This article was first published in Logistics Business
Collaboration is a word thrown around the outsourcing world with limited understanding, meaning few invest enough time and money in improving it. Clearly, collaboration across a supply chain is important – no individual IT component generates real value alone. But with increasingly complex IT delivery models often underpinned by a mix of in-sourcing and outsourcing, how can you strengthen collaboration across your own supply chain?
1. Start early
Collaboration isn’t a tap that can be turned on and off – it’s based on trust built over time. So start working towards efficient collaboration from the beginning, even before contracts are signed. That means you should work together to jointly scope and develop solutions, as opposed to the traditional approach of chucking an RFP over the fence and waiting for a response.
2. Agree ways of working
During any procurement process, there’s a temptation to meet deadlines at all cost. But it’s critical to agree ways of working before you’re bound to inflexible contracts. Invest time and effort in defining roles and responsibilities, for example, and you’ll avoid a breakdown in relationships later.
3. Reward collaboration
While many organisations penalise poor performance in their supply chains, few reward true collaboration. Look to provide collaboration bonuses and other incentives, such as positive public references, when the supply chain works seamlessly.
4. Consider committing to ISO44001
The standard on Collaborative Business Relationship Management doesn’t solve all the issues, nor does it claim to. But it does provide a set of principles, a framework covering roles, activities and processes, and a recognised benchmark. Perhaps more importantly, publicly committing to ISO44001 will help secure senior stakeholder support and funding. Many organisations recognise the benefits and more now require certification (or a commitment to achieve it quickly) for key supply chain partners.
5. Fix first, settle later
One thing that often stands in the way of true collaboration is excessive finger-pointing when problems arise. By ensuring all your supply chain partners agree to fix issues immediately and apportion blame later, you’ll prioritise end-to-end service delivery. Of course, this relies on all suppliers being financially incentivised.
6. Share risk
It’s common to want to transfer significant risk to suppliers. While this can be done, the result is usually a significant increase in price. It’s important to assess where the risk is and transfer it only when the risk-cost balance is right. By doing this, you can minimise costs and re-invest savings into supplier management.
7. Competitive tension
Suppliers that don’t collaborate effectively should see some of their scope transferred to other, more collaborative, suppliers. While such opportunities are usually only possible in sourcing contracts of substantial size, they should be considered.
8. Measure progress
It’s important to regularly establish how well collaboration is actually working through hard and soft metrics. This will also need a readiness to review and amend collaboration agreements if they aren’t driving the right behaviours.
9. Use an independent mediator
Independent mediators can be useful when analysing collaboration among suppliers, particularly where there’s thought to be a lack of it. So ensure your service managers have the skills and training to recognise good and bad collaborative behaviours and identify when an independent mediator would be useful.
Driving proactive collaboration isn’t easy and takes serious investment. But a breakdown in collaboration would be far more costly. With a lack of effective collaboration increasing the risk of poor service and even litigation, it must be taken seriously at the highest levels.
Mike Dodd and Rob Cann are sourcing experts at PA Consulting