June 6, 2007
VICS Pushes the Collaboration Envelope
By Bill Bittner, President, BWH Consulting
The first day of the Uconnect 2007 Conference in Orlando, FL was dedicated to in-depth discussion and training on the various technologies and business practices that enable companies to thrive in the 21st century. While much of the discussion is oriented toward technology and how to make it work, Voluntary Interindustry Commerce Solutions Association (VICS) is a refreshing combination of practical business approach supported by the technology necessary to implement it.
VICS emphasizes a perspective of the supplier-manufacturer-retailer relationship that defines standard business processes which enable all the players to contribute. Shared forecasting and event planning techniques lead to collaborative store level execution. By agreeing on how they will work together, making plans for exception handling, and improving visibility through technical integration, VICS participants are able to minimize their operating costs and maximize revenues.
Much of the challenge with business integration has involved people, not technology. It has been difficult to convince traditional adversaries that they can all benefit from cooperation. But two factors are coming together at this time to make the benefits of cooperation clear.
First, transportation costs are making everyone sensitive to the wastefulness of “empty miles”. Suppliers, manufacturers and retailers are all feeling the impact of higher energy costs on their transportation budgets. An easy way to reduce transportation costs is to capture some revenue against the trips needed to reposition equipment. This has led businesses to use many of the VICS initiatives on transportation planning as a way to better allocate their resources and reduce the empty miles.
At the same time, the internet is ready to expand into network-based services. This makes online applications that are hosted by independent service providers available for integrating business processes across company borders. Service Oriented Architecture supports the development of business processes that can be offered on a subscription basis.
Discussion Questions: Can companies get over their traditional suspicions
and collaborate to reduce high transportation costs? Will new web-based technologies
make overall collaboration easier?
[Author’s commentary] I think this is a
perfect time for greater cooperation across the supply chain. Rising transportation
costs will make individual companies willing to share loads and improve back
haul utilization. Ultimately, this will lead to more service oriented technology
solutions that support communities of users collaborating on common needs.
VICS will finally get the participation it really deserves.
BrainTrust
Recent Discussions
Discussion Questions
Poll
Yes, collaboration will significantly increase as the transportation costs hit the bottom line. CEOs are meeting and discussing how they can work together to reduce transportation cost and increase service. Collaboration is already taking place among the wise. Transportation cost is not the only issue, however, there is a huge shortage of drivers.
Visibility tools will help the collaboration efforts and help maximize the transportation efforts to avoid dead hauling. There are many companies developing or using these tools.
Most retailers who want to reduce transportation costs traditionally use professional freight consolidators, rather than try to team up with other retailers and manufacturers directly. Some retailers use their trucks for backhauling their suppliers’ freight to their own distribution centers, but that’s the usual limit to inter-company cooperation. Freight consolidation and the related logistics network functions (trucking, ocean containers, etc.) are specialties in themselves, demanding years of experience, with constantly changing conditions.
You hit the nail on the head, Bill! — “suspicions” is the key issue. This is a great example of organizations’ Master Systems generating invalid information about their suppliers that becomes the basis for mistrust. In other words: organizations believe their mistaken assumptions about their business partners.
Our research over the last 40 years has shown the business organizations have not budged much in learning how to work openly and fairly with each other. Organizations’ Master Systems continue to generate a lot of information that says such things as “It is a dog-eat-dog world,” “I just KNOW they are making more than 30% on us,” and thousands of others. This is information that is untested, and in some instances, untestable; which means that it has a very high probability of being invalid. Naturally, as is always the case, organizations cannot see their own information processes that generate so much mis-information and so many errors.
So it boils down to this: business organizations do not see their own assumptions and prejudices, which means they continue to see evidence that supports those assumptions and prejudices, which strengthens them. This produces an ultra-stable environment based on invalid information. Interestingly, our research has shown that in not a single case has information of the usual type (seminars, conferences, books, articles, presentations, etc.) been able to change this ultra-stable status-quo. In other words, the data illuminates this whole problem, it indicates that it won’t change by doing the usual things, and it describes the different kinds of activities that effectively disrupt these patterns and facilitate significant change.
