testing to refurbishment and back onto the store shelves.  The   consumer never knows how many touches took place.  They see that manufacturer fixed its own equipment, when in actuality it was another manufacturing entity that performed the task.  Though internal manufacturing may see the outsourced party as a competitor, the reality is that delegating this task allows the manufacturer to concentrate on its core competency - production.  Consumers benefit with better developed products and remain loyal.

It Will Affect the Triple Bottom Line: Companies and executives in the supply chain industry have a lot to gain by teaming up with competitors. Reduced internal costs, acceleration of new project initiatives, and market growth are just some of the benefits of a strategic relationship.  Consumers win from this partnership as well - a luxury environmentally friendly car, reduced wait times on returns, saving costs on new equipment, and higher quality products.   As long as both entities choose partners wisely, take protective precautions, and clearly define the collaboration in terms of the expected value and mutual effort, collaboration can propel partners to attain the triple bottom line: people, profits and planet while satisfying their mutual customers' needs.

Source: Renova Technology

Keywords:  supply chain management, supply chain partnerships, customer satisfaction, logistics management, supply chain optimization, supply chain solutions, reverse logistics, supply chain management IT, data analytics, warranty

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