Prof. Jack van der Veen is professor of Supply Chain Management at Nyenrode Business University. He set aside 1.5 hours of his time for Yellowstar to explore the subject with us. This is part 2: "The logic of chain collaboration is obvious. So what's holding companies back?"
How do you view the current state of chain collaboration?
“In general, the result of collaboration is to enable companies to operate faster, better, cheaper, more sustainably and more innovatively. On top of that, it's more fun, too. With the help of IT, by working together you create a transparent chain, without unnecessary intermediate links. Hiccups and bottlenecks in the supply chain disappear. Reliability increases, error rates decrease and customer satisfaction rises. In short, why wouldn’t companies operate in this way? A revealing experience for me years ago was a lecture on chain cooperation that I gave to the top managers of Dutch logistics companies. Most were self-made men in their sixties who had made it and whom one can only admire. To put it succinctly, their response to my account was that they had already successfully weathered so many storms that they saw no reason to change. However, if you ask the next generation, the fortysomethings eager to take over, their perspective is very different."
Beer distribution game illustrates importance of transparency
“We regularly play the ‘beer distribution game’ with business representatives at Nyenrode: we get four players around a table and task them with supplying the customer with beer in the most effective way. Each player represents one link in the chain and manages its own inventory: from factory through distributor and wholesaler to end customer. Each link then processes the incoming orders. At a certain point in the game, player x decides to order more than they actually need due to dwindling stocks, creating a bullwhip effect. The next link sees that increased demand and adds a little more on top, just in case. Before long, things get totally out of hand. Everyone responds to the demand they experience, whereas actual demand varies only modestly. It's all self-created variability. The core of the solution is information sharing! Transparency removes the variability. Digitisation eliminates bullwhip effects and chaos in the chain. Anyone who has played the bear distribution game will never forget it.
What do you think needs to happen to really move chain collaboration forwards?
"Before companies can learn, they will first have to unlearn. That's very difficult. Thinking and acting differently – through collaboration with chain partners – is a huge change for companies. What I am afraid of is that new generations who are keen to embrace that change will not get the opportunity because they have to start “at the bottom”. And because they can see that the old systems the organisation is using are no longer working, they give up. The logic of chain collaboration is obvious. The point is how you can actually bring about the required change. It's all about the three A’s: Awareness that the world is changing, Acceptance that you as an organisation, as a professional, as an executive therefore need to do things differently and, only then, Action, where you as a company actually get moving and start taking concrete steps."
How do you see those three A's developing?
“Awareness is fortunately increasing. Companies see competitors taking action and don't want to be left behind. Psychologically, that is an important trigger. I often use the metaphor of the fat smoker. The awareness that being overweight and smoking is unwise is absolutely there. But does the fat smoker accept that action is needed? After all, "Grandpa smoked like a chimney and he lived to be 85". The best trigger for actual change is if those closest to the fat smoker hold him to account for his behaviour. "Dad, you’re smoking again – isn’t that going to kill you?" Until that happens, nothing will change. A person's environment is an important determinant for taking action. That’s why I believe there is movement with regard to chain collaboration. The upper stratum that is taking action is getting bigger and bigger, the stratum that is doing nothing at all is getting smaller and smaller. That group of stragglers is slowly dying out."
Do you have any examples?
“The logistics industry body in the Netherlands evofenedex includes a group called 'supply changers’, which now numbers more than a hundred companies that meet regularly. At Nyenrode, we have a similar initiative – SCELP (Supply Chain Excellence Leadership Platform) – made up of supply chain directors and the like. They are platforms to discuss current developments and share best practices in the areas of talent/staffing, strategy, digitisation and sustainability. In this way, you share dilemmas, best practices and concrete tools and give each other a helping hand."
This interview with Professor Jack van der Veen is part of a series of three. Read part 1 "Everything starts with vision" here.