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Agenda

Agenda for
for Today’s
Today’s Presentation
Presentation
SCM
SCM and
and Keys
Keys to
to
Competitive
Competitive Advantage
Advantage

Collaboration
Collaboration
And
And
Collaborative
Collaborative Logistics
Logistics

Benefits
Benefits of
of Collaboration
Collaboration to
to
Logistics
Logistics and
and Supply
Supply Chain
Chain
Logistics and Supply Chain Management:
An Evolutionary Perspective

Focus
Supply Chain
Management

Functional Orientation Logistics


• Transportation
• Inventory
• Warehousing
• Manufacturing
• etc.

1940 1950 1960 1970 1980 1990 2000 Beyond


Keys to Competitive Advantage
Through SCM
n Start with the customer
n Develop integrated, end-to-end solutions
n Segment customers on service needs
n Leverage technology to improve supply chain operations
n Quantify value throughout the supply chain
n Differentiate product closer to customer
n Know corporate core competencies
n Source strategically
n Develop and sustain successful collaborative relationships
New Strategies for
Supply Chain Success

“We’re able to keep our prices low cause we


disintermediated some links outta the supply chain”
What is Collaboration?
SC
M
Definition of Business Collaboration
(Michael Hammer, 2000)
n Business Collaboration: “Multiple companies working
together for mutual benefit”

Supplier Intermediary Customer


Sharing information, knowledge, risk, and profits
to reduce costs, cycle times, and inventories

n Logistics: The “Sweet Spot” for Collaboration


Logistics resources are discrete and geographically-constrained, limiting
opportunities for single-company optimization
Opportunities are enormous … reduced rates,
eliminating LTL, increasing backhauls, faster and
more consistent delivery, etc.
Collaborative Logistics
Further Defined
n “Encourages sharing of information and resources
relating to the logistics and supply chain processes”
– Creates a synergistic business environment
– Allows members to pool resources for greater efficiency
– Shifting of functions and activities to points in
network where they are most appropriate
Strategic
n Facilitates business expansion beyond Fit
existing core competencies Expertise
Ability to
n Three types of collaboration: Invest
– Vertical, Horizontal, and Full
“Vertical” Collaboration

Supplier #1
n Increased efficiency in
transactions and
communications
Manufacturer #1
n Focus on cost reductions
internal to each of the firms
Distributor #1
n Examples include EDI,
e-mail, and CPFR
Retailer #1
“Horizontal” Collaboration

Supplier #2 n Focus tends to be


Supplier #1
elimination of “hidden”
costs, such as
unbalanced movements
Manufacturer #1 Manufacturer #2
n Typically leads to larger
gains that are “cross-
enterprise,” than does
Distributor #1 Distributor #2 vertical collaboration

Retailer #1 Retailer #2
“Full” Collaboration

Supplier #2 n Drives “cultural” and


Supplier #1
business process change

n Synchronizes planning
Manufacturer #1 Manufacturer #2
and operations

n Maintains or improves
levels of customer service
Distributor #1 Distributor #2 n Benefits accrue to all
members of the
collaboration
Retailer #1 Retailer #2
Examples of “Full” Collaboration
Enablers and Impediments to
Collaboration
Enablers Impediments
n Common Interest n Doing things the old way
n Openness n Conventional accounting
n Recognizing who and what are practices
important n Tax laws
n Mutual help n Limited view of the supply chain
n Clear expectations n Annual negotiation process
n Leadership n Time investment
n Working together and adjusting to n Inadequate communication
one another n Inconsistency
n Cooperation, not punishment n Betrayal
n Trust n No experience with
n Benefit sharing collaboration
n Technology
Source: Mentzer, Foggin, and Golicic, “Collaboration: The Enablers, Impediments,
and Benefits,”Supply Chain Management Review, September/October, 2000.
Example of How Collaborative Logistics
Helps to Reduce “Hidden” Costs
n “Asset Repositioning” is a “hidden” cost that all members of a
supply chain pay, but none control individually
Tuesday
Shipper A
Wednesday

