Part 1

On October 30th, the Data2Move community will met again to explore Supply Network Collaboration. In this two-part article, Arjan van Weele, professor of Purchasing and Supply Chain Management, shines some light on this thought-provoking topic: “Companies can no longer ignore the fact that good collaboration is vital.”

“Many of us are not aware of this, but we are all completely dependent on others. For our survival, for peace, for prosperity. Especially now that the world is becoming more and more interconnected. We have to learn how to collaborate in networks,” says Professor Van Weele.

“Companies often don’t realize how dependent they are. Until there’s a flood in Thailand, leaving three factories under water that produce semiconductors, required by companies here to make Printed Circuit Boards – who then send people home, because the process grinds to a halt.”

Competition is becoming a myth

“Based on our research, we can now see that competition is becoming a myth,” he states. “One supermarket competing with another… That’s not really what’s going on. It’s these companies’ supply chains that are competing. Look at the automotive world: it’s the suppliers of Volkswagen that define the quality of their cars.”

“By now, we have realized that companies are so dependent on their supply chain partners, for the quality of their products and services, as well as their reputation, that they can’t ignore the fact that good collaboration is vital. It is ASML’s network that enables the company to realize the innovations they need in order to survive. They have to innovate every 18 months. Moore’s Law. You can’t make that happen with a loosely coupled system. Supply Network Collaboration is about companies, their suppliers, their customers and knowledge partners, all joining forces in a network.”

Different approaches to Supply Network Collaboration

“The interesting thing is that you can approach it from different angles. From the innovation side, or from the operations side. From the logistics side, of course: how do we optimize the flow of goods? From the procurement side – how do the various parties deal with each other in terms of contracts? Or what about the IT side: how do we exchange data, how do we make sure all partners are connected?”

“And, last but certainly not least, there is the human side of enterprise: how can we get people from different companies in different sectors, all with different company cultures, to work together without any obstacles?”

“It’s far from easy,” says Professor Van Weele, and he smiles: “Well, that’s the theme of the day!”

Part 2

“Humanity has a great capacity to adapt to new circumstances. However, in our interconnected world, you can clearly see there is a limit to this capacity. It’s important to take into account how much change people and organizations can accept and digest.”

“It’s the same when you’re talking about supply network collaboration. It’s a learning process with ups and downs.There are companies who do it extremely well – here in the Eindhoven area, for instance – but for most companies there’s a long way to go.”

Get into it for the long term

“Look at retail, for instance. A while ago, I read about a German retail chain taking 450 Unilever products off the shelves because they couldn’t agree on a price increase. The customers seem to come in second, they have nothing to say about this. Why not look at the situation together, find out how to take costs out of the chain, and see what both parties want to make as a margin. This kind of powerplay leads nowhere.”

“Based on science, we know that collaboration brings much more than arm wrestling. Supply network collaboration will not result in better financial results today, but it will do so tomorrow. If we only focus on the short term, meaning quarterly results, this will generate opportunistic behavior in your relationship with supply partners and customers. That’s a hassle you need to prevent. In each and every supply chain, there is so much waste to take out, so many costs to be avoided.”

A meeting of the minds

“Companies already depend on their suppliers in terms of product and service quality. Now, they also depend on them in terms of innovation. Getting the best innovations from suppliers means you need to invest in your relationships. Innovation is all about people. Many companies agree they need to stimulate joint knowledge sharing and innovation. But that requires a new approach to collaboration. It takes a lot of trust – both personal trust and institutional trust. That illustrates the importance of the Data2Move event’s theme.”

“We should realize that you get the best solutions when you bring all relevant companies and specialists together. Supply network collaboration always requires a meeting of minds.”

The first step towards network collaboration

What would be a good first step towards collaboration in networks? Professor Van Weele: “Ask your network which questions they currently want answered, what it is that bothers them. For instance, managing their chains: what keeps them awake? They might say: ‘You know what we think is difficult? Predicting demand. Especially discontinuities.’ In our case, we would say: well, we’ve developed these forecasting models, do you think they’d work for you?”

“Or perhaps your network might say: ‘You know, we suffer from stock obsolescence.’ Perhaps because their products’ shelf lives are getting shorter – while a purchaser enthusiastically bought a lot of them, in order to get a discount. How should they make decisions from now on? Another example of a question: ‘In our business scarcity is an issue. We have to wait an entire year for certain components for our Printed Circuit Boards, but we need to have them done in three months.”

“I hope we get to discuss questions like these during our event, so we can start doing something about them. That’s where our community’s enormous amount of knowledge, experience and creativity comes in.”