As a company that specializes in data integration, we see it happening already. It is true that companies are very suspicious of who they can trust, but when times get tough, we see companies align with unlikely partners. One area where we have seen this is with companies in the magazine and newspaper industries. Because of the internet, many of them have seen decreasing and flat sales over the years. In some cases we are seeing them consolidate efforts to reduce costs associated with shipping and distribution. As transportation costs continue to increase for other consumer goods manufacturers and distributors, it makes sense for them to partner with other companies.
Service oriented architectures are an option, but companies need to identify what is best for them and when. Internally we house data for many companies who leverage our database, hardware, data cleansing processes and reporting tools to avoid the costs related to doing it themselves. For other companies, it makes more sense to analyze logistics information internally where they can integrate it with their internal data (such as inventory returns, customer complaints, etc). Cost is only one factor in analyzing which transportation avenue is best for each company. If they are damaging product or getting products on the shelf late, those are also things to consider. Companies should partner with “like” companies that will have the same concerns with these issues. But again, the question remains, “Will they be able to trust each other?”
I’m more a fan of strong leadership than herd-like collaboration. One of my least favorite words is “consensus,” and a committee decision that worked out well eludes my radar screen. On the other hand, most if not all of the important social decisions in history were clearly driven by a single individual or geopolitical entity. Our innovators were/are usually rebels operating unilaterally.
That’s why I like Wal-Mart’s continued pressures on manufacturers to participate in innovative technologies. Left on their own, they might take more than thirty years to maximize the features of the simple barcode. (Oh, wait. They did that already.)
Those of us who have been involved in the brass-knuckle negotiations between suppliers and retailers know that the eventual solution for these events always favors the participant with the most power or the most powerful idea. It’s never, ever a consensus, and it’s never, ever a partnership. Behind closed doors, someone always emerges as the 400 lb. gorilla. Remember the so-called “merger” between Chrysler and Daimler-Benz?
The “empty miles” initiative rings of “backhaul,” a practice with which we’re all familiar but which has declined in the last couple of decades due to various regulations. Laws against hauling wet stuff in a dry trailer, hauling dry in the wet, hauling non-food in a food-oriented trailer, and hauling illegal aliens from the Mexican border without food, water, adequate ventilation, and bathroom facilities. (Oh, wait. They do that already.)
Web-based tools (never “solutions”) are super and getting super-er. I marvel at today’s applications and reflect on how “diverting” could have benefited from it. BTW, “diverting” was just another in a long list of situations illustrating how difficult it is to get suppliers and retailers to collaborate successfully.
In the end, suppliers and retailers look out for themselves first and consumers last. The alternative is their collective subscription to Rodney King’s kumbaya philosophy of “Why can’t we all just get along?” Which scenario do you think is more likely to prevail?
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Yes, collaboration will significantly increase as the transportation costs hit the bottom line. CEOs are meeting and discussing how they can work together to reduce transportation cost and increase service. Collaboration is already taking place among the wise. Transportation cost is not the only issue, however, there is a huge shortage of drivers.
Visibility tools will help the collaboration efforts and help maximize the transportation efforts to avoid dead hauling. There are many companies developing or using these tools.
Most retailers who want to reduce transportation costs traditionally use professional freight consolidators, rather than try to team up with other retailers and manufacturers directly. Some retailers use their trucks for backhauling their suppliers’ freight to their own distribution centers, but that’s the usual limit to inter-company cooperation. Freight consolidation and the related logistics network functions (trucking, ocean containers, etc.) are specialties in themselves, demanding years of experience, with constantly changing conditions.
