Collaborative Principles for Better Supply Chain Practice

Value Creation Up, Down and Across Supply Chains

Norman McLennan

• Publisher: Kogan Page
• Year: 2018
• Print ISBN:
  9780749480493
• Edition: 1
• eBook ISBN:
  9780749480509
• Topic: Business
• Subtopic: Operations
• Index: Business

Hyper competition and globalization mean that markets are changing. There is aggressive competition, shortening product life cycles, financial pressures and ever more demanding customers and consumers. Companies need to adopt new practices and new ways of thinking, so they are looking at collaboration across supply chains to become more sustainable, efficient and economical. Collaborative Principles for Better Supply Chain Practice looks at behavioural and commercial collaborative business principles and their application by means of case studies which showcase collaboration success across the private, public and 3rd sectors.

Collaborative Principles for Better Supply Chain Practice covers different perspectives: the client looking down the supply chain, the suppliers looking up the supply chain and the inter-dependencies of organizations horizontally across the supply chain. The book explores operational and project-type environments in different industry sectors, which will help you think about your supply chain differently and optimize your processes to achieve supply chain excellence. Online supporting resources include a bonus chapter and a roadmap on negotiations.

PART ONE

Knowledge architecture around collaboration (the jewel in the crown)

01

Introduction

The rationale for collaborative business practices across supply chains and why collaboration can be the jewel in the crown for organizations

In this introductory chapter we examine the rationale behind collaborative business practices from different perspectives across supply chains and explain why, if used effectively, collaboration can be the ‘jewel in the crown’ for organizations. We also define what is meant by ‘supply chain’ across different sectors.

Considering whether to embrace a more collaborative business model requires a comparative reflection on the way organizations currently do business versus where they could be through greater collaboration. The three questions that should be asked are:

1. Where is the organization now?
2. Where does it want to be?
3. How is it going to get there (the collaborative journey)?

In terms of the why, we look at the importance of relationships in collaboration, their main characteristics, why this has grown in importance in the business world, the importance of developing trust in business relationships and risk in that context, along with the challenge of leadership in a collaborative setting and positioning to strive to achieve optimum outcomes. The impact of organizational culture will also be considered.

The term ‘supply chain’ is often used glibly by many organizations and industry practitioners, across many different sectors globally. However, what does it mean? Let’s start by defining what is meant by ‘supply chain’.

A supply chain can be defined as the third party organizational network that supports a client’s or industry’s primary objective. For example, in the global upstream oil and gas sector that primary objective would be to extract hydrocarbons from licensed oil and gas reserves. The activities of such a supply chain would typically cover the front-end concept development through the reservoir, design, build, operational and decommissioning project phases. There is a vast organizational range involved – onshore and offshore contractors, suppliers and service providers, consultants and specialist advisers through to the end user clients (integrated majors and independent operators) and such complexity is the same for other industries and business. Additionally, there are significant business flows to other non-core sectors that are necessary to support the core sector. Consider the upstream oil and gas sector, for example – if the oil sector is burgeoning because of a high oil price environment then it is likely that the local and national infrastructure will also be benefiting in increasing business for hotels, shops, restaurants, transportation – taxis, rail, flights etc. So, the supply chain has a very broad reach.

We turn now to the compelling business case and rationale for collaboration and why, if used effectively, it can become the ‘jewel in the crown’ for organizations.

Relationships in business are important because they are a critical aspect of sustainable success and developing, performing and maintaining effective operations. This is equally true in both the public and private sectors, but ultimately it is the interaction of relationships between organizations that creates the dynamics of better business.

Inter-company relationships often have a focus on governance and compliance where the emphasis is around establishing boundaries and adherence to processes to manage risk. However, businesses would do well to acknowledge that relationships are perhaps one of the principle risks that they must assess and manage.

Over the past 20 years there has been a significant trend towards long-term business models such as joint ventures, consortia groupings, partnerships, alliances and outsourcing, to name but a few. Such models often focus on developing integrated offerings or solutions. These business models can be highly complex and encompass a high degree of interdependency where successful outcomes depend on the ability of organizations to embrace joined up collaborative thinking and work in an integrated fashion. The risks and vulnerability of such business models are very much linked to whether effective relationship have been built.

The dictionary defines risk as ‘the chance or possibility of loss or bad consequence’, and typically at the outset client or customer organizations seek to remove or reduce the uncertainty and risk by contracting with others to undertake the project, operations or work, thereby transferring the risk to contractors, suppliers or other types of organization involved. Additionally, modern business practices suggest that clients or customers seek to divest themselves of non-core business activities or establish more complex business solutions through outsourcing initiatives or programmes that frequently have direct interface with end users. An integral aspect of success is third party supply chain performance, reliability and dependability. Indeed, strategy around third party organizations upon which client or customer organizations will be reliant is a critical component of building compelling business cases and value propositions to put before executive decision makers.

There are a few key corporate considerations for relationship management that will help inform the reader reflect on their own organizational focus on relationship management capability:

• Business strategy and leadership – This should be considered in the context of whether collaborative relationships are strong or weak in terms of direction and encouragement for leadership across the organizations involved in a business proposition or contractual arrangement.
• Risk assessment and management – Typical sources of high risk are visible at a strategic, operational and project level. However, the greatest probable risk for any business is a breakdown of relationships, whether that is between client and contractor/supplier or amongst partners.
• Value creation – Unlo...

Table of contents

• Cover
• Title Page
• Copyright
• Contents
• List of figures
• About the author
• Preface
• Acknowledgements
• How to use this book
• PART ONE Knowledge architecture around collaboration (the jewel in the crown)
• PART TWO Case studies of exemplar historical collaborative practice
• PART THREE Case studies of exemplar collaborative practice in play or evolving
• Further reading and useful websites
• Index
• Backcover