Decades of outsourcing and offshoring in search of ever-greater efficiency means the elongated supply chains companies depend upon are more fragile and opaque than ever before.
Cutting the carbon in the products you offer, securing your brand’s reputation against child labour, reducing costs, or ensuring timely supply of a key commodity like rice or cocoa can only be achieved through close collaboration along the supply chain.
This is what Martin Chilcott, founder and chief executive of 2degrees, calls the “collaboration imperative”. As he puts it: “With all these unprecedented pressures, large-scale collaboration really is a necessity for companies wanting to survive and thrive in 21st century. We really are in this together.”
CHALLENGE
Traditionally, the problem with collaboration has been that it proved very expensive with anything more than just a few strategic partners. This was because it involved being face to face. As a result, what passed for collaboration really only amounted to the odd quarterly meeting with a fraction of the supply chain and a website that pushed out policies to the rest.
However, technology is changing all that. Digital technologies and collaboration platforms such as 2degrees are enabling companies to work closely with thousands of their suppliers at a depth that was previously impossible. Crucially, they also allow those suppliers to work with each other, unlocking knowledge and capability long hidden in silos up and down value chains.
With a network of more than 50,000 professionals, 2degrees is at the forefront of this digital platform development and, according to Mr Chilcott, the technology is making a whole new world of collaboration available to business.
Digital technologies and collaboration platforms such as 2degrees are enabling companies to work closely with thousands of their suppliers at a depth that was previously impossible
“Large-scale supplier-to-supplier collaboration, with operational managers from different organisations working together to solve problems, share best practice and find solutions, is now possible,” he says. “This is what we call ‘fully linked collaboration’.”
Stateside Food’s chief engineer Rick Lloyd has experienced fully linked collaboration first hand as part of Asda’s supply base on the digital platform 2degrees runs for food and drink processors and manufacturers. “I now know that I can contact my opposites in big companies and ask them a question and they’ll answer it. There are no longer inter-company silos; the exchange has wiped that out – it’s a phenomenal tool,” he says.
DIGITAL SOLUTION
There are three underlying factors that determine why the use of digital platforms is the only option for collaboration – scale, complexity and speed. In terms of scale, the total number of suppliers to a major brand can run into tens of thousands, with the volume of stock keeping units in a grocery store exceeding 100,000. No face-to-face programme could effectively reach a supplier base that big. Labyrinthine complexity also makes digital the only option.
The tragedy of the Rana Plaza factory collapse and scandal of the horsemeat debacle both exposed the degree to which supply chains involve a tangled web of contracting, recontracting and subcontracting arrangements. Traceability depends on data.
Finally, there is the speed at which everything happens. How rapidly decisions are made and swiftly markets change now demands agility. However, while the technology is vital, it is not sufficient on its own, argues Mr Chilcott.
“It is not just a matter of applying digital technology. We need a new mindset too. We must step away from the very limited ‘command and control’ approach that we used in the past, and adopt a more open, collaborative, empowering culture,” he says.
“In many cases, the suppliers themselves have the answers and simply need to be allowed and enabled to work with each other. Seeing a supply base as an ecosystem to be supported in this way liberates the creative potential for interaction and innovation.”
COLLABORATION IN ACTION
For the industry leaders, collaboration is seen as a strategic function and the kinds of organisations that are leading the way in the use of the platform are major fast-moving consumer goods and food companies such as Unilever, retailers like Asda-Walmart and Kingfisher, banks like RBS, and pharmaceutical giants such as GSK.
When you get into the detail, it is the individuals who are working together. As Professor Richard Wilding, chair of supply chain strategy at Cranfield School of Management, explains: “2degrees platforms enhance levels of relationship management through greater social interaction. The sharing of ideas freely between all stakeholders drives innovation, which in turn maximises value in the final marketplace at less cost to the supply chain as a whole.”
On issues such as energy, waste or health and safety, operational managers from different companies are asking each other for insight and advice. Bringing as many as 1,500 specialists together at a time creates a phenomenal human resource for problem-solving, with hundreds of thousands of exchanges of knowledge taking place. Whether discussing how to use a particular technology, engage a colleague or build a business case, it is this collaboration at a practical level that delivers tangible benefits, creates value and makes sustainable business happen.
It is also these sorts of exchanges that have led to investments being made. In one community of more than 300 companies, for example, 2degrees estimates they are generating close to €100 million in operational savings that have been directly supported and accelerated by fully linked collaboration.
So the future of supply chains is digital and fully linked. As can be seen with disruptive market innovators such as Uber and Airbnb, the digital era of business has arrived and is here to stay. Once the tech is out there, there is no going back. The secret is to embrace the change, Mr Chilcott concludes.
“It is all about getting the tech to work for you, rather than against you; to help you gain competitive advantage, not lose it; enhance reputation, not risk it. The adversarial approach to supplier management is history. You can’t coerce your suppliers, not for long anyway, and you can’t audit them into submission and compliance. The old ways are dead, killed by digital. The future is fully linked collaboration.”
To find out more about 2degrees supply chain collaboration solutions and the digital platforms available, visit www.2degreesnetwork.com
