Collaboration: The supply chain reaction

Despite the technology being capable, collaboration with the supplier is rarer than many in the industry would have you believe. "True collaboration is not that common in the supply chain," says SAP's Bamber. This is simply because many companies are not ready to deploy collaboration in their supply chain. Generally speaking their preparedness can be judged by how far they have progressed along the supply chain maturity model.

This model characterises a company's supply chain as moving through three phases: from the initial stage of functional silos, where separate departments do their own forecasting, to a second stage - consensus forecasts - where internal departments work together on planning but do not consult suppliers. The final stage is where suppliers and customers collaborate on forecasting. "Only 20 per cent of companies are at the third stage," estimates Bamber, while some 40 per cent are still at the first stage. These companies need to sort out internal issues before they can attempt collaboration in the supply chain.

"Many companies need to move to stage two before they can think of moving to stage three," warns Bamber. "They need to make sure that their own internal processes and forecasting are correct before being able to make use of collaborative tools. There are a lot of political and organisational issues that need to be sorted out."

The manufacturing value chain is an area where collaboration can be very valuable. Racing engine manufacturer Cosworth, for example, uses Documentum to create shared workspaces with its business partners.

"Cosworth works with multiple vendors and can provide data from a wide variety of applications," says Mike Kan, managing director of collaboration services at Documentum. "For example, Cosworth can use XML to pull data out of the ERP system, providing information such as a part number with a PDF drawing." Suppliers can use the system to bid for the work and make sure that Cosworth gets the right components.

Kan says that partnership applications are where the value of collaboration is most significant. "Our approach is to look for a partnership where we can test the application." He adds that transactional systems can also be supported because there are always collaborative aspects. "The Cosworth deployment is a good example of that," explains Kan. "It is different from vanilla e-procurement because the process involves collaboration between Cosworth and its suppliers to try and improve the engine on an ongoing basis."

Collaboration becomes even more important in fragmented manufacturing value chains. It is common, for example, for OEMs to outsource their manufacturing requirement to a third party. John Sedej, vice president at leading manufacturer Flextronics, says that companies need to realise that outsourcing the manufacturing does not mean they can forget about it.

"Collaboration is still needed throughout the design process even if the manufacturing is outsourced," says Sedej. "We are involved right from the concept phase. Every decision taken can have an impact on the manufacturing, such as the weight of the product or the location of the components. We can help the OEM make the necessary design trade-offs."

The choice of manufacturing site can even have an impact on the design. "For example, if you manufacture in a low-cost location, you might want to have hand-placed components. This will affect your component choice and can keep the investment in expensive equipment down for suppliers," says Sedej

Flextronics uses both face-to-face meetings and electronic collaboration to work with its partners. "We need an initial face-to-face meeting to lay out objectives and identify priorities," says Sedej. "After the relationship has been established we typically use remote collaboration tools such as WebEx."

Accurate forecasting is just as important in manufacturing as it is in grocery retailing and all parts of the supply chain want to keep their stock levels to a minimum. When a consumer goes into a shop to buy a printer, they will typically have a couple of brands in mind. If the retailer has placed an order and the OEM is unable to supply them, then they will lose that business.

The target is to keep the inventory at a minimum while being able to service the order. Flextronics offers a software tool called SimFlex to model the demand in the future to help everyone in the supply chain to have the lowers amount of inventory. "It is strategic collaboration and it forces companies to ask themselves the hard questions," says Sedej.