Co-creation and Collaboration in the Supply Chain

Co-creation and Collaboration in
the Supply Chain
Emeritus Professor Martin Christopher
Cranfield School of Management
Cranfield University
Cranfield
Bedford MK43 0AL
United Kingdom
Tel : 44 (0)1234 751122
Fax : 44 (0)1234 721225
E-mail : m.g.christopher@cranfield.ac.uk
www.martin-christopher.info
Agenda
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The new rules of competition
Gaining advantage through collaboration
The challenge of complexity
The case for ‘co-opetition’
The Supply Chain of the future
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
5
Inventory profile of the automotive
supply chain
(UK 1999 Figures, Volume Car Stock Levels
120
First Tier
Supplier
M axim um
Inbound
Logistics
Vehicle
Manufacturers
Outbound
Logistics
Distribution
& Retail
Ave rage
100
M inim um
60
40
20
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Customer
Marketplac e
Outbound Transit
Loading & Despatch
Vehicle Production WIP
On-site Part (VM)
Inbound Transit
Finished Components
Assembly WIP
Pre-Assemby WIP
In-house built Parts
Bought-out Parts
0
Raw mater ial
Days of Inventory
80
Source: Holweg (2002)
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
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Co-creation in the supply chain
Extended Enterprise
Focus on splitting the pie
Focus on expanding the pie
Value to Customer
Value to Customer
Traditional Relationship
Value to Supplier
Value to Supplier
Source: J.H. Dyer, Collaborative Advantages
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The extended enterprise viewpoint
Single company thinking
• Focus on the customer
• Increase own profits
• Consider own costs
• “Spread the business
around”
Extended enterprise thinking
• Focus on the ultimate
consumer
• Increase profits for all
• Consider total costs
• Team with the best
• Guard ideas, information
and resources
• Share ideas, information
and resources
• Improve internal process
efficiency
• Improve joint process
efficiency
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
Intermediary
Manufacturing Collaboration
• Design for localisation
• Scheduling synchronisation
• Design anywhere build anywhere
Customer Collaboration
• Joint product definition
• Rapid proposal response
• Online custom configuration
SPEED to Margin
Supplier
Product Development Collaboration
• Global platform design
• Customisable products
• Global distributed product
development
Enterprise
Customer
Supplier Collaboration
• Joint development
• Outsource design
• Contract manufacturing
Complementor
Source : Accenture
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Co-opetition: a definition
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
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Co-opetition
Cooperative Competition
Co-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
Source: D. Meyer, 15th March 2011
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Co-opetition Partners
• 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
Source: D. Meyer, 15th March 2011
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Co-opetition = Value Creation
• 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.
Source: D. Meyer, 15th March 2011, and reubenmiller.typepad.com
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The Prisoner’s Dilemma –
The Importance of Trust
Source: www.cfo.com
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From “Bow-Tie” to “Diamond”
Traditional buyer/supplier interface
Sales
R&D
Building stronger partnerships through
multiple linkages
Supplier
Development
Key-account
selling
Buyer
R&D
Marketing
Production
Production
Operations
Marketing
Business
development
Marketing
Supply chain
Supply chain
Supply chain
Supplier
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Customer
Supplier
Marketing
Operations
Business
Development
Supply chain
Customer
The supply chain of the future
Market Driven
Tomorrow’s Model
• Virtual networks
• Information based
• Customer value oriented
Mass production
mass marketing
Mass customisation
one-to-one marketing
Yesterday’s Model
• Independent entities
• Inventory Based
• Low cost production
Supplier Driven
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