1. What is a Collaborative Supply Chain?
There is no single definition of a collaborative supply chain. The table below contrasts the characteristics of very traditional and very collaborative supply chains. Many supply chains today comprise elements of both, and many are becoming more collaborative and less traditional.
| Traditional | Collaborative |
| Assumes many customers and suppliers | Recognises limited choices of customers and suppliersr |
| Price is only differentiating factor | Price is one of many factors in total cost calculation |
| Focus is on individual transaction | Focus is on repeating and reliable transaction history |
| Perspective limited to company boundaries | Perspective is of interdependent firms with aligned interests |
| Cannot justify investment in any customers | May need to invest to support key customers and suppliers |
| Short term maximising | Medium to long-term acceptable returns |
| No commitment opportunistic behaviour | Commitment and mutual support |
| Buyer beware | No unpleasant surprises |
| Improve enough to win order | Continuous improvement to improve whole chain competitive performance |
| Hide failure to avoid loss of sales opportunity | See failure as opportunity to improve and remove possibility of future failure |
| High levels of individual risk | Shared risk lower levels of individual concern |
2. Why is a Collaborative Supply Chain Better?
Traditional supply chains compete within themselves, foregoing the value available from greater efficiencies and faster responsiveness. Collaborative chains compete against other chains, and develop smarter processes and products that are faster, and first, to capture added value. Businesses in collaborative chains align their commercial objectives and coordinate their information flows and actions to achieve them. The main benefits of collaborative chains are:
- Faster response to added value opportunities available from changing market opportunities and circumstances
- More competitive and commercially sustainable for all participants
- Acknowledgement that all in the chain must achieve their commercial objectives
- Create uniqueness and longer term interdependence built on trust and success.
3. Have You An Example?
We have many great examples of successful collaborative chain developments. The Scottish organic fresh milk chain (including dairy farmers who are members of Scottish Organic Milk Producers) transformed its performance through a collaborative development. Sales increased from 2 million litres per year to 10 million litres. Each business in the chain exceeded its objectives for volume and value generated. The ex-farm price for producers increased from an average 22ppl to 28ppl. This example involved market research, and development of a business proposition for each link in the chain. Case Studies
4. How Prevalent Are Collaborative Chains in Food and Drink?
Collaborative chain practices are not as well developed in food and drink as they are in other industries. Within food and drink, supply chains tend to be more highly developed in sectors that were unsubsidised, such as soft fruit and pigs. Even in the most sophisticated food and drink chains, it's relatively rare to find the highest levels of collaborative chain practice. So there's much scope for further development and commercial gain. Collaborative chains may be national or international in their reach, but the development of collaborative chains on a local level is also vitally important in Scotland.
5. Can All Chains Become Collaborative?
Even in the most traditional chains, and in chains where levels of transparency are not high, there are opportunities to adopt collaborative practices to realise value in new commercial developments. This is especially so when a change in specification commences with the farm product. Commitment of all in the chain is required to make the most rapid progress, and get a new or better product to consumers while it can attract a premium value return. Once this has been achieved, the next commercial opportunity or challenge will already be evident, and the next collaborative development will be required.
6. How Can Collaboration be Initiated?
Any business in the chain can initiate collaboration, and it is also common for industry organisations to provide both stimulus and support, because they are well positioned to identify opportunities and engage with businesses at different points in the chain. A shared business proposition, and expectation of additional commercial value amongst chain businesses, lies at the heart of any collaborative development.
7. What Are The Critical Success Factors for Collaboration?
The factors contributing to successful collaborative supply chain development are very clear:
- There must be a strong commercial motivator, either opportunity or challenge, that provides a clear imperative to respond
- A business proposition with commercial targets and value measures must be jointly developed, based on detailed specifications and actions at each link in the chain
- Independent 'honest brokers' (such as SAOS or an industry body) are usually required to help overcome obstacles between supply chain companies, and may take responsibility for progress and introducing other resources
- Each business in the chain must appoint a person with lead responsibility who has over-all decision making authority over his company's role and responsibilities in a development
- Out of chain resources and expertise is almost always required, and may include research, followed by process, product or system development, agronomy, and finance (including grants).