Whitepaper: Supplier Collaboration Maturity Index - A Road Map for Evolution toward Greater Supplier Collaboration
 

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Whitepaper: Supplier Collaboration Maturity Index - A Road Map for Evolution toward Greater Supplier Collaboration Document Transcript

  • 1. Supplier CollaborationMaturity IndexA Road Map for Evolution toward Greater Supplier CollaborationExecutive Summary:Retailers aspiring to emerge as evolved players in Supplier Collaboration,should have a balanced focus on technological investments as well assupplier-process maturity. A comprehensive web-based supplier portal withintegrated analytics capability can help retailers transition smoothly tohigher levels of collaboration maturity, with enhanced visibility, transparency,seamless collaboration and real-time information exchange with theirtrading partners. Such a portal can result in dramatic cost reductions andsignificant efficiency gains for retailers and their suppliers© 2011 Manthan Systems manthansystems.com
  • 2. Supplier Collaboration Maturity Index A Road Map for Evolution toward Greater Supplier Collaboration Director at Gartner Research Supply Chain Team, Mickey North Rizza, aptly summarizes: “Supplier collaboration is a lucrative journey that, when done right, yields the long-term value of increased revenue and greater profit margin. Costs are eliminated with leaner processes, improved product designs and faster time to market. The supplier collaboration journey typically begins with transactions or practices and gradually deepens with added visibility and collaboration between both parties, including scorecards, inventory, forecasts and demand. As companies progress on the journey with selected strategic suppliers, transactional practices mature into relationships with joint value.” Supplier Collaboration is Key Supply chain inefficiencies are the most common operational challenge for large retailers often leading to stock outs, delayed procurement cycles and missed promotional opportunities. Greater collaboration with suppliers is one of the principle methods of addressing these inefficiencies. Supplier collaboration implies a high level of transparency, visibility, real-time sharing of business critical knowledge and superior synchronizing of processes and plans between all stakeholders in the retail supply chain. Despite these proven benefits, trying to build a collaborative supply chain is like enrolling for a weight loss program. The expected outcome is clear but going through the program and sustaining the pace is a daunting task. Most retailers and suppliers have differing IT architecture, platforms and applications. Some of the smaller suppliers operate with minimum technology infrastructure. Getting everyone on-board any integrated collaboration plan is a critical challenge. Building trust among stakeholders, security concerns arising out of shared processes and various operational and logistical challenges add to the problem, resulting in many collaboration ventures falling by the wayside. Supplier Collaboration Maturity Considering the complexity of the task at hand, retailers should embark on a journey of Supplier Collaboration by adopting a phased approach towards building a completely collaborative environment. Starting with tactical collaboration covering limited processes and select key suppliers, they should gradually move to a more comprehensive model that offers collaboration across the entire spectrum of interactions covering the comprehensive supplier pool. As retailers evolve their supplier process with the underpinning technologyA whitepaper fromManthan Systems© 2011 Manthan Systems. All rights reserved. Page 1
  • 3. Supplier Collaboration Maturity Index A Road Map for Evolution toward Greater Supplier Collaboration investments, their relative position in terms of supply-chain automation, processes maturity, communication models and visibility indicates their Supplier Collaboration Maturity. A Collaboration Maturity Index provides a good marker in a retailer’s evolution towards higher levels of collaboration maturity. Such an index can provide guidelines to retailers to plan and monitor their transition from one level of collaboration maturity to another. It can help them assess current state of maturity and evaluate readiness to move to the next stage. Supplier Collaboration Maturity Index Manthan Systems has brought its rich domain expertise and experience in the retail industry, to develop a proprietary Supplier Collaboration Maturity Index that addresses this need of retailers. This index maps retailers’ supplier collaboration maturity against four vital parameters and presents the key markers and milestones that retail enterprises have to achieve at each level of maturity. It also provides retailers with a road-map of capabilities to be built to bridge the gap, investments to be made and opportunity costs involved in getting to the desired levels of collaborative maturity. It also ensures that retailers’ and suppliers’ internal systems, technologies and processes are in a state of readiness to make the transition from one level of maturity to another. Supplier Collaboration Maturity: Key Parameters We have identified four primary areas that impact the supplier collaboration maturity of an organization. Visibility: Supply chains can serve as a clear virtual window offering complete end-to-end visibility into the procurement-to-pay cycle. Poor visibility, especially to suppliers, leads to delays in demand information working its way through the supply network and lapses in stock control. Information exchange: Synchronized information seamlessly flowing both Gifted Privileged ways, between retailers and suppliers, and the Visibility use of state-of-the-art communication platforms are indicators of the Slowcoach Established collaboration level of a supply chain. Many retailer-supplier networks do not facilitate Collaboration such low cost and robust information exchange infrastructure and some Level of Automation Supplier Process MaturityA whitepaper from Fig 1.1Manthan Systems© 2011 Manthan Systems. All rights reserved. Page 2