Thursday Shipper B

– Neither shipper understands how its actions affect costs of asset repositioning
– Carrier must optimize asset utilization to respond to both shipper requirements
– Since no single player controls asset repositioning costs, they are a “hidden”
cost paid for by all … this problem may be relieved through use of
“Collaborative Logistics”
7 Immutable Laws of
Collaborative Logistics
Collaborative Logistics Networks Must Support:
n Real and Recognized Benefits to All Members
n Dynamic Creation, Measurement, and Evolution of
Collaborative Partnerships
n Co-Buyer and Co-Seller Relationships
n Flexibility and Security
n Collaboration Across All Stages of Business
Process Integration
n Open Integration with Other Services
n Collaboration Around Essential Logistics Flows
#1 Must Result in Real and Recognized
Law
Benefits to All Members

n Successful Collaboration Requires Benefits Be:


– Real
– Perceived
– Quantifable
n Gains and Losses Must Be:
– Shared equitably among participants
– Through agreed-upon terms and conditions
# 2 Must Allow Dynamic Creation, Measurement,
La w
and Evolution of Collaborative Partnerships

n Collaborative Logistics Networks Must Facilitate


Change as Business Conditions Evolve
n Members Must Be Able to Quickly ...
Investigate

Integrate

Acclimate

Negotiate

Cooperate

Evaluate

Regenerate
#3 Must Support Co-Buyer and
La w
Co-Seller Relationships
n Must Support Communities of Trusted Partners
Collaborating to Fill Capacity and Streamline Processes
n Comprehensive Solutions are Required

n Collaborative Relationships Needed Between


– Buyers and sellers
– Buyers and buyers (Co-buyers)
– Sellers and sellers (Co-sellers)
– Competitors
Co-Buyer Collaboration

Buyer

Buyer
Seller

Buyer
Aggregating demand to lower
costs and leverage buying power
Buyer
Co-Seller Collaboration

Supplier

Supplier

Customer
Supplier

Combining operations for customer


convenience and reduced costs
Supplier
General Mills Example
Cross-Enterprise Collaboration

Green Bay Bangor

Buffalo Wells

Cedar
Partner
Chicago
Rapids Mechanicsburg General Mills

Stand Alone $3,821K


Collaborative Results
Together $3,090K
• Efficiency gain…19%
Savings $ 731K
• Driver turnover…under 10%
19% Savings • Service reliability…over 99%
#4 Must Provide Flexibility
Law
and Security

n Collaborative Logistics Network Must Offer


– Combination of both public and private markets
– Quick and easy establishment of relationships between
member organizations
– Flexibility to limit “data-sensitive” exposure
– Ability to share information openly to gain forward
visibility in the supply chain
– Opportunity for members to form their own alliances
within the membership
# 5 Must Support Collaboration Across All
Law
Stages of Business Process Integration

n Four Stages of Business Process Integration Will Include

Messaging Shared Shared Shared


Data Process Results

n Effectiveness of Collaborative “Communities” Will Depend on


Ease of Sharing Secure Information Across Member Firms

n Collaborative Logistics Network Must Support Enterprise Needs


of All Members, Regardless of Extent of Integration
#6 Must Support Open Integration With
Law
Other Services

n Strength of Collaboration Relies on Ability to Choose


from a Variety of Options
– No Unique, Single Model for Procurement of Logistics
Services
n Collaborative Logistics Network Must
– Provide logistics functionality
– Facilitate logistics collaboration between vertical
procurement networks
– Be supported by open integration with other logistics and
procurement networks
#7 Must Support Collaboration Around All
Law
Five of the Essential Logistics Flows

Products

Information Assets

Documents Capital
How Does Collaborative Logistics Help
to Meet Logistics and Supply Chain
SC
MObjectives?
Overall Benefits of Collaboration to
Supply Chain Management
n Improved Efficiency and Effectiveness (Better, Faster, Cheaper)
n Increased Sharing of Information and Knowledge
n Facilitates Focus on Supply Chain and Corporate Core
Competencies
n Supply Chain More Responsive to Needs of Customer …
Creating Competitive Advantage over Other Supply Chains
n Facilitates Evolving Structuring and Restructuring of Supply
Chains … Addresses Issues of Disintermediation
n More Satisfying and Productive Inter-Personal and Inter-
Company Relationships throughout Supply Chain
Thank You, … and I would be happy
to provide more information on …

For further information, …


please
leave business card
or e-mail
johnlangley@utk.edu

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