Understanding Supply Chain Collaboration

Wednesday, September 8, 2010

By Jeremy P Stanfords

The management of the flow of materials and services needed to make a product and deliver it to customers is termed Supply Chain Management (SCM). It is a part of a companies overall strategy for meeting customer demand for their product. The first part of SCM involves the choice of suppliers for the goods and services needed to create the product. Next, supply chain management services develop processes with suppliers for pricing, delivery and payment.

It is at this point that the potential for, and perhaps today the necessity of, supply chain "incoming" collaboration comes into play as SCM managers must manage inventory, verify shipments, authorize payments and transfer goods to manufacturing. Next, SCM managers schedule production, testing and packaging. Finally, the SCM manager is responsible for the logistics of delivery of the product to fill the customer's needs and provides an opportunity for "outgoing" collaboration.

Supply chain collaboration is a business to business (B2B) concept initially thought of as the relationship between manufacturers and retailers, but has now been extended to the relationship between the raw materials supplier and manufacturer. Successful collaboration means that two or more companies are working jointly to develop shared information, develop joint plans based on that shared information, and consequently execute their businesses with greater success than when acting independently. Such collaboration often is never attained within a company let alone between companies.

A model for supply chain collaboration is included in Collaborative Planning, Forecasting and Replenishment (CPFR) that is a business model considered by many the standard for direct material planning and fulfillment through collaboration. CPFR is intended to eliminate uncertainty in demand and supply by exchange of information, including demand signals, forecasts, inventory and transportation with chain partners. Integrated information systems assist in collaborative forecasting and replenishment processes, increased sales, and reduced inventory and cycle time. Successful partners exhibit mutual trust and believe that both sides profit equally when both supplier and customer are responsible for using inventory efficiently and keeping it as low as possible.

Even new product development and commercialization should be a process in which suppliers and customers collaborate to reduce time to market. With today's shorter product life cycles, the new products must be developed and launched with ever-shorter time schedules to remain competitive. In the product development and commercialization process, customer needs must be known, materials and suppliers must be identified and through collaboration integrated into the best supply chain flow for the combination of product and market.

For large business, there is SCM software that supports CPFR standards. For enterprises that have invested time, resources, and money over years in Enterprise Resource Planning (ERP) projects to standardize their internal operations, their systems often lack the functionality, scalability and security needed to address collaboration within a multi-enterprise supply chain. However, Software-as-a-Service (SaaS) hosts can provide an attractive solution.

Author writes about a variety of topics. If you would like to learn more about Supply chain collaboration, visit http://www.tradecard.com/.

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