Co-creation and Collaboration in the Supply Chain
Co-creation and Collaboration in the Supply Chain Emeritus Professor Martin Christopher Cranfield School of Management Cranfield University Cranfield Bedford MK43 0AL United Kingdom Tel : 44 (0)1234 751122 Fax : 44 (0)1234 721225 E-mail : [email protected] www.martin-christopher.info Agenda • • • • • 2 The new rules of competition Gaining advantage through collaboration The challenge of complexity The case for ‘co-opetition’ The Supply Chain of the future New competitive realities • Input costs are rising but … • New sources of low cost competition mean that the pressure on price will continue and … • Continued concentration of markets means that bigger, more powerful customers will demand more from their suppliers whilst … • Conventional marketing strategies have less effect in a time-sensitive, on-demand world 3 Volatility Index 4 Nothing ever changes ........ “..... In 50 years between 1870 and 1920 the cost of distributing necessities and luxuries has nearly trebled, while production costs have gone down by one-fifth.... What we are saving in production we are losing in distribution.” Ralph Borsodi ‘The Distribution Age’ 1929 5 Inventory profile of the automotive supply chain (UK 1999 Figures, Volume Car Stock Levels 120 First Tier Supplier M axim um Inbound Logistics Vehicle Manufacturers Outbound Logistics Distribution & Retail Ave rage 100 M inim um 60 40 20 6 Customer Marketplac e Outbound Transit Loading & Despatch Vehicle Production WIP On-site Part (VM) Inbound Transit Finished Components Assembly WIP Pre-Assemby WIP In-house built Parts Bought-out Parts 0 Raw mater ial Days of Inventory 80 Source: Holweg (2002) The search for collaborative advantage • Seek out opportunities for horizontal as well as vertical collaboration • Co-operate to grow the cake, compete on how to slice it • Leveraging capabilities and knowledge through collaboration • Share assets in the supply chain where appropriate 7 Complexity in the global supply chain : the Boeing 787 787 8 Co-creation in the supply chain Extended Enterprise Focus on splitting the pie Focus on expanding the pie Value to Customer Value to Customer Traditional Relationship Value to Supplier Value to Supplier Source: J.H. Dyer, Collaborative Advantages 9 The extended enterprise viewpoint Single company thinking • Focus on the customer • Increase own profits • Consider own costs • “Spread the business around” Extended enterprise thinking • Focus on the ultimate consumer • Increase profits for all • Consider total costs • Team with the best • Guard ideas, information and resources • Share ideas, information and resources • Improve internal process efficiency • Improve joint process efficiency Source : A T Kearney 10 The business case for supply chain integration • Supply chains compete, not companies • Most opportunities for cost reduction and/or value enhancement lie at the interface between supply chain partners • Supply chain competitiveness is based upon the value-added exchange of information • Supply chain integration implies process integration • Supply chain competitiveness requires the collective determination of strategy 11 The role of supplier and customer collaboration Intermediary Manufacturing Collaboration • Design for localisation • Scheduling synchronisation • Design anywhere build anywhere Customer Collaboration • Joint product definition • Rapid proposal response • Online custom configuration SPEED to Margin Supplier Product Development Collaboration • Global platform design • Customisable products • Global distributed product development Enterprise Customer Supplier Collaboration • Joint development • Outsource design • Contract manufacturing Complementor Source : Accenture 12 Co-opetition: a definition A business strategy based on a combination of cooperation and competition, derived from an understanding that business competitors can benefit when they work together. A “non zero sum” scenario, in which the sum of what is gained by all players is greater than the combined sum of what the players entered the scenario with. Source: D. Meyer, 15th March 2011 and istockphoto 13 Co-opetition Cooperative Competition Co-opetition occurs when companies work together in parts of their business where they do not believe they have competitive advantage and where they believe they can share common costs. Basic premise: - Co-opetition strategy and value creation leverage the alliance - Partner with other shippers (even competitors) to control logistics and transport costs - Load consolidation Source: D. Meyer, 15th March 2011 14 Co-opetition Partners • Producers, Customers, Consumers who drive producer demand and determine product eco-footprint • Shippers and Terminal Operators who generate the freight flows and provide the critical infrastructure for product flow • Logistic Service Partners (3PLs) who can design and implement optimised solutions and move the freight • Fourth Party Providers who can facilitate partnerships, referee blockages, find common ground • Governments who can assure that legal and regulatory arrangements are in place to support seamless collaboration Source: D. Meyer, 15th March 2011 15 Co-opetition = Value Creation • Co-opetition does not simply emerge from coupling competition and cooperation issues • Co-opetition implies that cooperation and competition merge together to form a new kind of strategic interdependence between firms, giving rise to a co-opetitive system of reciprocal value creation. Source: D. Meyer, 15th March 2011, and reubenmiller.typepad.com 16 The Prisoner’s Dilemma – The Importance of Trust Source: www.cfo.com 17 From “Bow-Tie” to “Diamond” Traditional buyer/supplier interface Sales R&D Building stronger partnerships through multiple linkages Supplier Development Key-account selling Buyer R&D Marketing Production Production Operations Marketing Business development Marketing Supply chain Supply chain Supply chain Supplier 18 Customer Supplier Marketing Operations Business Development Supply chain Customer The supply chain of the future Market Driven Tomorrow’s Model • Virtual networks • Information based • Customer value oriented Mass production mass marketing Mass customisation one-to-one marketing Yesterday’s Model • Independent entities • Inventory Based • Low cost production Supplier Driven 19
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