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Collaboration. It could be the most overused word in supply-chain management today. Companies doing routine business deals claim to be "collaborating"; so do partners swapping the most basic data. No wonder the term has lost much of its meaning. But the best supply-chain performers don't settle for buzzwords. They're deeply involved in relationships that call for tight links between partners. It's an environment where information flows freely in both directions. Where manufacturers, distributors and retailers respond quickly to changing business conditions. And customer service - another tired phrase - is paramount.
Collaboration can take many forms. It can flow in either direction - upstream to suppliers, or downstream to customers. What true collaborative relationships have in common is a level of trust and data sharing that would be unthinkable under a traditional corporate structure. Managers tend jealously to guard information, not only from outsiders but also from others in the same company. Collaboration requires a leap of faith among individuals and organizations. Here are 10 best practices from those who have taken that leap, and have seen big rewards as a result.
1. Know your customer's service requirements from the start. Companies might think they know what they're getting into when they sign a contract. But a surprising number of details are often left to chance, or completely ignored. They only draw attention when things go wrong. DSC Logistics, a third-party logistics provider based in Des Plaines, Ill., spends a lot of time documenting a new customer's needs in areas such as order cycles, returns management, inbound carrier notification and packaging specifications. "One of the greatest reasons why [supply-chain] integrations are not successful is that requirements are not defined up front," says Ken Heller, DSC's vice president of new operations development.
Heller recommends the creation of a detailed process map, along with the listing of all documents and possible glitches. Top managers tend to reject the possibility of things going wrong, he says, while shipping clerks may be more knowledgeable about how supply chains really work at the operational level.
DSC recently took on logistics for the food-service business of consumer-products giant Unilever. The deal involves managing shipments to many of the nation's largest fast-food chains. Heller says DSC worked closely with the client's customer-service and inventory-planning teams to assess its strict requirements. Such an effort can also be the basis for detailed reporting and performance measurement of the vendor, he says.
Management consultant Rick Hoole, a director of PRTM in Waltham, Mass., calls for creation of a joint service agreement (JSA) separate from the basic contract between a company and its service provider. The JSA drills down into the processes by which the vendor will carry out the customer's wishes, he says. It's focused on day-to-day concerns over metrics, workflow and communications between partners. While not a legally binding document, a JSA nevertheless can head off misunderstandings and promote collaboration, Hoole says.
2. Focus on internal collaboration. Often the toughest part of forging a collaborative supply chain isn't in the links between independent partners - it's getting a company's internal departments to cooperate. For all the talk of "silo busting," the walls between functions remain solidly in place at many businesses. Texas Instruments, having worked hard to link up with buyers of its semiconductors, is only now turning its attention to internal collaboration, says supply-chain manager Michael Senecal. "There are all sorts of opportunities to eliminate redundant tasks," he says. The goal is to improve visibility of product and data within the organization, and ensure that all departments are working from the same set of numbers.
In what Senecal terms a two-year project, Texas Instruments is taking steps toward creating a single data repository, with a unified vision of demand across short-, medium- and long-term planning horizons. "We're all using the same base data," he says. "That in itself is a huge improvement." The next phase is to model all internal businesses within one planning engine. Finance and operations managers of the company's five manufacturing units have chosen Senecal to orchestrate their processes in a coherent fashion.
A crucial step toward internal collaboration is determining who "owns" bits of information throughout the company, says Russ Henry, senior vice president of marketing with Velosel Corp., a Santa Clara, Calif.-based vendor of software for collaborative product data management. Individual departments often won't take responsibility for the data that they nominally control, covering such elements as price, shipping conditions and product dimensions. By creating an atmosphere of accountability, companies can move toward the establishment of a product information management repository, with complete and accurate data, Henry says.
3. Shorten your planning horizons, to respond more quickly to change. Texas Instruments is slashing the lead time for committing to set quantities of custom-made product. In the past, it would ship based on quarterly numbers, and lock in orders at the beginning of each quarter. Now it wants to set up a monthly sales and operations planning (S&OP) process. And, through better collaboration with customers, it's delaying final decisions until the end of a quarter. The result, says Senecal, should be a steep reduction in excess product in the pipeline.
|Some contract manufacturers are expanding their services to OEMs."It requires a bit of infrastructure and a logistics network to do it well. But you've got to play full tilt, not go halfway."|
- Jim Molzon of Solectron
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