At Supply Value, our mission is to sustainably improve the world by making organizations work together smarter. We believe that results unachievable by an individual are surpassed when you work together. This is true not only for individuals, but also for organizations. However, good cooperation between organizations is very difficult to achieve. In practice, we see that organizations encounter various barriers that cause collaboration with their supply chain partners to be hindered. In this insight, we will discuss which barriers we see most often, and what your organization can do to remove these barriers. In this way, we will help you recognize, prevent and remedy the ways in which effective collaboration can be sabotaged.
The barriers we see most often in practice can be roughly divided into 2 topics: IT systems & communication and different interests & resources. IT systems & communication is mostly about the problem that organizations use different IT systems that are not compatible with each other, making communication and (confidential) information exchange difficult. Different interests & resources is about the fact that the organizations in the chain must recognize the common interest of effective chain cooperation and be willing to invest in it. Below we explain the problems that can arise in this regard and how you can deal with them.
IT systems & communication
One of the most common problems for organizations working together with their supply chain partners is that different organizations often use different IT systems. This complicates cooperation because these systems often do not connect or cannot communicate (sufficiently) with each other. This makes proper and efficient information exchange between chain partners very difficult, while this is one of the most important features of effective cooperation. This often involves confidential information that must not be allowed to be out in the open: simply sending an e-mail or opening up the cloud to chain partners is far from always responsible. Moreover, it is not only the information exchange systems that can cause problems here, but also the planning systems, for example. For example, if you want to work more intensively with one of your supply chain partners in order to reduce the delivery time to the end customer, it is important that the planning software used by your supply chain partner can be integrated with the planning software within your organization.
So how do organizations deal with this? There are several ways to overcome the barrier of different IT systems:
- New IT system: The most obvious solution is to let go of the old systems and jointly implement a new and the same IT system with your supply chain partners. However, despite the fact that jointly procuring a new IT system is cheaper than going it alone, this is still a rather expensive and time-consuming solution. After all, this means that all data from the old system must be transferred to the new system, and your employees must learn to work with this new system.
- Broker system: A simpler solution is to use an intermediate system, also called a “broker.” This system links the various systems together and translates the information from one system so that the other system understands it. In this way, each can continue to use its own familiar system. The costs associated with such a broker are hereby offset by the savings from more efficient information exchange.
Finally, there are relatively simple solutions for exchanging confidential information. The easiest option is to enter into a Non-Disclosure Agreement. An alternative is to take into confidence a third party that manages all information of all parties.
Different interests & resources
The second common barrier to chain cooperation involves the interests of the organizations in the chain. Effective cooperation gets off the ground only if all organizations in the chain pursue the same interests. When chain partners do not yet cooperate with each other, they do not yet take into account each other’s goals and interests: they work in a silo. For good cooperation, you want to break that silo by establishing common goals; however, this can be very difficult because of contradictions in pre-existing goals. For example, an organization’s goal may be to offer its products to the end customer at the lowest possible price, but its supplier’s goal is to deliver the highest possible quality with the best materials, not looking at cost. What we also see happening a lot is that chain partners give different priority to joint projects. This then leads to discussion about the investment and schedule, preventing the project from being started.
The resources available to a chain partner play an important role here: usually, effective cooperation requires an upfront investment, which is more than recouped later. However, smaller organizations in the chain do not always have sufficient resources to make such an investment. In that case, if the other chain partners are not willing to bear the costs of the smaller organizations and the investment does not go through, the whole chain misses out on the benefits of the investment. Moreover, the place where the costs fall is by no means always the same as the place where the benefits fall. Because organizations know this, they are often very reluctant to make investments of which they are not sure they will reap the benefits. Finally, it also happens that there is discussion within a single organization about the importance of collaborative projects: for example, administrators may be eager to collaborate with chain partners, but the layers below them do not see the point, or this is not communicated well.
Obviously, the latter is the first thing to be resolved. It is essential that an organization agrees internally on the need for chain cooperation. Therefore, ensure that everyone understands the usefulness of the cooperation and that there is a commitment from top management that is felt throughout the organization. The first step is to clearly formulate the cooperation objective: what exactly are we going to achieve with this cooperation? Communicate this objective clearly to the chain partners, and identify the stakeholders and their interests. Collaboration is often seen as a ‘soft’ concept, while in essence, it is about getting more return on investment by better coordination and economies of scale: something that is actually very ‘hard’. It is therefore important to talk about any conflicting interests, where negotiation is inevitable. Therefore, always keep the cooperation objective in mind so that the common interest is given priority.
When the entire chain recognizes this common interest, it will lead to a change in attitude toward needed investments: chain partners with the most resources will be willing to invest more to get the collaboration off the ground. To ensure that those who invest more will also benefit more, you can consider setting up a fund. Chain partners then deposit their resources into that fund, from which investments are then paid. By keeping a clear overview in the fund of which organization has contributed which part, the benefits from the investments can also be distributed proportionally to the investments among the chain partners. Negotiating too hard and commercially is out of the question; this ruins the relationship before the cooperation has begun. Build trust by promising less and delivering more, and give each other attention. By acknowledging the different interests that each chain partner has, devising a common plan to meet those interests without losing sight of the cooperation objective, and above all by trusting each other, the noses will start moving in the same direction and good and effective chain cooperation will become possible, from which every chain partner can benefit. You can download the insight below.
