Achieving Supply Chain Synergy By Thinking Differently

What if your supply chain could outperform even your wildest expectations? On this episode of the Chain Reaction Podcast, we uncover the secrets to achieving supply chain synergy, where collaboration among companies creates results far exceeding the sum of their individual parts. We dissect the concept into four crucial aspects—network synergy, collective value, harmony and orchestration, and collaboration—to show how aligning processes, optimizing inventory, and leveraging technology can bolster efficiency and resilience. Learn about the transformative role of mergers, acquisitions, and strategic partnerships with giants like 3PLs and Amazon Warehouse Services to streamline operations and effectively tackle supply chain challenges.

We don’t shy away from the hurdles either. Discover the vital role of technology in optimizing supply chain operations and facilitating effective collaborations. We tackle the complexities of integration, including process alignment, overcoming cultural mismatches, and ensuring transparent communication. Accurate demand forecasting and risk mitigation are crucial elements we highlight. By optimizing networks and fostering real-time information sharing, companies can achieve cost savings and improved customer satisfaction. To cap it off, we encourage you to brainstorm innovative strategies for gaining a competitive edge in supply chain management. Don’t forget to subscribe and share the podcast to stay ahead in the ever-evolving world of supply chains!

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Chapters

• 0:03 Achieving Synergy in Supply Chains
• 13:20 Overcoming Barriers to Achieving Synergy
• 23:16 Optimizing Supply Chain Advantage

Transcript

Tony Hines: 0:03

Hello, tony Hines, here You're listening to the Chain Reaction Podcast, all about supply chain advantage. Thanks for dropping by today. Great episode coming your way in just a few minutes. So stick around, stay tuned, find out more. Well, one and one make two. You'd think so, wouldn't you? Is that the case? Or can you get synergy, and can one and one synergise to three? Well, we're going to look at some of the numbers, what they mean and how things can change when we think about things differently. And it's all about thinking about things differently when it comes to managing your supply chain that we're going to talk about this week.

Tony Hines: 0:53

Synergy plays a crucial role in managing supply chains. It's the idea that combined values of multiple companies working together is greater than the sum of the parts that the individual contributions can make. And here are some key points about supply chain synergy. I'm going to look at four particular aspects of supply chain synergy. The first one is network synergy. Supply chains must achieve synergy across their end-to-end operations, and that means that hubs and links in the chain have to work together to benefit the entire network. So that's the first point. The second collective value. When old companies collaborate effectively, they create collective value, and this value results from their combined efforts, leading to better outcomes than if they were to operate independently. Thirdly, harmony and orchestration Supply chain partners should work together towards common objectives and they have to agree those and operate based on real-time information, and this ensures efficiency, effectiveness and resilience in today's complex supply chains. Now, when I said they have to work to common objectives, that's the harmony aspect, and using real-time information is the orchestration. And fourthly, collaboration. Despite its importance, collaboration amongst trading partners hasn't always been widespread. Initiatives often fail because they can't agree on determining how the value that's created in the supply chain should be distributed amongst the partners in that chain. To achieve supply chain synergy, organizations must focus on clear strategies, collaboration, technology adoption and risk management.

Tony Hines: 2:36

Now, when we speak about synergy, we're really talking about cooperation, because the definition of synergy is how we can achieve more by working with others than we can by working alone. If you search for the term synergy, you'll get various definitions. Synergy is defined as the interaction or cooperation of two or more organizations, substances or agents to produce a combined effect greater than the sum of their separate effects. And if you look for synonyms of synergy, you'll come up with words such as alliance, co-action, harmony, symbiosis and unity. The real message here is the whole is greater than the sum of the parts. In other words, when two or more people or organizations combine efforts, they can accomplish more than they could on their own separately. And so when we think of strategies that involve synergy, we're thinking about cooperative strategies, and that's what we're going to explain further how that can work in the supply chain.

