CollaborateRiskManage.jpgOwed to increasing globalisation, organisations are doing business with partners outside of their traditional comfort zones, complicating supply chains with an array of risks and variables that must be managed to avoid disruptions like quality issues, shipment delays or product shortages.

Deciding on the best approach to reduce global supply chain risks has long been analysed by supply chain management professionals.

Collaboration as a method of risk management is one of them: it involves improving visibility and sharing risk-related information across the entire supply chain. This method allows for risks to be spread out across a trading partner network as a practical way of distributing the ability to control risks in the respective areas of each link in the supply chain.

Supply chain agility works in tandem with a collaborative risk management process, where both proactive and reactive measures can be employed to contend with risk. Practices like postponement, multi-sourcing and supplier diversification provide choices for supply chain managers to delay activities or select which suppliers they should source from to avoid possible threats.

However, collaboration and the agility that results from a group effort can only be achieved by involving suppliers at every level where significant benefits can be achieved.

Previously, many organisations did not explore effective collaboration with supply chain partners because of a lack of trust. The traditional lack of trust and control prevented organisations from collaborating closely with suppliers, causing friction and redundancy when both parties duplicated the same tasks. With the transparency of shared data and mutual collaboration, organisations are more comfortable sharing responsibilities with suppliers. The recent trend to more open and bi-lateral communication has made this challenge a non-issue. The trust factor is no longer a barrier for developing and maintaining collaborative relationships and most organisations have dismissed this as a concern.

Benefiting from collaboration

Collaboration addresses supply chain risks by avoiding, controlling and evaluating all risk factors across the global supply chain. This includes the entire product lifecycle where risk plays a role. The amount of risk you are capable of minimising is realised in distinctive ways during each point in the process. Examples where more collaborative processes are a key to risk mitigation include:

•  Product Design and Development — most organisations think collaborative product development practices onlytake place between internal teams within a retail organisation, with little interaction from the supplier or service provider. However, by connecting with the factory early in the product development stage, you gain visibility and set expectations with all of the parties involved. These ways of connecting with the factory include sharing forecasts and plans with suppliers earlier in the lifecycle, seeking out innovative new material or products with raw material suppliers, and by reserving capacity or taking a position on raw materials to ensure availability.

•  Production — Risk is reduced by unifying critical data that can be used to make decisions in a single solution, increasing protection and decreasing impending production issues. With collaboration, your teams can mitigate supply chain failures, whether political, economic, or environmental, by analysing diversification across regions, gaining snapshot views of work in progress and identifying potential production delays that might lead to concerns.

•  Logistics — Risk and agility are optimised through real-time visibility into global logistics activities providing the ability to quickly react to demand changes and unexpected disruptions. Also, with increased visibility you can make order and shipment modifications quickly to dodge any incoming obstacles and improve reaction time to customer changes. The shared visibility and collaboration gives suppliers, at each tier, insight into possible dropped styles or order postponements – all leading to a more nimble and responsive supply chain.

By leveraging solutions that collect and share information from multiple technology sources and service providers, it is easier for organisations to access information across supply chain trading partners and reduce global supply chain risks. More importantly, this collaboration can include suppliers across every tier of the supply chain. This gives an organisation the ability to better manage the supply stream by accurately analysing the various options to reduce global sourcing risks.

According to data from Gartner and ARC research, over the past decade companies have collectively spent billions of dollars on PDM, ERP, TMS, WMS and other “big data” systems. In order to effectively use the information from these existing applications, Gartner states that a growing percentage of enterprises will rethink their supply chain execution software portfolios, and adopt cross-functional platforms that support true integrated, end-to-end business processes.

Adapted from an Amber Road report “How Collaboration Reduces Your Global Supplier Risks”