Supplier and Customer Collaboration
Over the last few years supplier collaboration is gaining prominence and lot of data sharing is happening with the suppliers helping them to plan their manufacturing capacity better. It has helped the suppliers meet the requirements and ensuring adequate inventory control. Supplier collaboration has become an important supply chain initiative across different industries and corporations have realized the benefits. Of late there seems to be surge in the supplier collaboration initiatives as organizations want to follow the example of others who have done it and have achieved significant benefits.
Organizations who have gone ahead with supplier collaborations- have not done so on the customer collaboration side (or the number of organizations who have done is far less- I am referring to non VMI scenarios)- sharing replenishment data with their customers.
Customer collaboration can be at a strategic level whereby an organization can work with its customers’ long term plans to develop new products & services, enhance its capacities and thereby ensuring strategic customer relevance.
Customer collaboration can also be at an operational or tactical level wherein customer forecasts, promotions and short term demand signals can be used to recalibrate the supply responses providing better service levels, lead times and flexibility.
In operational customer collaboration it will be the vendor who will inform the customer of the supply quantity that needs to be delivered as against the order quantity- this will help in demand supply balancing keeping inventory levels low. If we take a VMI scenario, the situation is different. The common issue in VMI is less transparency with respect to the SKU and quantity being replenished by the vendors- this is primarily because very few companies share the forecast data and leave it to the vendor to replenish the SKUs based on the inventory position at the time of delivery- may be because they do not forecast for VMI items.
Customer collaboration would help in fine tuning the VMI process – for VMI to be effective, the retailer should share its SKU level forecasts for the VMI items with the CPG manufacturer and the manufacturer can share the data in terms of what will be replenished in the next delivery schedule. This will help smoothen the process and the customer can plan appropriately for the SKUs being delivered with respect to promotions, space management and warehouse management.
However the customer collaboration has still not caught up- as much as it is being done on the supplier side.
Probable reasons would be that organizations are not tuned to tell their customers
what quantity they would deliver which would help customers ensure proper inventory control- this would be possible if they look at the ordering pattern from their customer. It is still working based on an order from the customer about the quantity based on their business plan and the supplier supplying that quantity.
Having both supplier and customer collaboration would ensure that the extended enterprise works in a real partnership model and that there is free flow of information which will help in effective decision making and inventory control and cost savings. Hence I strongly feel that organizations should not restrict their collaboration on one side but should do it both at the supplier and customer end. Organizations which have had experience say in supplier collaboration- should focus on extending it to customer collaboration end- this will be more effective as they can bank upon their learning while doing supplier collaboration.
It would be interesting to understand from you if you have done both supplier and customer collaboration and how has it benefited your organization and also the challenges faced.