  • 4. Supplier Collaboration Maturity Index A Road Map for Evolution toward Greater Supplier Collaboration still communicate over primitive methods such as phone, fax and e-mail. This poses a high chance of communication errors, ineffective planning and delays in getting stocks to the right place at the right time. Automation: Highly automated supply chains need little manual intervention and offer automatic, real time updates on all aspects of the supply chain such as stock, shipment status, sales and promotional lift. Greater levels of automation are more conducive to higher collaboration. Supplier Process Maturity: Some retailers have embraced mature supplier processes with the entire supplier interaction from procurement-to-pay being highly process driven. With a focus on standard operating procedures, fact based performance reviews, processes and documentation, process maturity fosters higher supplier collaboration. The Supplier Collaboration Maturity Index of an organization is a direct function of these parameters. Based on where they stand on these areas, we classify organizations into four categories of Supplier Collaboration Maturity: novice, veteran, dormant and evolved. Level 1: Novice Organizations at this level of the collaboration maturity index have silo systems, limited information exchange and low investments in supplier interaction automation. Order processing and procurement cycles of hundreds of vendors are managed manually. Communication is primarily over phone, fax, email and other non-standard methods placing a huge constraint on collaborative potential. In most Novice organizations, transaction data is usually scattered across multiple systems on both retailer and supplier sides making it difficult to get an integrated picture for planning ahead. A critical first step Novice organizations need to take towards higher collaboration maturity is investment in data warehouse systems to integrate transaction data from disparate source systems. They have to build technology capabilities to get a cohesive business picture of all supplier data and move towards more streamlined and advanced communication platforms for timely information exchange. Level 2 : Veteran Veteran organizations have time-tested and mature supplier processes in place, resulting in greater supplier collaboration. However, Veteran organizations have low supply chain infrastructure investments and offer limited visibility on downstream demand and stock flows. Collaboration is largely on an event-to-event basis with a clear focus on larger vendors andA whitepaper fromManthan Systems© 2011 Manthan Systems. All rights reserved. Page 3
  • 5. Supplier Collaboration Maturity Index A Road Map for Evolution toward Greater Supplier Collaboration high-value processes. Small and medium sized vendors often get missed out in the planning and decision making process and collaboration does not transcend to an enterprise-wide level. Such a tactical and departmentalized approach to collaboration helps to meet short term supply chain goals but fails to sustain a long term and pervasive collaborative culture. With few automated systems and technology enablers, collaboration in Veteran organizations is a heavily people- and process-dependent effort. Costs of collaboration are high and change management issues are frequent as people move or processes change. These organizations have to focus on building critical capabilities in automated systems to lower cost of collaboration. Veteran organizations should leverage technology as a key enabler in transitioning to an enterprise-wide collaborative culture including small and mid-sized vendors and all aspects of the procure-to-pay cycle. Investments in advanced supplier collaboration portals can complement their mature processes to offer long term and sustained business benefits. Level 3 : Dormant Dormant organizations have a high level of technology investment but lack the strategic and tactical expertise for collaborating. Day to day supply chain operations are automated and offer high visibility, none of which is leveraged for collaborative functioning. These organizations are typically invested in tactical information exchange with EDI systems (Electronic Data Interchange) or trading hubs that facilitate real time information exchange on orders, settlements, sales and Advanced Shipping Notices (ASNs). However with little efforts towards joint planning or decision making, these organizations leave significant collaboration potential underutilized. Inadequate buy-in on the critical need for collaboration and inefficient supplier management processes are behind the low initiatives on collaboration. Dormant organizations are inward looking and are yet to transition to a supplier-focused way of functioning. These organizations should begin using their technology environment for improved vendor collaboration. They can focus on a few strategic suppliers to begin with and gradually move towards collaborating with the composite supplier base. They should initiate a streamlined, shared system of measuring supplier performance regularly and feed the results back into the system to assist in improved vendor performance. This will help get the best out of their suppliers while adding strategic and consultative value to the partnership.A whitepaper fromManthan Systems© 2011 Manthan Systems. All rights reserved. Page 4
