Collaboration in Supply Chains Necessary to Compete Effectively and Efficiently; Technological Issues, Strategy Misalignment, and Lack of Trust are Impediments

In an era of global supply chains, companies must share real-time key data and information with strategic customers, suppliers and supply chain partners in order to thrive instead of merely survive, according to "Collaboration: Enabling Synchronized Supply Chains," the 14th annual report on trends and issues in logistics and transportation issued jointly by Capgemini U.S. LLC (San Diego, Calif.), Georgia Southern University, and the University of Tennessee and sponsored by Intel. The results were released here this week at the Council of Supply Chain Management Professionals annual conference.

A record U.S. 2,311 supply chain executives participated in the 2005 study, which was a fourfold increase in respondents over last year. Even with a dramatic increase in respondents, the demographics of the study remained stable with nearly 50% of respondents from the manufacturing sector. Respondents are responsible for more than $86 billion in annual spending on transportation. The participants were subdivided into two categories - leading-edge firms and laggards -- based on respondent's characteristics of excellence developed over the last six years of the report

The 2005 year's study focuses on "collaboration," a concept that was defined by the report as having three key characteristics: alignment of individuals and organizations, sharing of real time data, and standardization of processes. The study concludes that very little true collaboration is currently going on today, as analysis shows that less than 10% of participating firms are capable of full collaboration. The top three reasons identified as impediments to collaboration were technical issues (94%), strategies not aligned (86%), and lack of trust (82%).

"This survey demonstrates that collaboration is more than just good business sense, as supply chain members that align their people, processes, and technology can collaborate to make the 'right' decisions based on high integrity, high visibility information," said Peter Moore, vice president of supply chain and RFID at Capgemini. "Despite a consensus on the need for collaboration, however, this year's survey results demonstrate that technical and cultural barriers often keep organizations from reaching the desired level of integration across the supply chain."

"The first type of collaboration, coordination, or interrogation, appears to be making slow improvement. One measure of this level of success is the Perfect Order Index, as it has increased over five percentage points in the past two years of the study," said Mary Holcomb, study co-author and professor of logistics at The University of Tennessee. "The element with the most significant level of improvement was sending a correct invoice to the customer. While that sounds simple at first, the reality is much different. This requires greater internal communication, as well as accurate information regarding inventory stocking levels."

Other key findings from the study include:

  • Respondents had more success partnering with manufacturers than end-user consumers, retailers, or distributors.
  • Since 2003, commercially purchased software packages have increased 6% at respondent companies.
  • In addition, 47% of leading-edge firms use commercially purchased software packages today, as compared to only 26% of laggard firms.
  • "Just in time" is considered important or very important to 7 in 10 (71.7%) leading-edge firms compared to only four in ten (42.4%) of laggard firms
  • Prioritizing data visibility & synchronization was the other major difference between three-quarters of leading-edge firms who claim it is important or very important to them (78%) vs. less than half of laggard firms (43.8%)
  • The two tools that have decreased in use since 2003 are software developed in-house (a 4% decrease) and third party providers (a nearly 2% decrease).
  • The top five domestic distribution processes in use are inbound logistics management, consolidated shipments, drop-ship programs, core carrier programs and third-party distribution.
  • Since the 2003 report, rail and express package on-time delivery performance has improved slightly, while three truckload modes (TL, national LTL and regional LTL) on-time performance has decreased slightly.

"The final phase of collaboration - coopetition -- is just now starting to emerge in the supply chain landscape, according to this year's report," said Karl Manrodt, study co-author and professor of management, marketing & logistics at Georgia Southern. "In the long run, this is where significant waste can be removed from supply chains. It will take a different mind-set, based on trust established with current partners, to fully extend beyond what is currently occurring."

Source: Capgemini U.S. LLC

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