The optimal solution for the supply chain of today is the concept of the “Collaborative Supply Chain”.

Supply chain management has evolved over the last 40 years for the original “Reactive Supply Chain” model.  This model was characterized by MRP systems driving quantities irregardless of transactional or carrying costs.  “If I had it on the shelf I could sell it” and “Just in Case” inventories are hallmarks of this level of operations. Other highlights include no integration and a push supply model with inventory flowing from supplier to carrier to stock as much to ‘fill the pipeline’ as any other driver.

In the last 15 years, theory and tools had evolved to bring about the evolution of the “Proactive Supply Chain” model.  For the first time practitioners began applying measures of activity cost and the drain to the enterprise of inefficient transportation, and inventory coming to rest on the balance sheet.  Outsourcing of non’ core competency’ activities such as transportation management and warehousing with Third Party Logistics (3PL) providers boomed.  Leading edge companies recognized that physical space owned or controlled must have the ‘value add’ component maximized.  Companies accepted that an aversion to outsourced, shared space was a financial excess that few could afford.  Many companies began adopting a ‘pull’ inventory strategy and VMI inventories were seen in industries where the mere suggestion of employing the strategy would have been unheard of 10 years before.  Still, interfaces from supplier to manufacturers were transactional in nature although more efficient. “VMI inventory tactics allowed for ‘economic transportation quantities’ while implementing ‘economic purchasing quantities’ via hourly or daily pulls from vendor stock. Yet, the only link from the ultimate ‘consumer’ of a product containing a component was the “marketing and planning” department or team. In many cases, supply chain economies and tactics were put into motion which lowered the overall cost of a product significantly, only to have these gains lost as the finished product went into, and sat in, a distribution channel that was out of phase with sales due to the inherent disconnect between a static ‘planning’ regimen, and the real world market consumption in the day to day world.  Suppliers participated in the ‘loop’ but were still subject to ‘pulls’ based on ‘forecast’ or ‘plan’.

Advances in internet tools have led to the emergence of the “Collaborative Supply Chain”.  This evolution capitalizes on a new era in systems integration and the ability to collaboratively develop a ‘game plan’ which serves as the overlay to the ‘demand chain’. Extending the supply chain to include as much hard sales, thus ‘demand’ data as possible allows providers and suppliers to ‘map in’ using standards and inter-system transactional synchronization.  And, a new concept of a 4PL provider has added a function that can more easily integrate multiple 3PL providers to service a supply chain.  By moving to an external ‘manager’ of the 3PL process a company can avoid having to deal with pricing and contracting with multiple providers, instead, outsourcing these functions to a provider that is the umbrella provider for pricing and service. Most likely, this 4PL has relationships and collaborative tools in place with multiple 3PL providers. An example of this benefit is using the umbrella provider to arrange for multiple suppliers product, possibly spanning several supply chains, to be aggregated on a container for transport where LCL rates for multiple supply chains would have been the inefficient result in the past.  Another mark of the collaborative supply chain is that actual sales information is aggregated and burst down to components so a vendor can see spikes in pull at the raw consumer level.  Thus an ingredient supplier can see a jump in consumer demand for an end food product, almost in real time, and collaborate with THEIR customer as to the significance of the spike.

Although the dot-com era was a financial bust for most participants, a significant amount of basic and applied research was accomplished, and is emerging today in the form of market enhancing tools completed by follow-on teams.  Exchanges and Collaborative procurement processes are but two examples of concepts which were born in that era.  The advent of standards based ERP and other tools, coupled with advanced messaging and back room collaboration tools, is allowing the most enable supply chains to function nearly end to end with little day to day administrative intervention.  Thus, producer, provider and consumer collaborative engines can interoperate in the background constantly polling and exploring for efficiencies in both time and cost.
Our tools at Performance Logistics allow us to act as a 4PL, interact with YOUR existing 4PL, or act directly as a 3PL to service your supply chain needs.