A Closer Look at Supply Chain Market Innovations and Consortium Buying

There have been a lot of things changing in the Supply Chain chain space due to the pandemic and new-found importance of technology. On top of old measures such as quality and productivity, companies have started to shift their focus on digital transformation and increasing resiliency. 

Tom Kruse, the Global Head of the Supply Chain Collaboration at Corning, explains that as companies focus on resiliency in the Supply Chain during the Covid-19 pandemic, many increasingly look for innovative approaches. He extends that the concept of Supply Chain collaboration and consortium buying is a key trend that’s gaining traction. Kruse adds that companies with innovative Supply Chain organisations are taking the traditional concept of collaborating with customers and suppliers one step further by seeking out like-minded organizations across different industries and markets and to collaborate with them either formally or informally across multiple areas of the Supply Chain. 

But what exactly are SCM innovations? How did consortium buying come to be, and how does it work? How can SCM benefit from the two?

What are SCM innovations?

SCM innovations are critical for companies, regardless of the size. Essentially, supply chain innovation refers to the improvements implemented throughout the supply chain. These can include incremental or radical changes that apply to processes, services, and products. In most cases, SCM innovations are focused on differentiating the strategies through the use of technological solutions like artificial intelligence to provide the organisation with a more competitive advantage.

In a way, recent events have caused unprecedented disruptions, which have emphasised the value of innovations in the sector. For example, there has been an increase in the sophistication of data analytics. Through Big Data analytics, supply chain managers can derive crucial insights and information from large chunks of data, both unstructured and structured. Companies can also anticipate and address common SCM issues, such as transportation problems and equipment malfunction. 

Another example of a supply chain innovation is the use of Augmented Reality. It offers several applications including inspection and maintenance of SCM assets, optimisation of warehouse processes, and boosting workers’ efficiency and safety. With proper use of Augmented Reality, SCM organisations can benefit from the following: 

• Better inventory visibility
• Smoother remote collaborations between cross-functional teams
• Improved distribution and delivery

Other notable examples of supply chain management innovations include IoT, RFID and Geotagging, and On-demand Warehousing. Here are some quick stats and facts: 

• Increased use of IoT by up to 13.6 percent by 2022. Internet of Things or IoT provides organisations with the ability to monitor inventory and deliveries and automate stock reordering in real-time. It’s also projected to increase transparency in SCM.
• The cost of setting up RFID has significantly improved over the years. It’s no longer as costly and as complicated as before. It benefits companies by helping them save money on tracking their fleet. 
• On-demand warehousing is considered a part of the sharing economy. It allows organisations to save money on warehouse costing and warehouses to maximise the available square footage. 

Consortium buying and Supply Chain collaboration are also innovations used in the sector. However, unlike the rest of the examples enumerated above, they’re not as tech-focused. Instead, they rely on the sharing economy revolution. 

What is a Supply Chain Collaboration?

Thomasnet.com explains that the sharing economy is the new economy. The SCM industry has been undergoing massive changes to keep up with the transforming market and new demands. One of the key trends observed is supply chain collaboration. Essentially, SCM collaboration involves two or more organisations working together to reach shared or common goals. Ultimately, this discreet team-effort is done to reduce costs, improve customer service or boost performance. Some examples of companies that get involved in an SCM collaboration include:

• Retailers and wholesalers/manufacturers
• Manufacturers with procurement companies
• Material suppliers with logistic companies 

SCM collaboration is seen effective in delivering real value for the parties involved when executed correctly. Some key tips that can help ensure the success of the collaboration include the following: 

• Choose partners based on goals, value potential, and capability
• Create a robust system to measure performance
• Aim to build long-term inter-firm partnerships
• Invest resources in the right people and infrastructure  

What is consortium buying?

Consortium buying – or otherwise referred to as group purchasing – involves two or more organisations cooperating in purchasing goods/supplies. It plays a significant role in spend management, especially these days when companies have limited resources to work with. It’s a cost-efficient innovation that organisations from all over the world have started to adapt. InfoSys shares that consortium buying models can be created using three distinct methods, namely:

• Horizontal Buying – Those who participate in a horizontal group-buying generally do not compete with each other. This type is mostly a group purchasing of companies coming from different industries. 
• Vertical Buying – It’s a type of consortium buying from organisations within the same industry, which could sometimes result in steep competition between the participants. 
• Master Buyer – This type involves a single buying organisation which allows a specific number of companies to buy off supply agreement contracts with additional fees on top of the base cost.

Such collaboration between the companies often offers perks such as stronger bargaining power and lower purchasing price. It also offers other potential gains such as streamlining of processes, decreasing workload and gaining additional insights among the other members of the group.

Conclusion 

There’s much to expect from the SCM sector in terms of innovations, collaborations, and consortium buying trends. It would be great to see how technological advancements such as AI, Big Data and IoT and the growing interest in SCM collaboration and consortium buying reshape what we know today. 

In terms of consortium buying, the concept is relatively straightforward and the benefits can be clearly observed, however the process of setting up group purchasing takes some amount of work and knowledge. There are various organisations that specialize in consortium buying who can drive value to their partners. 

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Russell Harrison is the Executive Advisor at The Supply Advisory (a division of Datasearch Consulting), a leading executive recruitment firm specialising in Procurement & Supply Chain.

You can view the The Supply Advisory website or contact them directly at info@supplyadvisory.com for a more detailed discussion.