Cost Optimisation
January 10, 2024

Collaborative Supply Chain Models: How Partnerships Can Cut Costs

Explore how collaborative supply chains cut costs through partnerships and more, enhancing efficiency with Holocene
Romain Fayolle

Today's supply chains are all about working together. While the focus was more on the individual team's excellence in the past, companies have understood over time that the supply chains are more like relay races, where every individual needs to be at their best if they all have to win. Supply chain teams win or lose as a team. And companies have realized that these are not just your internal teams but also your supply chain partners, such as suppliers and distributors. This article explains how joining supply chain forces can help businesses save money.

What Does Collaboration in Supply Chains Mean?

In the past, companies usually handled their supply chains on their own. Data used to be siloed even within the company, and teams would not have the visibility of other teams or end-to-end visibility. But now, they're teaming up. Now, companies work not just with other teams but also with their suppliers and sometimes even competitors. They share resources like trucks, buying materials together, and, most importantly, they share information about what customers want.

When companies share information like how much inventory they have or how the end customer demand is shaping up, everyone in the supply chain can plan better. This means less waste and lower costs as the information sharing improves visibility and dampens the bullwhip effect.

How to Work Together in Supply Chains? Benefits of Collaborative Supply Chain

There are many ways in which companies can improve collaboration across various functions of the supply chain. This helps connect disparate systems and provides an end-to-end view of the chain.

Collaborative Supply Chain includes elements like:

  • Joint Planning and Forecasting: Planning and forecasting activities as an end-to-end supply chain enables collaboration. Shared demand forecasts lead to more accurate production schedules, reducing waste.
  • Real-Time Data Sharing: Effective collaboration needs real-time data sharing from all parties. There has been a massive surge in solutions like data lakes in recent times. Such unified data sources help build the base for data-driven decision-making and managing exceptions.
  • End-to-End Visibility: Complete supply chain visibility is critical for monitoring inventory, supplier issues, forecasting mismatches, and exception handling. This visibility helps identify and close issues right at the start.
  • Shared Risk Management: Collaborative Supply Chains have a shared risk management approach. This means that the supply chain partners do the risk assessment for their parts and share it with the larger team in advance. Together, they work on mitigation strategies to respond to potential disruptions more effectively.

Collaborative Supply Chains require a paradigm shift in operations and has many cost-associated benefits like:

  1. Improved Transaction Costs:

These are the costs of doing business with each other, like order generation, billing, and goods receipts. Many of these costs are considered as the cost of doing business, but they can be managed through collaboration. For example, Company A and Company B can use the Electronic Data Interchange (EDI) system to streamline their order and billing processes and significantly reduce transaction costs and lead time. 

  1. Process Costs:

These costs come up when companies' ways of doing things don't match up. These are also known as Non-Value Adding or NVAs. This can cause extra work, like entering the same information many times in different places. A collaborative supply chain process can align these processes and save time and money.

One way to do this is to have teams from both sides – the supplier and the customer – work together to make things run more smoothly.

  1. Uncertainty Costs:

These happen because companies often aren't sure about what they'll need or when, so they keep extra stock just in case. This extra inventory leads to higher inventory holding costs.

Better communication between companies can reduce the need for these extra stocks and reduce costs. One great example is the collaboration between retailers and FMCG companies. Retailers share point-of-sales (POS) data, which helps the companies replenish their stocks in time. This ensures higher service levels and controlled inventory costs.

How Holocene Helps with Collaborative Supply Chains

Holocene has the tools and expertise to help companies work together in their supply chains. Holocene's suite enables:

  1. Technology for Sharing Data and Making Decisions:

Holocene's technology helps companies seamlessly share information and better understand their partners' operations. This allows them to make informed choices and reduce costs.

  1. Helping Build Strong Partnerships:

Holocene assists in uncovering the right partners in your supply chain and working closely with them. Which supplier is more efficient? Who has the lowest costs? And who has the shortest lead time? Data-driven insights make sure that you find the right partners for the long term and be successful together.

Holocene supports you on the journey of building an efficient collaborative supply chain that keeps costs down. Connect today to understand more.