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Co-creation and Collaboration in the Supply Chain
Emeritus Professor Martin ChristopherCranfield School of Management
Cranfield UniversityCranfield
Bedford MK43 0ALUnited Kingdom
Tel : 44 (0)1234 751122 Fax : 44 (0)1234 721225E-mail : [email protected]
www.martin-christopher.info
Agenda
• The new rules of competition• Gaining advantage through collaboration• The challenge of complexity• The case for ‘co-opetition’• The Supply Chain of the future
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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
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Volatility Index
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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
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0
20
40
60
80
100
120Maximum
Average
Minimum
Day
s of
Inve
ntor
y
First TierSupplier
InboundLogistics
Vehicle Manufacturers
OutboundLogistics
Distribution& Retail
(UK 1999 Figures, Volume Car Stock Levels
Source: Holweg (2002)
Inventory profile of the automotive supply chain
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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
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Complexity in the global supply chain : the Boeing 787 787
Co-creation in the supply chain
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Valu
e t
o C
ust
om
er
Valu
e t
o C
ust
om
er
Value to Supplier Value to Supplier
Traditional RelationshipFocus on splitting the pie
Extended EnterpriseFocus on expanding the pie
Source: J.H. Dyer, Collaborative Advantages
The extended enterprise viewpoint
Single company thinking• Focus on the customer
• Increase own profits
• Consider own costs
• “Spread the business around”
• Guard ideas, information and resources
• Improve internal process efficiency
Extended enterprise thinking
• Focus on the ultimate consumer
• Increase profits for all
• Consider total costs
• Team with the best
• Share ideas, information and resources
• Improve joint process efficiency
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Source : A T Kearney
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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
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The role of supplier and customer collaboration
Source : Accenture
Enterprise CustomerSupplier
Complementor
Intermediary
SPEED to Margin
Manufacturing Collaboration• Design for localisation• Scheduling synchronisation• Design anywhere build anywhere
Product Development Collaboration• Global platform design• Customisable products• Global distributed product
development
Customer Collaboration• Joint product definition• Rapid proposal response• Online custom configuration
Supplier Collaboration• Joint development• Outsource design• Contract manufacturing
Co-opetition: a definition
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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
Co-opetition
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Source: D. Meyer, 15th March 2011
Cooperative CompetitionCo-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
Co-opetition Partners
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Source: D. Meyer, 15th March 2011
• 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
Co-opetition = Value Creation
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Source: D. Meyer, 15th March 2011, and reubenmiller.typepad.com
• 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.
The Prisoner’s Dilemma – The Importance of Trust
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Source: www.cfo.com
From “Bow-Tie” to “Diamond”
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Traditional buyer/supplier interface Building stronger partnerships through multiple linkages
R & D
Production
Marketing
Supply chain
SalesMarketing
Operations
Business development
Supply chain
Buyer
Supplier Customer
R & D
Production
Marketing
Supply chain
Key-account selling
Marketing
Operations
Business Development
Supply chain
Supplier Development
Supplier Customer
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The supply chain of the future
Yesterday’s Model
• Independent entities
• Inventory Based
• Low cost production
Market Driven
Supplier Driven
Mass customisation
one-to-one marketing
Mass production
Tomorrow’s Model
• Virtual networks
• Information based
• Customer value oriented
mass marketing
