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The benefits of organization need not result from formal or informal designs where relationships are defined between people within an organization. As information technology has evolved, a new dimension to organization has emerged-partnering through collaboration. Partnerships among the supply channel members occur as information is shared among them for their mutual benefit. These partners collaborate to achieve their own organizational objectives, usually lowered cost from reduced inventories and improved customer service from higher fill rates.
Partnering with members across echelons in the supply channel has see success when retail point-of-sale information was shared suppliers who were better able to plan inventory levels at the retail level (vendor managed inventory control or VMIC) and with requirements plans shared with suppliers in just-in-time systems. There were early successes with collaborative planning and organization called the voluntary inter-industry commerce standards (VICS) created collaborative planning forecasting, and replenishment (CPFR). CPFR is a program of information sharing that involves forecasts, production schedules, order replenishment quantities and their timing, and lead times. VICS established guidelines for explaining underlying business processes, supporting technology, and change-management issues.
Collaboration among channel members has the potential for improving supply chain performance by reducing the uncertainty associated with demand and lead times. Recall the “bull whip” effect on demand forecasting that arises when each channel member forecast demand based on information derived from the order patterns of an immediate downstream member. Sharing information abut end customer demand is known to improve forecasting for all members. Improved forecasting reduces inventory levels in the supply channel.
However, a program such as CPFR encourages collaboration beyond forecasting. Although sharing information among partners reduces demand-estimating variability, decisions also need to be made about order quantities, shipment sizes, delivery methods, and procuration or supplier response times. In a partnering environment, information about these issues will be shared and the outcomes negociated. Compared with traditional approaches in which each member makes his or her own decisions, early results from pilot tests have been impressive. From a VICS survey, retail participants have reported.
- an 80 percent increase in business with CPFR partner
- a $ 9 milion increase in sales
- simultaneous sales growth and inventory reductions of at least 10 percent
- improved fill rates with less inventory
- service level of 100 percent, with almost 40 turns per year
However, collaborative partnerships are being adopted slowly. The greatest impediment to mass adoption appears to be trust. Companies remain reluctant to share vital data with firms outside their control and who may have business relationships with competitors. Formal agreements between partners may reduce distrust, but it is likely to remain a hurdle to overcome for some time. Yet, the potential for collaborative partnerships remains high.
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