Tony Hines: 3:43

Synergy refers to the combined power or effectiveness that arises when two or more elements work together. It's greater than the sum of their individual efforts. For instance, successful teamwork can result in productive synergy, and business mergers aim to achieve synergies for enhanced performance. What we're actually talking about here is creating value beyond the sum of individual components, and if we think about supply chain synergies, they can be achieved in a number of ways. They might be achieved through a merger and acquisition. As companies merge or one is taken over by another, their supply chains can be combined to create operational synergies, and supply chain executives play a pivotal role in delivering such synergies by identifying how they can happen and how value can increase, and this is often taken into account during due diligence and post-close phases of a merger or an acquisition. If you think about that in a little more detail. If one company takes over another, there might be duplications of supply chains between the two different companies, and those can obviously be thinned and merged in such a way as to achieve more value, better performance and reduce the cost of operating.

Tony Hines: 5:04

The supply chain Strategies play an important part in creating synergy. A clear supply chain strategy that helps align processes, systems and policies means that the supply chain can operate more efficiently and effectively, leading to synergy. Collaboration and communication between supply chain partners can enhance efficiency, the sharing of information, the coordinating of activities and, of course, aligning goals that contribute to synergy. Optimization of inventory and demand planning when you coordinate inventory levels and demand forecasts across the supply chain, you can minimize excess inventory, reduce stockouts, improve overall performance and, of course, optimize the supply chain and the way it works. And if you listen to my episode on inventory management, you'll perhaps see some ways that synergy can occur by listening to that particular episode.

Tony Hines: 6:06

And then, of course, one of the most important things you can do is leverage technology. For example, you might want to have better, advanced analytics to understand what's going on in the supply chain. You might want to employ artificial intelligence, you might want to automate and streamline processes to reduce cost and, of course, working in partnership with technology suppliers can actually help you to do that. So you gain synergy through an alliance or a partnership. I'm sure many companies, through processes such as working, say, with Amazon Warehouse Services, will have gained synergy for their own organisation because the oars part of the alliance will take away some of the problems that the individual company might have found very difficult to face on its own. And there are other examples of that, working with other kinds of companies, where maybe a 3PL or a 4PL organisation takes away some of the issues that an individual company would find difficult or even impossible to handle alone. So synergies is about alliances, cooperation and leverage lean and continuous improvement practices, optimise processes, eliminate waste and give possibilities for efficiency. Through synergies that can occur as you investigate the interaction of the various parts of the supply chain and improve those processes and practices.

Tony Hines: 7:39

Strengthening relationships with suppliers can also foster collaborations that reduce risk and enhance overall supply chain performance. Better supply relationship management is one way to achieve this, and you can also achieve better risk management and resilient supply chains by addressing risks. To build those resilient supply chains by working with others. To build those resilient supply chains by working with others, by cooperating, by exchanging information with partners in a supply chain, for example, to get advanced warning of what's happening in those different parts of the supply chain before they actually disrupt anything. So these are some examples of how synergistic strategies might be employed in your supply chain. So, to summarize, synergies and supply chains can be achieved by developing a clear supply chain strategy, fostering collaboration and communication, optimizing inventory and demand planning, embracing technology and automation, implementing lean and continuous improvement practices, enhancing supplier relationship management and embracing risk management and resilience.

Tony Hines: 8:52

If we look in detail at some examples of how Synergy works in practice, that might give you a different way to understand the impact of Synergy. And so, for example, when we have a merger of two companies, one company either merges or takes over another, and the supply chains will have to merge, not always because they can be run independently for a while until you get to know and understand where synergies can take place. But you can consolidate and become more effective, more efficient at what you do, by looking for ways to combine parts of the two supply chains to make them work better for the newly formed organisation, the merged organisation, and you might consolidate distribution centres, you might move distribution hubs around and delete some and keep only those that are already efficient and imbued with current technology automation. You might share transport networks, streamline procedures and get cost savings in that particular way. Or you might have operational efficiencies by relocating some of those hubs. You might decide, for example, not to go with any of the existing hubs but take the opportunity to delete one or two existing hubs and replace it with a new hub that has state-of-the-art facilities in a more optimized location. So there are various ways, through merger and acquisition processes, that that can happen.

