Collaboration is key, but the customer should be the focus

Collaboration along the supply chain is re-emerging as a buzz phrase as suppliers and their retail clients try to squeeze further costs out. At least, that was the message that came out of a recent conference organised by warehouse automation specialist Swisslog at Gaydon in Warwickshire.

But what sometimes appears to be missing is an holistic approach to problems that are encountered, said Alan Smart, lecturer in logistics and supply chain management at Cranfield University. "The end customer can sometimes get ignored because we are managing our own part of the supply chain operations," said Smart.

In contrast, he said, the end customer should be the focus: "The objective is to drive improved performance downstream." However, he was clear that collaboration was a strategy - not an objective - and defined it as "alignment of business activity or process between members of the supply chain to achieve joint, shared benefits"

Smart admitted that the controversial part of this process was the "sharing" bit, which companies - particularly big retailers - find hard to do. "Win-win is not the same as 50:50," he said. "A collaborative split of 80:20 might be perfectly acceptable."

Collaborative programmes should be aiming to increase the size of the cake, by preventing things such as "stock-outs", he said. He pointed to research from an Efficient Consumer Response (ECR) Europe study from 2003, which reported that 40% of retail managers had identified availability as a problem. Smart added: "If you start from the basis that everything has to be done equally, then that might be a barrier."

But, with other figures from the ECR study showing that 5% of stock was lost between the back door of supermarkets and shelves, it would seem that retailers have a big part to play in improving availability.

However, he was equally clear that huge savings were viable along the supply chain: "The total cost of sourcing, converting and delivering product is seldom the sum of the lowest functional costs of each element in the supply chain." The trouble, it seems, is that everyone along the supply chain takes their "cut of optimisation", resulting in a failure to deliver the best optimisation at the end point, said Smart.

"One of the key factors that runs though all this is that there has to be trust in all these relationships," he added. "Where there is tough bargaining, you are unlikely to get into a collaborative relationship. Instead of collaboration, one of the most powerful partners grabs all the benefits."