Supply chain collaboration has been around in one form or another for many years. However, recent developments suggest that momentum seems to be gathering. Could collaboration be the route to supply chain success?
The Cambridge English Dictionary defines collaboration as “when two or more people work together to create or achieve the same thing.” This has certainly been the case in the context of supply chain management where examples of collaboration include resource sharing schemes, product or research and development collaborations, industry forums, cluster developments, partnering and alliancing, to name but a few.
To get an idea of how collaboration works in practice, we talked with one of our clients, L3 Marine, a member of the power and propulsion sub-alliance to the Aircraft Carrier Alliance which is contracted to supply the two Queen Elizabeth Aircraft Carriers. The use of an alliancing structure for both the “prime” contract and relating sub-contracts is a very formal method of collaboration but we were interested to discover whether L3 Marine’s experience as a member of an alliance could give us an insight on how collaborations should work.
L3 Marine’s sub-alliance members are Thales, Converteam and Rolls Royce. Thales are members of the “main” alliance and therefore could be viewed as the prime contractor for the sub-alliance. The structure of the sub-alliance, formalised by way of a legal agreement, provides that the costs of the sub-alliance members are covered. However, the sub-alliance will make a profit only if the whole sub-alliance achieves key milestones.
Amanda Phelps, L3 Marine’s Commercial Manager, believes that the key to the alliancing relationship is adopting alliancing behaviours. She explained that, prior to the contract award, the sub-alliance members took part in a workshop where various scenarios were played out. They learnt that, in order for the alliance to work, the risk would need to be accepted jointly.
Following this watershed moment, the sub-alliance members developed and signed a charter which sets out the alliancing behaviours and actions that members agree to adopt.
Amanda explains that, when issues arise, open and honest meetings are held to deal with them. The key to successful resolution of such issues is a “cards on the table” approach which helps clear the air.
As there is a “no blame” culture, the focus then turns to developing an action plan. The lack of an adversarial ‘prime versus sub-contractor’ approach seems to be key here. In a non-collaborative contract, the parties involved are bound to find someone else to blame when things go wrong because the contractual risk is too great not to do so.
Whilst some of our more traditional legal brethren might disagree with a “no blame/no sue” culture, such as that adopted by this sub-alliance, many lawyers now have first hand experience of how alliancing or collaborative contracting can work.
The sub-alliance, as a whole, employed a law firm to prepare the Sub-Alliance Agreement and advise them as a group when issues arose during negotiation.
Whilst each sub-alliance member took their own legal advice, Amanda says that the sub-alliance would not have achieved such a robust contract without the involvement of a firm instructed by the sub-alliance itself. She goes on to say that the personalities of the two lawyers involved were very important to achieving the result. They understood the needs for a collaborative, non-adversarial approach to contract negotiation.
Regular communication between the sub-alliance members is taking place, both by way of formal meetings (the programme manages to meet fortnightly and the managing directors meet monthly), but also on day-to-day matters.
Colin Turner of Augusta Westland confirms that, in his experience, communication is vital to a successful commercial collaboration. The right relationships at all levels of the supply chain are crucial to the success of a project, no matter how big or small. The parties involved need to gain a greater understanding of how each other works and cooperate together to achieve key milestones. If openness and trust exist between the parties then any risks and issues can be openly discussed and they can be jointly addressed and proactively managed. Everybody benefits.
The ability for collaborations to have a positive impact on delivery times and cost to the customer and profit for the partners is clear. New forthcoming British Standard BS11000 seeks to support collaborative business partnering and is one of the ways in which a business of any size may establish an ethos of collaborative working. As we know, the SC21 programme has relationship management at its heart and goes a long way in supporting the BS11000 Framework, something that Colin Turner believes to be vital.
Methods of collaborative working continue to develop. But for some it will require a real paradigm shift. The benefits of this way of working may mean that collaboration is part of the answer to supply chain success.
For advice or more information, contact Kate Westbrook.
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