You hit the nail on the head, Bill! — “suspicions” is the key issue. This is a great example of organizations’ Master Systems generating invalid information about their suppliers that becomes the basis for mistrust. In other words: organizations believe their mistaken assumptions about their business partners.
Our research over the last 40 years has shown the business organizations have not budged much in learning how to work openly and fairly with each other. Organizations’ Master Systems continue to generate a lot of information that says such things as “It is a dog-eat-dog world,” “I just KNOW they are making more than 30% on us,” and thousands of others. This is information that is untested, and in some instances, untestable; which means that it has a very high probability of being invalid. Naturally, as is always the case, organizations cannot see their own information processes that generate so much mis-information and so many errors.
So it boils down to this: business organizations do not see their own assumptions and prejudices, which means they continue to see evidence that supports those assumptions and prejudices, which strengthens them. This produces an ultra-stable environment based on invalid information. Interestingly, our research has shown that in not a single case has information of the usual type (seminars, conferences, books, articles, presentations, etc.) been able to change this ultra-stable status-quo. In other words, the data illuminates this whole problem, it indicates that it won’t change by doing the usual things, and it describes the different kinds of activities that effectively disrupt these patterns and facilitate significant change.
As a company that specializes in data integration, we see it happening already. It is true that companies are very suspicious of who they can trust, but when times get tough, we see companies align with unlikely partners. One area where we have seen this is with companies in the magazine and newspaper industries. Because of the internet, many of them have seen decreasing and flat sales over the years. In some cases we are seeing them consolidate efforts to reduce costs associated with shipping and distribution. As transportation costs continue to increase for other consumer goods manufacturers and distributors, it makes sense for them to partner with other companies.
Service oriented architectures are an option, but companies need to identify what is best for them and when. Internally we house data for many companies who leverage our database, hardware, data cleansing processes and reporting tools to avoid the costs related to doing it themselves. For other companies, it makes more sense to analyze logistics information internally where they can integrate it with their internal data (such as inventory returns, customer complaints, etc). Cost is only one factor in analyzing which transportation avenue is best for each company. If they are damaging product or getting products on the shelf late, those are also things to consider. Companies should partner with “like” companies that will have the same concerns with these issues. But again, the question remains, “Will they be able to trust each other?”
I’m more a fan of strong leadership than herd-like collaboration. One of my least favorite words is “consensus,” and a committee decision that worked out well eludes my radar screen. On the other hand, most if not all of the important social decisions in history were clearly driven by a single individual or geopolitical entity. Our innovators were/are usually rebels operating unilaterally.
That’s why I like Wal-Mart’s continued pressures on manufacturers to participate in innovative technologies. Left on their own, they might take more than thirty years to maximize the features of the simple barcode. (Oh, wait. They did that already.)
Those of us who have been involved in the brass-knuckle negotiations between suppliers and retailers know that the eventual solution for these events always favors the participant with the most power or the most powerful idea. It’s never, ever a consensus, and it’s never, ever a partnership. Behind closed doors, someone always emerges as the 400 lb. gorilla. Remember the so-called “merger” between Chrysler and Daimler-Benz?
The “empty miles” initiative rings of “backhaul,” a practice with which we’re all familiar but which has declined in the last couple of decades due to various regulations. Laws against hauling wet stuff in a dry trailer, hauling dry in the wet, hauling non-food in a food-oriented trailer, and hauling illegal aliens from the Mexican border without food, water, adequate ventilation, and bathroom facilities. (Oh, wait. They do that already.)
Web-based tools (never “solutions”) are super and getting super-er. I marvel at today’s applications and reflect on how “diverting” could have benefited from it. BTW, “diverting” was just another in a long list of situations illustrating how difficult it is to get suppliers and retailers to collaborate successfully.
In the end, suppliers and retailers look out for themselves first and consumers last. The alternative is their collective subscription to Rodney King’s kumbaya philosophy of “Why can’t we all just get along?” Which scenario do you think is more likely to prevail?