  • 6. Supplier Collaboration Maturity Index A Road Map for Evolution toward Greater Supplier Collaboration Level 4 : Evolved Evolved organizations have a balance of high supplier process maturity with reasonable technological investments in supply chain processes. Their supply chain systems have evolved from mere transactional information exchange to totally transparent platforms that support highly collaborative workflows. These organizations resort to proactive methods of collaboration such as sharing annual marketing plans, jointly planning promotions and consultative sales forecasting. They work towards getting early supplier buy-in for various sales and promotion processes. At the Evolved stage of collaboration maturity, organizations are connected with their suppliers in a mutual partnership characterized by synchronized information flow and joint decision making. With real time updates on stock positions, replenishments in these organizations are largely supplier-driven or pull-based function. Evolved organizations can drive greater value from their well-entrenched collaboration initiatives by leveraging advanced analytics-driven collaboration portals. The analytical insights offered by such advanced supplier and analytics portals will provide a framework for improved tracking of collaboration goals. Key metrics and fact based KPIs for effective vendor score-carding can help in driving two-way improvements and greater strategic partnering with suppliers. Mature Processes and Superior Technology: Striking the Right Balance Retailers wanting to emerge as evolved players in Supplier Collaboration, need to demonstrate an equal focus on technological investments as well as processes maturity. The path to evolution is never a straight line but a systematic process of phased evolution by planning, implementing and driving adoption both internally and by suppliers. It involves a phased progression to the next logical level of collaborative business processes and decision support capabilities as demonstrated in the figure below (Figure 1.2). This requires a right mix of timely investment in process reengineering and technology to realize the expected business benefits. Supplier Collaboration Portals: Advanced supplier portals have proved to be an answer for retailers trying to scale the collaboration maturity curve as smoothly as possible. Integrated web-based portals with comprehensive supplier collaborative capabilities facilitate seamless collaboration, visibility, transparency and real-time information exchange between retailers, suppliers and all other touch-points in the retail supply chain resulting in dramatically reduced operational costs, quicker turnarounds and significant efficiency gains. Such a supplier portal product from Manthan Systems, Supplier Portal & Analytics (SPA), has the distinctive advantage of being the only such supplier portal designed exclusively for the retail industry. Built around the best practices prevalent in the retail industry, its uniquely designed workflows brings tremendous value to retailers with its close understanding of retail supplier processes, its rapid deploymentA whitepaper fromManthan Systems© 2011 Manthan Systems. All rights reserved. Page 5
  • 7. Supplier Collaboration Maturity Index A Road Map for Evolution toward Greater Supplier Collaboration Across entire sourcing Lifecycle; Self service Real time analytics for Advanced collaboration Integrated web based enterprise platform with closed loop BI and automated information sharing across entire value chain Sales, Inventory, Promotion Cycle, Visibility Electronic data sharing for core P2P processes Push and pull data Disjointed systems sharing accessibility information for Promotion, Product Launches, etc PO, OOS notice, Fax, Phone, Email Remittance advice Information sharing in need to know basis Collaboration Event Based Basics in place; Strategic approach for Collaboration across Tactical and departmentalized collaboration across Fig 1.2 limited processes approach to collaboration ; complete sourcing Limited vendor performance lifecycle with real time tracking Analytics and fact based Vendor score-carding proposition and seamless integration with existing IT environments. Additionally, SPA’s powerful guided analytics capabilities are yet another differentiator providing retailers with critical Business Intelligence on every aspect of their entire supply chain ecosystem enhancing its decision making capabilities. Manthan Systems is a leading provider of Retail Performance solutions for the retail industry. Manthan’s suite of Retail Supplier Portal and Business Intelligence products are used by over 60 leading retail enterprises in 14 countries transforming the way they improve strategic and tactical operations through analytics-driven decision making. Retail chains and large format department stores are increasingly focused on building collaborative maturity in a move to optimize costs, improve replenishment and develop agile responses to market changes - efficiencies that will lead to enhanced customer satisfaction and profitability.A whitepaper fromManthan Systems© 2011 Manthan Systems. All rights reserved. Page 6
  • 8. India USA United Kingdom Australia South East Asia Europet: +91 80 2299 0585 t: +1 800 746 9370 t: 0207 554 8609 t: +61 3 9394 6362 t: +62 21 2358 4520 t: 069 677 33 520