Tony Hines: 10:24

And sometimes companies take over other companies for just those sorts of reasons. They may want to acquire a company because it has a very efficient logistics operation and that might suit the firm that's going for the takeover. They might only want that part of the company. They might want to take over a company because it has a very efficient distribution network, and so they're buying the distribution network and then they can merge their own operations into that distribution network and delete the existing distribution network that they've been working with. So there's lots of different ways in a merger or an acquisition where synergies can form part of the strategy and they might have been the original reason for the takeover.

Tony Hines: 11:12

In the first place, having clear supply chain strategies is key and it may be that you focus on particular aims that you want to achieve. It might be to optimize production, distribution and inventory management, and you'll focus down on how that can be achieved and decide that there might be collaborative arrangements that can replace existing arrangements to achieve that objective. For example, if you want to optimise production, you might decide not to produce everything yourself, but you might want to work with partners who can help take some of the strain and some of those parts of the production process that would reduce your cost and make the operation in total more efficient. You might find that you want to work with a warehousing partner who handles all the warehousing and perhaps some of the logistics function of the organization to smarten the distribution arrangements that you currently have, and through that synergistic strategy you'll be able to do that. You might also find you can manage inventory better than you do currently by working in partnership with technology companies who can give you better information to manage the inventory, perhaps achieving better demand forecasts, or working out and analysing the arrangements you already have in the supply network to serve particular geographical locations and switching strategy to work with partners in regions where synergy can be achieved, rather than having your own facilities there. Rather than having your own facilities there, you basically work with a partner who already knows the geographical areas.

Tony Hines: 13:20

Through that, cooperation and how to optimize your operation for efficiency and effectiveness are the key to achieving synergies through better strategy when it comes to working with supply chain partners and we talk about collaboration and communication strategies. Much of that is now happening using technology. We collaborate through technology and we communicate through technology, so our management systems become more critical to the way we work in partnership effectively, and we need data and transformative technologies that can give us information from that data faster so that we can make adjustments in the supply chain faster and mitigate risk, mitigate disruption and achieve our goals effectively. Working in partnership with technology companies who are able to supply the technologies to improve our collaboration and communication is one way to achieve synergy, and it might be a cheaper way or a less costly way to do so, because we can work with people who understand the technology, who develop the technology, who improve the technology, who keep on top of the technology without having to do that, but achieve the benefits from having access to that technology without necessarily making very large investments of our own, where things might not work out as well as they do with a company that specialises in those services.

Tony Hines: 14:54

Not everything goes smoothly when we think about formulating supply chain strategies to achieve synergy. There's integration complexity Merging two supply chains involves aligning processes, systems and organisational structures, and that isn't always as straightforward or easy as it might sound in a podcast such as this and complexity can lead to delays and inefficiencies in achieving the integration and, of course, leveraging the synergy. Second thing is there might also be cultural mismatches. Different organization cultures can create barriers for collaboration and communication, and it's sometimes very difficult to actually imbue a single culture over two merging organisations, for example, where one organisation might have done things very differently to the organisation that now has taken it over, and there might be resistance from the workforce and indeed even from the customers and suppliers of the other organisation. So it isn't always smooth and straightforward.

Tony Hines: 16:00

There might also be a lack of supply chain visibility. You might not be able to see into the partner networks as clearly as you want to, and that can be a real barrier to data visibility, data sharing and, of course, transparency in the network, and having that transparency across the networks is important. Communication might be difficult across different geographies, different languages, different functions, different stakeholders and, of course, miscommunications can occur, which lead to missed opportunities for synergies to take place. There might also be demand forecasting challenges. Accurate demand forecasts become complex when merging supply chains, and creating harmony in the forecasting methods is essential so that you can actually get a much clearer picture of what's happening in the supply chain. And only by having those accurate demand forecasts can you leverage the synergy across supply chains. Risk mitigation might also be difficult when disruptions occur, when there are particular supplier dependencies or if there's regulatory changes in different geographic regions, for example, which impact the overall effectiveness of the strategies you want to implement. And the final thing is standardised processes, policies and performance metrics across any merged supply chain can become strained, difficult and prevent the effective implementation of the strategy to create the synergies, again, that you want to achieve. So those are just some of the barriers that you might face, and you have to think about how you're going to overcome those as well.

