Collaborative Supply Chain Management: How Retail Partnerships Enhance Operations
Staying in control of supply chain logistics can be difficult at the best of times. With so many moving parts, it’s tough to know where to focus your energy at any given time. That’s why in today’s economy, so many retailers work with fellow brands to create collaborative supply chain management systems. Retail, hospitality, automotive, and medical businesses will enter supply chain partnerships for various reasons, ranging from supply security to smoother deliveries.
We’ve put together this blog to investigate the nature of supply chain collaboration across various industries, elaborating on the benefits they provide, and describing some approaches that partnerships can be based around.
Benefits of Building a Collaborative Supply Chain
Businesses can be inspired to collaborate within supply chains for various reasons, whether scaling their operations up or adapting to new challenges. You can inform your business development decisions by better understanding the benefits of collaboration in logistics and supply chain management.
Enhanced Efficiency
Streamlined Processes: Two or more businesses collaborating throughout the supply chain generally result in more well-coordinated, organized actions. Organizations can trim the fat and utilize the best aspects of each side.
Optimal Resource Utilization: Partners can optimize aspects like production schedules, inventory levels, and transportation channels through sharing resources, insights, and information. By sharing their best practices, they can reduce lead times and operational costs.
Leaner Operations: Retail partnerships are often borne from a need to optimize expenditure, with collaborators holding each other accountable with practices like just-in-time inventory management, waste minimization, and continuous process improvement.
Increased Agility
Rapid Response to Market Changes: Businesses can adapt to shifts in consumer demand quickly with a strong collaboration in place, with the increase in resources allowing for agile adjustments in production, inventory management, and distribution.
Flexibility in Sourcing: Once a partnership is established, collaborators can access each other’s networks of suppliers and manufacturers. This allows businesses to develop and adapt their sourcing strategies for lower costs, increased quality, or more plentiful availability.
Innovation and Adaptation: Collaborative partnerships often foster innovation, with partners actively working creatively on brand-new concepts. This could mean developing new products, designing new branding materials, or customizing existing goods in line with market trends.
Improved Visibility
Real-Time Data Sharing: When facilities collaborate closely rather than transactionally they can exchange data and information with one another in a timely, accurate manner. Logistics teams can better account for inventory levels, order statuses, and schedule adherence.
Supply Chain Traceability: Partnerships require transparency, which allows retailers to accurately trace the origins and movements of products and materials. By doing so, each brand can ensure that everything they sell complies with government regulations, company ethics, and quality standards.
Proactive Problem-Solving: Retail collaborators with increased awareness are more capable of spotting potential supply chain issues, such as bottlenecks, disruptions, or dips in quality earlier in the process – making it easier to address them proactively.
Relationship Building
Trust and Understanding: In business collaborations, trust and mutual respect are fostered, allowing for more genuine passages of information, support, and general communication. With a commitment to mutual success, positive dynamics can be built.
Long-Term Partnerships: Successful collaborative supply chain projects build strong relationships, with long-term partnerships established that last for years. With a degree of certainty and trust, collaborating businesses can better weather the challenges of changing marketplaces.
Value Co-Creation: Long-term partnerships can become core to brand identity for each partner, with the two companies becoming inextricably linked in value creation. Collaborators that provide innovation, efficiency, and risk management strategies to one another provide long-term value.
Risk Mitigation
Diversified Supplier Base: Retail partnerships offer diversified supplier bases, decreasing each company's dependence on its existing suppliers. Brands with alternative or backup suppliers can ensure that their chain isn’t stopped dead by natural disasters, geopolitical tensions, or supplier failures.
Contingency Planning: Companies with a wider base of resources in place can develop stronger, more innovative contingency plans in case of unforeseen events. This could include backup transport links, emergency distribution channels, or other necessary pathways to normalcy.
Shared Risk Management: A collaborative supply chain ensures that risk and responsibility are shared among stakeholders, allowing for more comprehensive management strategies and less catastrophic outcomes when problems arise.
When businesses share their supply chain management jobs, they allow their operations to be simultaneously more malleable and held to higher standards. With access to increased resources, trusting partnerships, and full awareness of the supply chain, retailers can greatly enhance their efficiency and security.
Collaborative Initiatives in Supply Chain Management
If you’re considering entering your brand into a retail partnership, it’s important to understand the different approaches commonly taken in collaboration. Any budding collaborator will fit somewhere within these dynamics, depending on the nature of a business and its value offering.
Vendor-Managed Inventory (VMI)
VMI stock management is a collaborative practice where the supplier is fully responsible for monitoring inventory levels at retailer locations and replenishing them accordingly.
Benefits:
Reduced Holding Costs: Retailers in VMI dynamics can minimize storage costs, optimizing their inventory levels to ensure no space is wasted in the warehouse. It also reduces the cost of effort, eliminating the need for restocking deliberations.
Forecast Accuracy: By embracing VMI, inventory levels can be accurately aligned with consumer demands, reducing stockouts or instances of excess inventory. This should help to minimize overhead due to waste and overstocking.
Enhanced Trust: Companies in VMI relationships foster closer collaborative trust so long as their dynamics are successful. If a supplier proves their ability to stock accurately according to demand, they showcase their ability to provide value without needing to be guided through the process.
Co-Managed Inventory (CMI)
CMI refers to the approach in which the supplier and retailer manage and replenish stocks based on shared data and strategic discussions.
Advantages:
Shared Responsibility: CMI dynamics spread the responsibility between the supplier and retailer, facilitating more considerate, careful decision-making. Sharing responsibility also helps to mitigate the consequences of risks more effectively.
