Collaborative Supply Chains Are Driving Manufacturer Growth

Isaac Newton is widely regarded as the most influential physicist who ever lived. But even Newton recognized that his mathematical insights came from standing on the shoulders of giants.

Supply chain managers should take a cue from Sir Newton by standing on the shoulders of third-party technology companies that can provide quick, innovative solutions at a fraction of the cost of building out those products in house.

Collaborative supply chains are driving manufacturer growth and logistics innovation because sharing technology and excess capacity improves overall efficiency for all stakeholders.

In the same way that division-of-labor on a production line increases output, collaborative supply chains allow partners to focus on what they do best — while benefiting from the technological breakthroughs of others.

Collaborative supply chains also allow companies to share excess capacity, which is often unavailable without a layer of technology that can connect supply with demand in real time.

Partnerships will shape future innovation

In a recent survey by KPMG, 88% of manufacturing executives agreed than partnerships, rather than in-house efforts, will characterize the future of innovation for their organization.

“Manufacturers have seen an explosion of new technologies and innovative developments in material science, advanced manufacturing and synergistic operating models,” says Jeff Dobbs, Global Chair of Industrial Manufacturing at KPMG in the U.S.

“With this accelerating pace of change, manufacturers the world over are now starting to take stock of the more complex world that they are operating in, and are using that insight to redefine ‘the art of the possible.’”

Collaboration for innovation is occurring at all levels of the supply chain. Some manufacturers are partnering with vendors to develop new innovations at the parts level, while others are teaming up with technology companies to develop and commercialize new innovations, according to KPMG’s Global Manufacturing Outlook report.

Innovation is speeding up

“The pace of innovation is picking up rapidly,” says Dieter Becker, Global Sector Chair for KPMG International’s automotive division. “Whereas in the past, organizations were willing to wait 10 to 15 years to develop and commercialize a new disruptive technology, today’s stakeholders expect new innovations constantly.”

The need to innovate quickly has pushed manufacturers to look outside of their internal R&D departments for quicker, more reliable solutions.

Partnering with non-traditional players from the technology sector can bring efficiencies that would be financially impossible for a manufacturer or distributor to develop on their own.

Original equipment manufacturing, RFIDs, software API integration platforms, and “smart” transportation technologies are pushing the envelope in supply chain optimization.

However, technology alone does make for a successful supply chain partnership.

Collaboration ultimately requires a “cultural alignment” that brings companies and supply chain professionals together to have them speaking the same language, according to Ron Levesque, a supply chain manager from ConocoPhillips Canada Ltd.

“I think we have to cultivate relationships and the (starts with) culture,” he said at last year’s Canadian Energy Supply Chain Forum.

Sharing Supply Chains for Mutual Gain

Kimberly-Clark — the Texas-based manufacturer behind Kleenex, Huggies and Scott — was one of the earliest pioneers in collaborative supply chain management.

In the early 2000s, Kimberly-Clark’s retail customers in the Netherlands were trying to incorporate point-of-sale (POS) data into their value chains so that replenishment decisions could be based on actual customer transactions.

As a result, the retailers wanted more frequent deliveries in smaller quantities. This was problematic because Kimberly-Clark’s fulfillment processes involved full truckloads.

The solution was to partner with another manufacturer that had a similar customer base.

Kimberly-Clark struck a distribution deal with Lever Fabergé (now Unilever’s Home and Personal Care unit) to service mutual customers in the Netherlands.

By sharing full trucks, the two manufacturers were able to increase delivery frequency without increasing transportation costs. They were also able to reduce the value of stored products by 30%.

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