What Is Collaborative Supply Chain Management?

by | Jun 7, 2017 | Supply Chain Management

In many industries, all parts of a business are kept specifically within the control of the business. This is not the same as proprietary or trade secret information, but rather the business is working one on one with other vendors, suppliers, and customers on an individual basis.

While this is effective in some ways, it creates a lot of inefficiency in others. As a very simplified example, let’s consider a scenario where company A and company B, who are in the same general geographic area, produce products. Both ship LTL or Less than Load as they simply don’t have the production or their buyers don’t have the demand for a full load.

This means both companies are paying higher freight at the LTL rates. If they used collaborative supply chain management, they could book a full load, combine their shipments to suppliers, and save on the cost of shipping per unit. It will take the organization of shipment dates and delivery locations, but with a bit of logistics planning, it is easily achievable.

The Benefits

For businesses in different industries or even businesses in the same industries, collaborative supply chain management makes a lot of financial sense. A big feature is the ability to share existing infrastructure, creating a more efficient overall pipeline and weeding out vendors or partners that are not efficient.

Additionally, if enough companies are using collaborative supply chain management, they have more influence with the partners and suppliers within the chain. The increase in volume moving through the pipeline also allows for expansion to include redundancies so if one supplier or raw materials fails; there is another vendor that is already in place to pick up the slack.

The big issue for many industries is to understand the value of pooling infrastructure, information, and knowledge. Once committed to this collaboration the results are often significant for all businesses involved.

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