May 6, 2009 | Demand chains
Two weeks ago, on coming to an agreement with a new client, sealed with a handshake, I indicated I would send him a letter that outlined our agreement. Pretty standard practice in my industry, but his response surprised me.
He asked ” do we need our agreement in writing because you do not trust me, or is it because you do not warrant my trust?”
Recovering from that was interesting, and it remined me that trust, emerging from the behaviour of the parties, is the basis of all successful demand chains.
Contracts codify expected behavior, and specify what is allowed, and what is not. By inference, if it is not stated as being banned, it is OK, and vice versa.
What does that do to the very basis of successful and mutually beneficial relationships: trust?
If you cannot trust someone, having a contract will not change that, it just outlines the basis on which the sanctions will be applied.
Apr 28, 2009 | Demand chains
Trust is often cited as the key in making relationships, personal or commercial work. What is sometimes poorly understood is that trust is an outcome of lots of other things, primary amongst them is truth, along with consideration of the others point of view, meeting others needs, and compatibility of objectives, to name just a few.
In relationships between businesses, there is the added complication that there are usually many people involved, and as businesses are inanimate, it comes down to the behavior of people.
Just as most of us were told as kids, telling the truth is sometimes difficult, but it is far easier than the alternative, and has lasting effects on the relationship.
Apr 24, 2009 | Demand chains, Marketing
The usual, and correct view of a supply chain is a number of competitors at each point in the chain competing to provide the goods and services necessary to send the goods along to the next stage. The classic is the Australian wool chain, where the agents compete to broker the wool, the scourers compete amongst themselves, as do the top-makers, weavers, and so on. This all takes a lot of time and energy, competing horizontally.
Well developed demand chains by contrast compete vertically. They are driven by demand, and each point in the chain works collaboratively with the others to best meet the customers need. Slowly, the competitive environment is altering, and competition at the point of sale is becoming a competition between competing supply chains, not just competing retailers.
The benefits of this type of activity are potentially huge.
Wool Connect, a group of wool producers has its wool in shops as socks after a couple of months, rather than a couple of years as would be the norm, and they know where the wool goes, and they get a premium for a premium product.
www.woolconnect.com
Apr 22, 2009 | Demand chains, Strategy
Interdependence drives successful collaboration, and collaborative arrangements never survive without clear areas of interdependence.
When individual collaborators judge their actions in the context of the best outcome for the group, rather than their own short term best interests, you have a collaboration that is sufficiently robust to survive and add value.
In other words, interdependence emerges when an individuals best interests are best served by serving the best interests of the collaboration.
Inevitably, this involves some sacrifice of independence, sometimes hard to do, but usually very profitable.
Apr 18, 2009 | Demand chains
In the past, those who held the information held the power, no longer is it so clear cut.
Now, we have so many options opened up to us that the sharing of information is the new power, as information attracts activity, as light attracts a moth.
This is a huge change in the competitive landscape that has occurred so quickly that many have yet to twig, and therein lies a wealth of opportunity to restructure demand chains based on the availability a and transparency of information, rather than its proprietary ownership or location.
Apr 14, 2009 | Demand chains
Most are familiar with the notion of supply chains, and describe them as assembling product, of some type, and moving it through a series of points where it often receives further investment in packaging and processing, to a customer of consumer.
Similarly, the concept of value chains is familiar, the emphasis being on the addition of the perceived value (usually again, packaging and the changing of the product form) at each point in the chain.
The notion of a demand chain changes the perspective of the chain 180 degrees, and seeks to define the whole chain in the terms of the end user, and what adds value to them. If some activity, or investment in the product does not add value to the end consumer of the product, why do it?
Most businesses, particularly in the agricultural sector where the food industry has its roots, produce stuff, and do it as well as they can, then look for someone to buy it, often an intermediary of some sort. This process repeats itself at each point in the chain.
How much better to start with the consumer, define their needs, and translate them back through the chain, with each point focussing on the end consumer as the reason to do, or not do, something. Voila, a demand chain!
