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Transactional collaboration aims for the efficient and effective execution of transactions between partners. This isn t to say that transactional relationships between supply chain partners offer no strategic value. However, partners in a transactional relationship rarely focus on reducing supply chain management costs or increasing revenues. The focus is usually on improving the ease at which transactions are conducted for example, by eliminating the need for constant renegotiation. Transactional collaboration usually applies to customer-supplier relationships in which common or maintenance, repair, and overhaul (MRO) materials are purchased, and the decision to deal with a supplier is based mainly on price. With less strategically important supply chain partners, companies tend to focus on minimizing the effort associated with day-to-day transactions rather than on developing long-term relationships. Transactional relationships rarely require sophisticated information systems. Indeed, many companies involved in this type of relationship lack the systems and infrastructure needed to provide and
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CHAPTER 4 Core Discipline 4: Build the Right Collaborative Model
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respond to information electronically. Because of this, many transactions are manual. An example of a transactional relationship is any time a customer and a supplier agree to a set price for a specific product over a set period of time or until a certain purchase volume is reached. The buyer gets a fixed price over the life of the agreement in exchange for purchasing a minimum quantity of products; this also helps the seller s production planning. Transactional collaboration is the most basic and by far the most widely used collaboration model.
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Cooperative Collaboration
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Cooperative relationships have a higher level of information sharing. Supply chain Cooperative partners may provide automatic commit- relationships have a ments and confirmations or share information on forecasts, inventory availability, higher level of purchase orders, or order and delivery sta- information sharing. tus. Usually, one partner posts information that the other partner reviews and acts on a one-way communication in which data are sent either manually or electronically ( pushed ) from one partner to the other or published in a manner that s accessible by the recipient ( pulled ). In a cooperative collaboration, the type and format of data provided usually are standardized. While more sophisticated technologies are available, electronic data interchange (EDI) is the primary method of communication used today, through either a proprietary EDI network or the Internet. For companies without an EDI capability, Internet-based supplier portals or extranets are an excellent alternative. Most of these tools enable document and content management and include embedded workflows to automate the routing of documents, forms, and certain data and tasks.
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Coordinated Collaboration
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In a coordinated relationship, supply chain partners work more closely together and rely more on each other s capabilities. As such, a coordinated relationship requires a two-way flow of information between partners and tightly synchronized planning and execution processes. Because the infrastructure and processes needed to support this type of information sharing are more complex than in the cooperative model, coordinated collaboration usually is reserved for more strategically critical supply chain partners.
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Strategic Supply Chain Management
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Coordinated collaboration requires a high level of negotiation and compromise.
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Unlike transactional and cooperative relationships, coordinated collaboration requires a high level of negotiation and compromise. Given the more strategic nature of these partnerships and the high level of data sharing, proprietary systems are needed for exchanging information. Because of this complexity, a coordinated relationship requires a long-term commitment by both partners and is rarely undertaken lightly. Putting the required processes and tools in place takes time and money; the expectation is that both parties will benefit from the expected efficiencies created as part of the ongoing execution of the relationship. Vendor-managed inventory (VMI) programs are a commonly used method of coordinated collaboration. In a VMI relationship, the supplier is responsible for making sure that the customer never runs out of materials. While some VMI programs are manual the supplier walks through the customer s site to monitor inventory levels most programs in place today are automated. In some cases, the supplier can remotely manage inventory at the customer s site based on forecasts and usage. In other cases, the supplier uses current consumption rates and inventory levels to determine if more inventory is needed. In either case, effective data transmission is the key to successful VMI, a hallmark of coordinated collaboration.
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