Win-Win Value Chain Scenarios Require Collaboration

Stephen DeAngelis

June 21, 2021

Today, many business professionals rightfully view their operations in terms of ecosystems or value chains. For the business to succeed, all stakeholders in the value chain must also do well. Historically, this is called a win-win scenario. In the win-win scenario, involved parties benefit more than they would otherwise have benefited. The win-win scenario is not about all sides reaching a happy compromise; it’s about all sides “winning.” Forward thinking business executives and supply chain professionals understand that the best way to create win-win scenarios is through collaboration. Back in 2018, Steven Bowen (@StevenJBowen1), Chairman and CEO of Maine Pointe, and Kate Vitasek, a highly regarded business consultant and faculty member at the University of Tennessee, wrote, “A University of Tennessee white paper, ‘End-to-end Supply Chain Collaboration Best Practices,’ shows a highly collaborative end-to-end focus on supply chain enables organizations to achieve greater levels of optimization as supply chain partners collaborate to drive continuous improvement and innovations.”[1] They add, “End-to-end optimization is not easy. It demands that supply chain partners shift from traditional transactional business models with the focus on cost savings to models that shift the focus to value creation.”

 

Foundations of Great Collaboration

 

Bowen and Vitasek assert, “To make the shift [from traditional transactional business models to value creation], organizations must first understand the fundamental differences in value extraction, value exchange and value creation. Value extraction occurs when an enterprise attempts to shift value from one player in the supply chain to itself (classic win-lose scenario), extracting profit and value from one member of the supply chain and transferring that value to a leading player. This is often done using highly competitive bids and power-based negotiations approaches. Value exchange is better, but still falls short. In a fair and balanced value exchange, organizations check their power at the door and instead focus on getting to a fair price versus value tradeoff (such as quality/service). While definitely better than value extraction, value exchange still falls short because the parties’ focus is to optimize within their own four walls.” Collaboration forces an organization to optimize the entire value chain (i.e., relationships and processes outside an organization’s four walls). Bowen and Vitasek explain, “The winners of today’s supply chains have made the shift to focusing on value creation, enabled by true end-to-end collaboration and win-win models. By working as true partners with a more transparent, win-win mindset, parties can identify opportunities that they simply cannot see by working within their four walls.”

 

Anne G. Robinson (@agrobins), Chief Strategy Officer at Kinaxis, agrees that collaboration creates winners. “The more data, people and processes you can connect to in the supply chain,” she explains, “the more you reduce your risk, improve performance tracking and ultimately make better decisions.”[2] She makes five recommendations for enabling collaboration within an organization. Many of the suggestions can be used to strengthen value chain collaboration as well.

 

1. Create a common vision for your supply chain organization. As Bowen and Vitasek noted, traditional transactional business models have focused on efficiency and cost savings. Robinson insists this focus “can often lead to divergent objectives in the different components of the supply chain.” To overcome this challenge, she suggests “creating a common vision that is supported from the top seeds a cohesiveness across all the supply chain players.” Robinson goes on to note that this common vision must be supported by shared data. She explains, “[When all stakeholders are] able to see the same information, you can work effectively around the sun because you don’t have people on one side of the globe waiting eight to twelve hours to find out what decisions should be made.”

 

2. Identify and propagate key performance indicators. Perhaps the biggest collaboration obstacle to overcome is breaking down data silos and learning how to share the right data securely. Data silos are a widespread problem. Bertrand Moingeon (@bertandmoingeon), a Professor of Strategic Management at HEC Paris, asserts, “Organizational silos are without a doubt the most widespread managerial structure, even though all management textbooks warn against them. This is true for all kinds of organizations, be they businesses, public bodies or non-profit organizations.”[3] Robinson observes, “Creating a vision alone is not enough to break down organizational silos. Supporting your vision with the right set of performance indicators enables a language and a tool for collaboration. However, it is important to propagate these metrics vertically.”

 

3. Ensure culture readiness. Robinson writes, “The organization must recognize collaboration as a strength to break down silos.” This is a tough challenge within an organization and it becomes even more difficult when trying to change the culture of the value chain. Robinson notes, “Collaboration often requires a deliberate shift in mindset. When that shift can happen within the supply chain system, people working in different time zones or in different languages can all be in sync.” Bowen and Vitasek add, “Creating an end-to-end collaboration culture is never easy, and it takes considerable time and resources.”

 

4. Reduce digital latency. Mark Adams, regional sales director for UK and Ireland at Cohesity, insists, “One thing is certain: data is — and will continue to be — the key to digital business. Companies that really want to make the most of data both now and in the future will need to create a nuanced approach to data collection, analysis and exploitation. While business leaders recognize the value of data, they don’t necessarily appreciate how hard it is to analyze the right information at the right time. There’s a lack of consideration about how information might be used by different people in different circumstances.”[4] Robinson adds, “Disparate data sources and divergent systems are frequently identified as causes of siloed behavior in the supply chain. The latency from one group to another, either from manual execution or simply delayed system updates, can result in errors in decision-making and delays in responding to customer needs and supply chain disruptions. Digital transformation and increased automation can help overcome the challenges from legacy systems.”

 

5. Establish end-to-end transparency. According to Robinson, “Having effective collaboration and communication, particularly if you are a global business, is heavily dependent on technology. By enabling this collaboration to happen you can reduce latency and continue the flow of business to meet the expectations of your customers. The closer you can bring the information to the individuals who are responsible for the next action, with tools that provide a shared view of the right data and enhanced transparency across the whole organization, the greater velocity you can have.”

 

Robinson concludes, “The reality is you will never eliminate volatility in the supply chain. However, the result of being connected and collaborative across supply chain functions enables greater agility and the ability to react and adjust to the ever-changing environment.”

 

Concluding Thoughts

 

Harry Drake, engagement director at TCS Global Supply Chain Consulting, insists collaboration is one of the keys to success in the Industry 4.0 environment. He explains, “Given today’s digital environment, collaboration tools are much more secure, easier to scale and user-friendly — especially when drawing on Business 4.0 technologies such as mobility, cognitive analytics, artificial intelligence and machine learning, cloud-bases applications, and advanced cybersecurity. Companies can generate advanced analyses across the supply base to better understand bottlenecks and areas for improvement when working with business partners. Business 4.0 will allow companies to harness an abundance of capabilities, by re-imagining the broader organizational environment and re-thinking the potential benefits of respective collaborative relationships. Customers, suppliers and logistics providers will benefit from the expanded integration and connectivity with the business ecosystem.”[5] Robinson agrees. She concludes, “Breaking down the silos, sharing a common data set and embracing collaboration across the supply chain will put your people in the best position to succeed. Moreover, this collaboration can be extended outside the four walls of an organization and bring in suppliers, distributors and customers. The more data, people and processes you can connect to in the supply chain, the more you reduce your risk, improve performance tracking and ultimately make better decisions.” In other words, collaboration helps create win-win scenarios.

 

Footnotes
[1] Steven Bowen and Kate Vitasek, “Optimizing value with a win-win supply chain,” Modern Materials Handling, 21 September 2018.
[2] Anne G. Robinson, “Five Ways to Collaborate More Effectively in the Supply Chain,” Raconteur, 12 March 2019.
[3] Bertrand Moingeon, “Transversal management: how to break out organizational silos,” LinkedIn, 1 April 2017.
[4] Mark Adams, “Why the future of data management requires us to remove fragmented thinking,” Data Center Dynamics, 10 May 2021.
[5] Harry Drake, “Three Scenarios for True Collaboration Across the Supply Chain,” SupplyChainBrain, 26 May 2021.