Tony Hines: 17:47

So let's return to where we began the episode and we'll take it from there. Firstly, we looked at network synergy and what it means to have that synergy in a network A network, of course, such as a supply chain. Supply chains must achieve synergy across their end-to-end operations, and that means that hubs and links in the chain have to work together to benefit the entire network. So that's the first point. The second, collective value. When old companies collaborate effectively, they create collective value, and this value results from their combined efforts, leading to better outcomes than if they were to operate independently. Thirdly, harmony and orchestration. Supply chain partners should work together towards common objectives and they have to agree those and operate based on real-time information, and this ensures efficiency, effectiveness and resilience in today's complex supply chains.

Tony Hines: 18:47

Despite its importance, collaboration amongst trading partners hasn't always been widespread. Initiatives often fail because they can't agree on determining how the value that's created in the supply chain should be distributed amongst the partners in that chain. To achieve supply chain synergy, organisations must focus on clear strategies, collaboration, technology adoption and risk management. Synergy, of course, can be quite elusive, because if it was easy to find synergy, then everybody would be chasing after synergy as a solution to make their supply chains more efficient and effective. And, of course, synergy often comes about accidentally as much as it does through pursuit of a particular strategy. But if we could harness systematically that search for synergy and search out the opportunities that exist, then we might be more effective in putting together supply chains that serve customers better and, of course, do that more effectively and more efficiently, meaning that we save cost, generate more profit for the organisation and for the partners in the supply chain, as well as add value for customers. So here are some closing tips to achieve this synergy that we've talked about in this episode and its impact on your organisation, partners and customers.

Tony Hines: 20:15

Number one network optimisation. Ensure that all hubs and links in your supply chain work harmoniously from end to end. Synergy arises when it's combined with the value of multiple companies that exceeds the sum of their individual contributions, and the impact should be efficient and seamless flow of goods, reduced lead times and cost savings. Number two collaboration and synergy. Encourage all supply chain partners to collaborate for greater good of the entire network Can be easier said than done, but spending time to create shared understanding, shared objectives and identification of mutual benefits will drive that synergy process and the impact would be improved responsiveness, agility and customer satisfaction. Number three harmony and common goals. Foster alignment amongst the partners so that everybody can work together towards those common objectives, and synergy will be the result. It will, of course, enhance reliability, achieve better risk management and streamline processes.

Tony Hines: 21:25

Orchestration and real time information Operate with shared real time information and coordinate and synchronize the supply chain. The impact will be to reduce uncertainty, have faster decision making and, of course, create agility and adaptability. Fifth, value distribution Understand the value created by each partner and the impact should be trust, stronger partnerships and sustained collaboration. Sixth, strategic marketing and supply chain integration Align the marketing efforts with the supply chain execution. Synchronize demand and supply to generate and produce faster delivery for superior customer service and satisfaction. Seven strategic partnerships Collaborate with partners to leverage strengths, share resources and innovate. Innovation comes through continuous improvement. The impact increased efficiency, cost effectiveness and innovative solutions.

Tony Hines: 22:28

Remember that supply chain synergy doesn't just benefit your organisation, but it benefits your partners, your customers and it creates win-win scenarios that drive success in today's dynamic business environment. Well, there we have it. That's a wrap. Well, I hope you've enjoyed today's episode, thinking about Synergy and thinking about what you can do in your organization to achieve supply chain advantage through synergy. Can you somehow systemise synergy into the thinking process, into the acting process, into that partnership, collaborative process that generates the sort of things, the sort of advantages that we've been talking about in the episode.

Tony Hines: 23:16

Well, I hope you can find ways to do that, but certainly you can sit down with the team and think about and think through some of those ideas that have been mentioned in today's episode. So I look forward to seeing you in the next episode of the Chain Reaction Podcast, when we'll have a new episode for you to think about to create that supply chain advantage. Don't forget to subscribe to the podcast so you'll be first to know when the new episodes drop. And also, give us a like. Tell your colleagues and friends about the Chain Reaction podcast so that they, too, can share in some of the knowledge and learning that you've benefited from, and I hope you have a great week and a great year ahead. I'm tony hines. I'm signing off. Bye for now. Thank you.