4 Reasons Why Supply Chain Collaboration Is Critically Important

Supply chain and procurement leaders may be all in on building resilience in their enterprise’s supply chain, but that doesn’t mean efficiency is less critical as a measure of success.

To ensure that supply chains are both efficient and resilient, many enterprises are starting to recognize the need to invest in building supply chain collaboration to ensure that connections with suppliers and partners are seamless and able to withstand disruptions.

However, making sure materials, components and finished goods are in the right place at the right time can be incredibly difficult given the complexity of today’s supply chains.

When a company has thousands of suppliers and customers all over the world, ensuring effective collaboration with all of them is necessary for the efficient functioning of the supply chain.

Collaboration is a key factor in building resilience and, along with visibility and real-time intelligence, it is one of the top capabilities underlying modern supply chain management software.

Collaboration is essential for managing global supply chains

Vast, multitier supply chains with myriad interconnected pieces combined with an increased need to mitigate risks and respond to disruptions make supply chain collaboration vital.

Companies have an intense need to collaborate with their suppliers on purchase orders, capacity planning, forecasting and quality management, as well as in areas such as inventory and warehouse management and transportation. Why?

1. Better decision making

Supply chain collaboration enables better and faster issue resolution and exception management, making supply chains more resilient to disruption and more efficient in creating value.

2. Stronger supplier relationships

By leveraging collaboration, enterprises can build and manage strong supplier partnerships, enhance problem solving and balance supply and demand more efficiently.

3. Greater competitive advantage

By realizing gains in operational efficiency through improved collaboration, companies that partner with suppliers effectively will gain competitive advantage over those that do not.

4. Revenue growth

For retailers and their suppliers, improved collaboration was found to have impacted estimated revenue — to as much as $2.6 billion in companies whose size is greater than $10 billion, according to a 2020 Coresight Research report.

Yet obstacles to supply chain collaboration are persistent

Too often, collaboration is stymied by enterprises running outdated software or relying on manual processes to manage supply chains. Functional silos within organizations can also inhibit collaboration.

In a 2021 American Productivity & Quality Center survey, 40 percent of the respondents identified a lack of support for collaboration across functions, as well as with external partners, as an obstacle to improving supply chain processes.

The proliferating number of risks to supply chains make seamless collaboration a must-have capability for enterprises.

Companies or suppliers may be reluctant to share data, or they may not share the right data, or be unable to share it at the right time.

To make supply chain collaboration effective, it is essential to make sure that information flows both ways, in real time, from companies to their suppliers and partners, and back from suppliers.

To achieve supply chain’s goals of minimizing costs and balancing supply and demand, enterprises will need to facilitate supply chain collaboration. Doing so, by breaking down organizational silos, enabling visibility through real-time information sharing and modernizing aging systems, will help make them more efficient and more resilient to disruptions.