1. Supplier Collaboration
Maturity Index
A Road Map for Evolution toward Greater Supplier Collaboration
Executive Summary:
Retailers aspiring to emerge as evolved players in Supplier Collaboration,
should have a balanced focus on technological investments as well as
supplier-process maturity. A comprehensive web-based supplier portal with
integrated analytics capability can help retailers transition smoothly to
higher levels of collaboration maturity, with enhanced visibility, transparency,
seamless collaboration and real-time information exchange with their
trading partners. Such a portal can result in dramatic cost reductions and
significant efficiency gains for retailers and their suppliers
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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 technology
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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 Maturity
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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 and
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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.
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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 deployment
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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.
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