Increased Flexibility: This kind of partnership allows for more resources and expertise to be leveraged by each party, rather than inventory management based on binary terms. The increased responsiveness facilitates more flexibility in the face of market shifts.
Enhanced Supply Chain Visibility: The more cooperative nature of a CMI arrangement the higher the visibility is across the supply chain. Enhancing this visibility allows for better coordination and accuracy, minimizing excess.
Collaborative Forecasting and Planning (CPFR)
CPFR is a collaborative supply chain management system in which partners work together throughout the forecasting and planning process, helping to improve accuracy in line with demand.
Principles:
Shared Data: Collaborators need to share their data openly for CPFR to be successful, with the free passage of data on sales, inventory levels, and any other relevant information. This honesty allows for the most accurate forecasting.
Collaborative Decision-Making: The nature of CPFR is for closer collaboration throughout the decision-making process, allowing for issues to be pointed out by multiple sets of eyes before comprehensive action plans are developed.
Continuous Improvement: With both parties committed to collaboration and accountability, CPFR is a system, that emphasizes continuous improvement. By engaging with regular reviews, consistent adjustments, and feedback sessions, overall performance can be enhanced.
These are three of the most common ways that retail businesses engage with collaborative supply chain management systems, with each bringing benefits to the table. What should be noted is that every approach requires a healthy dose of mutual respect and understanding for success – collaborations are meant to be helpful, not stressful. It’s also notable that supply chain connections aren’t always based on the connections of retailers and physical suppliers, with logistics-based partnerships similarly common.
Successful Collaborations in Retail Supply Chain Management:
There have been countless collaborations over the years, impacting the performance of retail brands and beyond. We’ve broken down some of the most notable collaborations in the wider business world below.
Retailer-Supplier Collaborations
These are among the most common supply chain collaborations, in which one brand provides a product or part for the other to sell or use in a product.
Coca-Cola & McDonalds (CMI): Coca-Cola and McDonalds are a match made in heaven, becoming near synonymous over the almost 70 years they’ve worked together. Coke is McDonald’s largest supplier and McDonald’s is Coke’s biggest restaurant customer. Their partnership is such a pillar for each business that there’s a McDonald's division at Coke’s offices, with their sales teams not allowed to give any other restaurant a better deal on syrup – demonstrating the relationship value of long-term partnerships.
Intel Chips for Dell Inc, Lenovo, & HP: Intel Processor Chips are known in the computing industry as the gold standard by many, with their team building the chips in-house rather than outsourcing manufacturing to China like many competitors. Brands like Dell, Lenovo, and HP all use their processors in their computers, showing how a strong enough supply chain can even serve competitors if their products and services are reliable enough.
Walmart w/ Procter & Gamble (VMI): Procter & Gamble has been linked with Walmart for years, getting electronic notifications when stocks of their products begin to dip in stores. With this dynamic, P&G has guaranteed that their goods reach Walmart distribution centers with plenty of time to spare, minimizing stockouts and maximizing availability.
Retailer-Logistics Provider Partnerships
In other collaborations, retailers who already have relationships with suppliers will also build collaborations with logistics providers to ensure that their supply chains run smoothly.
Amazon & UPS: For many years, Amazon and UPS were inextricably linked with the former using the latter as its primary logistics provider, allowing for the fulfillment of ambitious delivery policies. Now, Amazon has built its own Supply Chain and Logistics infrastructure as its capabilities have grown, offering similar logistical solutions to the businesses that sell from the platform, while they still use UPS when necessary.
Walmart & Shopify: Shopify is an eCommerce building service that helps small businesses build their online platforms, developing stores and apps. Now they’ve partnered with Walmart to allow sellers to use their software to sell from Walmart.com’s marketplace, facilitating inventory management, a range of white-label products, and sales channels.
Target & Shipt: Shipt was an application, focused on independent contractors shopping for consumer goods, groceries, and select electronics then providing same-day delivery to buyers. After a few years of Shipt’s success, Target acquired the company to utilize its infrastructure to facilitate same-day delivery from the majority of its locations.
Multi-Stakeholder Collaborations
In some cases, multiple stakeholders will come together to achieve a logistics-based goal – often with a focus on sustainability.
ZEMBA: The Zero Emissions Maritime Buyers Alliance is a buyer’s group focused on revolutionizing the ways that maritime shipping is approached, eventually committing to zero-emissions shipping solutions. This is an example of supply chain collaboration with a focus on something other than efficiency, with brands like Amazon, Nike, Patagonia, and New Balance, among many others working together for the sake of the environment.
By looking at the different collaborations that have taken place across the years, businesses looking to enhance their operations can take inspiration to use in their approaches. Whether searching for a supplier, in need of a logistics provider, or eager to get involved in a sustainability project, there are plenty of proven ways a collaborative supply chain can be set up.
Conclusion
In any retail business, building all the necessary infrastructure independently is almost impossible – finding suppliers, logistics providers, and collaborators will always be a part of bringing goods to an audience. If you look beyond a purely transactional relationship, you can build something more interdependent, based on trust, and mutually beneficial.
If you’re interested in meeting with countless supply chain and logistics professionals, gleaning insights from some of the brightest minds in the industry, and sourcing solutions that could take your business to the next level, make sure to attend Retail Supply Chain & Logistics Expo. This event will bring together professionals from retail and beyond, all focused on strengthening supply chains, so register for your ticket today.
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