Collaboration and its impact on Supply Chain Dynamics

Headnote

Abstract

In the past decade companies have realized that although their focus on consumer satisfaction has been important in achieving in-house innovation, their competitiveness and profitability have not improved considerably. A primary reason for this is that independent inventory management decisions are made by supply chain partners. Businesses have now realized that collaboration among trading firms is a more effective process to deal with issues related to inventory management, as compared to the customary approach of shifting the load of inventories. This research demonstrates, through a dynamic simulation approach, the positive performance outcomes of collaboration such as increased sales, improved profits, reduced inventory levels, reduced lost sales and improved order fill rates.

Keywords

Collaboration, CPFR, Supply Chain Dynamics, Continuous Simulation

1. Introduction

In recent years companies have realized that cost reduction opportunities in manufacturing processes have diminished and thus there is a need to effectively manage respective supply chains to improve competitiveness and profitability in organizations. Managers in firms now understand that their actions can severely influence other partners in the value network. Integration and efficient organization of supply chains have become a necessity in order to increase consumer satisfaction. The major challenge ahead for companies is to change their focus from individual based improvements to inter-firm coordination [1].

There has been a paradigm shift in the traditional approach of delivering products based on uncertain demand projections resulting in unprecedented high levels of finished goods inventory in the different echelons. Under the new approach, companies have acknowledged the importance of closer coordination among members of a supply chain to deliver products on time, in exact quantities and with the desired quality. Supply chain collaboration is an approach that leads to increased information flows, lower level of uncertainty and ultimately more profitable and efficient supply chain [2].

2. Literature Review

Collaboration is a method of enhancing inter-enterprise as well as intra-enterprise synchronization of information that makes it a business imperative. It implies sharing of data, information, forecasts, and functions or mix of all the above with a goal of creating a win-win situation for all the members of a supply chain. It is not a novel business approach or a paradigm shift as companies at times have been exchanging information and product data with their...