Q&A: What is supply chain collaboration?
Martin Chilcott, 2degrees CEO and Founder, gets to the point about the type of collaboration needed to cut costs, reduce risks and drive innovation within complex supply chains.
1. Why is collaboration so important, perhaps even uniquely important to sustainable business?
There are 3 main reasons why collaboration is more important than ever before in helping businesses survive and thrive in what are increasingly chaotic and uncertain times.
1. Firstly most of the environmental and social sustainability challenges businesses face are part of the challenge of the commons. No one company owns the atmosphere, the oceans, the fish stocks, or fresh water reserves. These are resources common to us all. And because of that they can only be managed sustainably through collaboration.
2. Secondly, today most businesses, have subcontracted or out-sourced and off-shored their purchases and operations to such an extent that they have become totally dependent on a geographically dispersed, and increasingly fragile supply-chain. For many companies up to 80% of their risks and impacts lie in this supply-chain. You can't coerce your suppliers (not for long anyway); and you can't audit them into submission and compliance. Ultimately you have to work with them.
3. Lastly, brand reputation is no longer something solely in the control of the brand company. It’s one of those risks that lies outside the company in the supply-chain. That makes mitigating brand risk something that can only be done with the co-operation of your suppliers. It becomes a collaborative exercise.
"To help differentiate it from traditional ways of collaborating and to capture the incredible connectivity and scale it is creating, we call it 'fully-linked collaboration’."
2. Collaboration is perhaps an over-used word. What do you mean by collaboration and how is it changing?
At 2degrees, we think of collaboration as a strategic function. Traditionally it has been very expensive to do this with more than a few strategic partners because it involved being face to face. But technology is changing that. Digital technologies and collaboration platforms like ours are enabling companies to work closely with thousands of their suppliers at a depth that was previously impossible. But more remarkably they are allowing those suppliers to work with each other unlocking knowledge and capability that was previously hidden in silos up and down value chains.
Large scale supplier-to-supplier collaboration, with operational managers from different organisations working together to solve problems, share best practice and find solutions, is now possible. To help differentiate it from traditional ways of collaborating and to capture the incredible connectivity and scale it is creating, we call it 'fully-linked collaboration’.
3. What kinds of companies and individuals are involved?
The companies that are leading the way are the major FMCG and food companies like Unilever and retailers like Asda-Walmart and Kingfisher; some banks like RBS; and pharmaceutical giant GSK. Still relatively small numbers right at the vanguard. They are bringing together their enormous supplier webs to work together.
When you get in to the detail, it is individuals that are working together of course. Operational middle management: energy managers, waste managers, factory managers, Health and Safety. All from different companies asking each other for insight and advice on whether to use a particular technology, or how to engage colleague, or build a business case. It’s the solving really practical problems together, that makes sustainable business happen.
"In one community of 300 companies, for example, we estimate they are generating over €100m of operational savings directly from these exchanges."
4. How do collaboration platforms like 2degrees create value for the companies involved and what are the tangible benefits?
Well if you think about it, if you bring together 1,000 plus engineers and managers involved in say food manufacturing from different companies; that's an extraordinary amount of experience and know-how. Normally that knowledge remains hidden, but collaboration platforms enable one company/one manager with a problem, to tap into that collective know-how to find someone who has already solved that particular problem.
The vast majority of problems that exist within a supply-base have already been solved by someone somewhere. It's just a matter of being able to connect up with the right people and persuade them to help you. In some of our programs 100,000s of exchanges of knowledge have taken place, identifying solutions on technical matters like waste water separation or how to build a business case for LED lights, or voltage optimisation.
And these sorts of exchanges have led to investments being made. In one community of 300 companies, for example, we estimate they are generating over €100m of operational savings directly from these exchanges.
5. Is 2degrees part of a new wave of collaboration platforms in sustainability and if so what other ones are in your opinion worth noting?
Yes 2degrees is one example of how digital technology is supporting a new wave of fully-linked collaboration. But some really interesting others are WeFarm which uses text message and mobiles to connect up small holder farmers in emerging economies to share know-how.
We partner with them on our Tea 2030 program and they claim to be connecting up approximately 50,000 farmers and growing fast. Another interesting business is EcoChain that uses a technology called Blockchain (the technology behind Bitcoin) to create real-time transparency in supply chains around CO2, water, materials etc. Those are my favourites.
6. What are the strategic implications of this new wave of collaboration?
I think what is really exciting is that these technologies are enabling really big problems to be solved by co-ordinating thousands of companies and making the most of their hidden capabilities. For instance, at the COP 21 talks in Paris, over 100 companies, including IKEA, Johnson & Johnson, Mars and Nike committed to powering their operations with 100% renewable energy by 2020 – supply base collaboration will be a key ingredient needed to makes this commitment a reality.
Helping suppliers face what is now inevitable, transition to becoming low carbon, sustainable businesses, represents a significant opportunity for large companies to cut costs and impacts, reduce risks and drive innovation across their supply-base. It provides an opportunity for Chief Procurement and Chief Supply-Chain Officers to transform their value-chains and generate a sustainable competitive advantage for their businesses.
The implications and possibilities of digitally enabled collaboration are very powerful indeed.