38 • SMART LOGISTICS • AUGUST 2011

SMART STRATEGIES COLLABORATIVE APPROACHEs

We are in the era of cutthroat competition. We watch our competitors closely and strategise our actions to gain one-up position. Traditionally, ‘compete & gain’ has been seen as the only way of doing and growing business. The primary assumption of competing is that there are limited opportunities and we have to make the most of it. For this, we go all out and do everything that is required, to project us as the most preferred option.

collaborative approach NeededAt this point in time, the overall Indian economy is changing, and so are the rules of running businesses. The size of the Indian supply chain industry is slated to be 13 per cent of the GDP. With the economy projected to grow at a consistent rate of around nine per cent, the benefits of the growth cascades down to the supply chain industry as well. There

are increasing opportunities and hence, it would be prudent to have a selective approach towards accepting new accounts. The vast market gives an option to select new accounts, which suits ones business model in terms of capacities, offerings, strength and margin expectations. That is where the need to have a collaborative approach becomes important.

There are two ways of collaboration viz., vertical collaboration and horizontal collaboration. In vertical collaboration, the stakeholders involved in the supply network, e.g. vendors, manufacturers, logistics partners, distributors, etc. collaborate; whereas, in horizontal collaboration, organisations with similar product or service offerings join together to improve service levels and overall demand.

competitioN betweeN lSpsI have been a part of a logistics service

provider (LSP) organisation for about 10 years and an LSP user for the same tenure. I have closely watched competition between LSPs where every fair & unfair action takes place to stay ahead of competitors. This has only resulted in a loss to one or the other LSP. The maximum advantage of competition goes to their clients or vendors, thus making LSPs weaker by the day. I worked on some of the collaborative opportunities with my competitors and was delighted with the results. It gave me the confidence that collaboration will definitely work. What is important is to maintain trust and transparency among collaborators. It is equally important to have some quick wins to sustain the collaborative approach.

By the term collaboration, I do not mean a mere written agreement in which two or more players decide to work together on certain terms; but rather an understanding within the

iS keyLack of visibility of demand, inventory holding status across the supply chain apart from hostile relationships between trading partners are some of the factors that pose barriers to the growth of logistics service providers. Adopting a collaborative approach promises to overcome these barriers and ensure overall growth of the industries, the supply chain industry in particular, where the growth will be in terms of size and quality.

collaboratioNNot competitioN,

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third-party logistics (3PLs) organisations, which work on agreed protocol and try to leverage on the collaboration – horizontal collaboration. This need not necessarily be a legal agreement.

varyiNg approacheS Let us see how the collaborative approach works in each of the stated cases: Infrastructure/CapacityCompetitive EnvironmentIn this scenario, you construct or invest in capacities independently and believe this is strength; but then, you may end up paying a big price as the capacity risk is fully on you. Moreover, you do not share your capacity with competing players. Also, you play your price depending on demand & supply rather than your cost.Collaborative EnvironmentHere, you share the facility, which implies that your facility is available for others to use, and others’ facilities are available for you to use, thus ensuring overall capacity optimisation. Also, there is rationalisation of price in the market. In addition, everyone focusses on their strengths, rather than focussing on everything from infrastructure to service levels.PeopleCompetitive EnvironmentIn such a situation, you poach the best people from your competitors so that your service levels are the best in the industry; but you forget that the same thing is done by your competitor as well. By poaching, the demand for limited resources goes up and so does the cost. This limits the development of new resources in line with industry requirements.Collaborative EnvironmentHere, you work closely with your collaborated partners; there is no poaching, unless approved by the partners. Thus, you retain your people for a longer time and can invest on their learning and development. Also, confidential matters of the business remain in your system and reference check of new recruits becomes easy. This helps in aligning compensation with skill sets and industry standards.Collaborated training and investments helps develop new talent to meet increasing needs.Business DevelopmentCompetitive EnvironmentHere, you strive towards winning the customer, even if it is not within your core competency, only to ensure that it does not go to your competitor.You go to the extent of engaging with the client,

even if you do not find the business or client’s approach promising. You discount prices to grab market share and take business risks and, above all, you hide your weaknesses and limitations.Collaborative EnvironmentIn such an environment, you do not waste time on clients who are not transparent and responsive. Such clients waste time analysing, drilling down costs, etc. rather than taking decisions. This also indicates that you too are not ideal for them. It is best to recommend the most appropriate alternative to them and focus more on clients who show interest in your services. If you cannot meet all the requirements of the clients, do a joint representation with your collaboration and win the business jointly. Make sure you have a price benchmarking done with all your collaborations and ensure that the price is a ‘win-win’ for you and the client. You can also do a reference check of the client with other collaborated partners, if they had any business relation in the past. Contingency PlanningCompetitive EnvironmentHere, you will have to invest for contingency arrangements and cannot look at competition for support in times of crisis. This results in duplication of resources and higher operation cost. Moreover, unattended contingency leads to service failure and makes client retention difficult.Collaborative EnvironmentThis creates a contingency plan based on a common pool of resources. In times of crisis, you can approach collaborated partners for support to ensure continuity.Consolidated buyingCompetitive EnvironmentLSPs negotiate individually with vendors for limited volume. However, the pricing of the terms of trade are kept confidential and vendors take advantage. In addition, the cost of doing business goes up, and thus impacting the industry.Collaborative EnvironmentCollaborated LSPs consolidate their requirements and negotiate with the vendor for favourable pricing and terms. Moreover, a consolidated approach helps a vendor to get the advantage of scale.Industry representationCompetitive EnvironmentHere you will find an individual approach with varied views, which is why it fails to put across the requirement of the industry at the appropriate time.

Collaborative EnvironmentThe group discusses & debates on what is good for the industry & client and makes a joint representation in the relevant forum. The authority also positively recognises and acts on group representations.

a collaborative platform The following are typical the steps to create a platform to collaborate: • Interact with other LSPs and form a

group. Share each other’s strengths and challenges in terms of infrastructure, operations, region, seasonality, etc.

• Identify projects and areas for collaboration & form cross organisational teams to attend projects

• Discuss and arrive at a protocol for a collaborated approach and review the status of projects

• Celebrate successes.It is important to understand that

collaboration does not erase your identity, but helps you achieve some of it jointly, and most of it by strategising and executing your business more efficiently. Collaboration will only free you from some of the worries on which you would have spent a lot of time and money. Hence, collaboration helps you focus more on your clients and business.

Another benefit of the collaborative approach is that you spend minimum time on investigating and double guessing what your competitor is up to. Thus, the available time is focussed on sustaining the current business and strategising growth. Since your competitor faces a similar scenario, no one gains with the time wasted. Thus, the benefit, in the case of the collaborative game, is the overall growth of the industries, the supply chain industry in particular, where the growth will be both, in terms of size and quality. Hence, to me collaboration always wins over competition. It is important, at this juncture, to understand that collaboration is not a cartel. A cartel is a formal agreement between competing organisations to create a monopolistic position, which can be exploited by the cartel partners to their benefit. In most of the cases, the cartel arrangements are detrimental to the interest of the client and the trade. The secret is to gang up on the problem, rather than each other. It is time to collaborate.

Sunil Nair, Director, ImpelPro SCM Solutions E-mail: sunil@impelpro.in