Collaboration... It's More Than Visibility
Collaboration. The use of this term in business-to-business marketing is equivalent to "free" in consumer marketing. It's catchy, it's new and, best of all, no one knows what it really means. Collaboration has been used to describe open-market bids, trade exchanges, shipment tracing/tracking, sharing order status information, and more.
But what is collaboration really? What does it mean to you and your supply chain? Is it more than just visibility?
According to the Gartner Group, collaboration is "mutually beneficial cooperative problem solving and opportunity exploitation—beyond traditional, predefined trading partners, to foster new, different and innovative ways to solve business problems and capture new business."
It's not just about knowing where a shipment or specific inventory item is, but rather effecting its movement, disposition or allocation, thereby improving all trading partners. While collaboration cannot exist without visibility, it goes beyond that to significantly change business processes and relationships between trading partners.
Visibility is a means to an end. Collaboration is the end-game that creates real business value.
What does this have to do with the supply chain and you? This will be the topical landscape for this column and others to follow. Together, we will explore the strategies, implications and real-world cases as they relate to collaboration in supply chain execution.
This month, we review an emerging standard for transportation management. Remember the last time you scheduled a pickup with your best carrier and they had no equipment available? Remember the last shipment that was delayed...and the revenue with it? Do you ever have to audit freight invoices? Is there anything about this process you would change? Read on.
The Voluntary Interindustry Commerce Standards (VICS) recently published standards for Collaborative Planning, Forecasting and Replenishment (CPFR), a nine-step process that helps automate and improve sales forecasting and replenishment between two trading partners. Currently, no components, processes or steps are defined for supply chain execution—the process of building orders into shipments, determining the mode/carrier, tendering, scheduling, shipping, tracking and payment. VICS has initiated a new sub-committee to define Collaborative Transportation Management (CTM).
CTM is a new process for carriers, offering unprecedented opportunity to discover new, potential business and position equipment accordingly. CTM builds on existing relationships between buyer and seller, incorporating new information and including the carrier in the process. Buyers, sellers and carriers collaborate in strategic planning, forecasting and replenishments, and physical execution. Collaboration goes beyond today's practice by providing commitment, exception-management and contingency plan agreements between the partners to manage the plan.
CTM includes the carrier at five key points—the creation of a joint business plan, order forecast, order generation, freight order confirmation and scheduling (including shipment creation) and carrier payment processes.
BUSINESS ISSUES DRIVE CTM
AMR Research's 1999 Supply Chain Management Report discussed the convergence of planning and execution: "Business trends such as mass customization and e-commerce are forcing manufacturers and retailers to shorten planning cycles, replan and reallocate on the fly, and expedite execution." Proposed collaboration is the only way to compress the planning and execution processes by interactively sharing information as it changes.
With shorter planning windows and the universal objective to minimize inventory in the value chain, transportation has become a critical opportunity. Sellers' and buyers' financial performance is dependent on the treatment of inventory. With status of inventory unknown or delayed due to unavailable carrier capacity, buyers and sellers must maintain higher levels to accommodate uncertainties. Transportation costs increase due to the use of secondary carriers or expedited services.
Carriers now have the ability to build business plans with key customers to better serve their freight requirements. Carrier commitments are no longer bound by the placement of their assets today or tomorrow, but instead where they will be next week or later. And, shippers now have the mechanisms to resolve invoice issues with carriers.
Collaboration in execution will improve competitiveness for all partners by improving communications and strengthen their positions in the market with agile supply chain execution capabilities. CTM should benefit all parties yielding reduced costs, increased asset utilization, improved service, increased visibility, increased revenues and improved end-customer satisfaction.
COLLABORATE WITH US!
Beau Browning is a member of the CTM sub-committee and author of the white paper that has been accepted as the starting point to define the emerging standard. Click here for a copy of the white paper on CTM.
Logility is a leading supplier of B2B collaborative commerce solutions for supply chain planning and execution via the Internet and an advisory board member of the VICS CPFR committee.