Supply Chain Collaboration Networks Foster Agility

Executive Overview

Configuring the right supply chain strategy that aligns with the organization’s objectives helps deliver more value to the customer and provides a competitive edge. An efficient supply chain must provide customers with goods and services when they want them, at a competitive price, while being consistent with the organization’s strategies. Today, geographical distance, adherence to regulations, and collaboration across extended supply chains are basic elements of global supply chains. The structure of the supply chain impacts the ability to respond to market fluctuations. Hence, collaborative relationships have emerged as a primary component of supply chain strategies.

The buzzword is collaboration between all stakeholders in the entire supply chain ecosystem. As supply chain industry analysts began to focus on the need for collaboration across an extended supply chain, the importance of network solutions became clear. Supply chain collaboration network (SCCN) solutions are garnering increased attention as a result.

ARC defines a supply chain collaboration network as a “collaborative solution for supply chain processes built on a public cloud – many-to-many architecture – which supports a community of trading partners and third-party data feeds. SCCN solutions provide supply chain visibility and analytics across an extended supply chain.” Many-to-many can also refer to many participants in a network accessing multiple sources of data critical to supply chain operations through a public cloud network.

Key findings include:

• Collaboration is crucial in supply chain operations.
• Supply chain collaboration networks (SCCN) provide flexibility and operational resilience.
• (SCCN) solutions provide visibility and analytics.
• SCCN solutions are a strategic necessity on the digital transformation journey.

Market Rebranding

ARC’s research shows the SCCN market is over $3 billion in size and is projected to grow at double digit rates for the next five years. How can such a large market, growing so fast, be largely unknown? Because it is not a new market at all, it involves a rebranding of markets that already exist.

SCCN is a new name for networked applications that were already in existence. The SCCN market is composed of EDI VANS, solutions that originally arose to support industry specific procurement in a marketplace environment, transportation management or other forms of collaborative supply chain applications based upon a public cloud architecture, real-time transportation visibility solutions, and interesting new solutions that can identify supply chain risks in near real time.

The Need for Rebranding

ARC combined these different solutions into a new market labeled “supply chain collaboration networks (SCCN)” as these different solution sets are all network solutions. Network solutions have distinctive advantages:

Onboarding and Communication Management: It can be time consuming and costly to integrate to trading partner systems. However, if a trading partner with products/services to sell is on a network, and a buyer of those products/services joins the network, the IT effort involved in facilitating collaboration between those two companies is greatly diminished.

Partner Management: Before doing business with a new trading partner, there are all sorts of things a buyer of products or services wants to know. Sellers on the network can enter this information and then give permission for other potential buyers of their products to see this information. This saves a seller time and can accelerate the speed with which two companies can do business.

Third-party Data: Industry and government data can be used to increase forecast accuracy. If this data is available on a network, accessing the data can be easier and less expensive. Similarly, third party information on the financial health of suppliers or information on supplier environmental, social and governance practices can be very helpful.

Network Analytics: A good example of this occurs with public cloud transportation management systems (TMS). In a TMS, a shipper tenders to a carrier for a lane. The carrier responds that they can take the load, or not, and the price of the move. A network built with the right permissions allows the lane information to be anonymized and aggregated. Shippers can know that the average price for a move on a lane is $X, and that the price they are getting puts them in the bottom 25 percent.

Collaborative System of Record: Some SCCN solutions can serve as the source of truth about a transaction that has occurred on the network. This eliminates “he said, she said” type arguments.

SCCN Applications and Digital Technologies

The supply chain operations reference (SCOR) model defines the key supply chain processes as Plan, Source, Make, Deliver, and Returns (in which we include traceability solutions). ARC believes risk assessment, which we will call “Risks,” should also be considered key. From an application perspective, the key SCCN applications are Source and Deliver. These two applications account for over three quarters of market revenues.

This is a fragmented market, with over 70 suppliers with a market share of less than 5 percent. While several of the established leaders in the market garner a large portion of their revenues from their EDI VANs, venture capital is flowing into emerging SCCN solutions, particularly in the Deliver application area, that rely on near real-time messaging.

In today’s disruptive world, companies need a flexible and adaptive integration platform to connect with trading partners and internal systems. For many companies, there are internal applications that they do not want to connect to any outside entity. SCCN solutions provide information that improves a variety of supply chain processes. The electronic exchange of information improves the quality of the data and the process. There can be good ROI for these solutions even when the messages exchanged, and partners involved in collaboration, are limited. But increasingly, SCCN is being used to improve supply chain agility. This requires connection to a greater number of partners and applications and a broader set of message types. Holistic integration capabilities also contribute to more complete information exchange and agility.

SCCN is seen as strategic as companies increasingly seek to transform their supply chain with digital technologies. “Digital” is a term that means different things to different people. To     some it just means automation. SCCN allows companies to use digital data in place of manually entered data, or even worse – no data, in the places in a supply chain where these information black holes exist. And in many companies’ supply chains, it is the end-to-end portion of the supply chain, knowing what upstream and downstream partners are doing and how well they are doing it, and     whether shipments to their facilities or their customers’ facilities will arrive on time, where there are the most impactful black holes. Filling these black holes in the end-to-end supply chain is where SCCN solutions excel. And ARC believes, this end-to-end digitalization is a more mature form of a digital transformation than many of the other ways companies think about “digital.” This form of digital transformation is critical to a company’s future success.

The focus right now is on gaining better visibility over the entire supply chain, “from the supplier’s supplier to the customer’s customer.” Visibility isn’t just about Tier 1 or Tier 2 suppliers anymore: it’s about the entire supply chain. As a component of digital transformation, these networks help shippers remain competitive, minimize risk, increase efficiency, reduce costs, and leverage new opportunities. Companies are using digital supply chain solutions to “comb” online publications, social media, and other sources to identify events that might disrupt a supply chain. Software vendors have stepped up and joined numerous companies in their quest to help shippers more proactively monitor and address supply chain-related issues.

SCCN Solutions for Traceability

Within the next few years regulations are likely to increase for companies involved in the production, processing, and distribution of agricultural commodities. President Biden signed an executive order on America’s Supply Chain in February 2021. In response, the U.S. Department of Agriculture is now seeking suggestions on how to improve and reimagine the food supply chain. ARC Advisory Services has done research on traceability. End-to-end traceability requires effective collaboration across the different parties. Networks have special features that support collaboration, traceability, and shipment visibility.

Table of Contents

• Executive Overview
• Market Rebranding
• SCCN Applications and Digital Technologies
• Impact of the Pandemic on Supply Chains
• Distinction Between Resilience and Agility
• Recommendations

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