The Concept Of Collaborative Planning Commerce Essay


This study is designed to provide a deeper understanding of the concept of collaborative planning in supply chain. It provides systematic approach for firms to join a platform of collaborative planning to support each other to achieve a common goal. More specifically, the study is an effort to answer the following questions:

Q.1 Why should firms choose collaborative planning?

Q.2 How should firms integrate activities with trade partners?

Q3 What activities are required for implementation of collaborative planning?

By answering these questions, it will be possible to identify key factors on implementation issues for CPSC and discuss the advantages and disadvantages of the concept.

Aim and Objectives

The concept of supply chain management is used to integrate units of a firm or a group of firms efficiently. It is simply way to work together for common goal achievement such as profit boost, cost reduction or long term sustainability. The supply chain concept facilitates a win/win situation. However, the implementation success in not always the case as showing in an empirical study (Lummus & Vokurka, 1999), R. R. Reviewing the advantages and disadvantages of the concept boost motivation for proper implementation. This study aspires to bring update knowledge on the implementation of the concept.

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Supply chain collaboration needs to share knowledge, execute processes commonly with allied member of the chain. Working jointly develops an environment for interdependency. The following objectives have been set to understand the issues on the implementation of collaborative planning deeper so that a framework can be developed to aid companies in the process. More specifically this study aims to cover following objective.

To explore the concept of collaborative planning.

To assess the potential for supply chain efficiency and effectiveness.

To identify management requirements for collaborative planning in the supply chain.

To discuss issues and challenges of collaborative supply chain planning.

To propose a suitable framework at planning stage.

To present collaborative planning process in a case study.


Statements such as "today's business is increasingly 'boundary-less', meaning that internal functional barriers are being eroded in favour of horizontal process management and externally the separation between vendors, distributions, customers and the firm is gradually lessening" by Christopher, 1998 and collaboration to "leveraging benefits to achieve common goals" by Bowersox et al, 2000 are rationale behind the study. It is an attempt to provide guidance for concept implementation of collaborative planning in supply chains (CPSC). The concept has been appreciated; however, the practical implementation is still not realized up to the extent the supply chains synergy is theoretically evaluated. What are the fundamental requirements for successful CPSC? What would be right way to facilitate for collaboration? These two main questions would be base for the research and to find the right answer, a review of existing literature is being done. Business and information technology literature are specially focused in review to facilitate CPSC. The aspiration behind the research is the emerging new tools and techniques that are capable of helping achieve successful collaboration. As supply chain is itself an evolving concept so implementation of the concept might be experimental. Contrary to that, technological advancements have provided better scope to carry out in practice. This would be the right time to have another look to

find more for successful concept implementation of CPSC.

Back ground

Forrester was a pioneer in recognizing the supply chain concept. In 1958 he comprehended stating, "there will come general recognition of the advantage enjoyed by the pioneering management who have been the first to improve their understanding of the interrelationships between separate company functions and between the company and its markets, its industry, and the national economy"(Forrester, 1958). Two other consultants, Oliver and Webber, first pronounced the term Supply Chain Management (SCM) in the early by redefining interrelationships between companies. Since then, the concepts and tools of SCM have been studied in academy and implemented in the industry by practitioners. In general, the supply chain is considered as a sequence of material suppliers, production facilities, distribution services and customers that are linked together by flow of goods and information. (Towill at et 1992).

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Supply chain (SC) is also defined as; it "…is a network of organizations that are involved, through upstream and downstream linkages in the different processes and activities that produce value in the form of products and services in the hand of the ultimate consumer." (Christopher 1998, p. 15). Supply chain is the linkage of material, information and financial flows between two or more firms. The main purpose of the SCM is to coordinate material, information, and financial flows in an effective manner similar to inter-organization or intra-organization management (Halal et al, 1993).

The supply chain concept is around 50 years old. However, since 1990s, it has gained more importance when some companies reveal management technique. Companies concentrate on core specialization and join other partners for specialized low cost and high quality products or services. In this way, they observe better of all parties involved in. Secondly, use of internet and cheap transport gives customer more choice for better quality at lower price. Third reason, individual business unit cannot control price and quality of the product. As, as even single product are required to pass through a series of processes such as procurement, manufacturing, packaging, distribution etc. (Lummus & Vokurka, 1999). However, it is on going process to find appropriate way to implement best practice supply chain collaboration or relationship. The motive of the study is also to organise knowledge to minimize gap between expectation and practical achievement in supply chain implementation.

The importance of supply chain management has been growing with time as it allows to plan and to develop functions and procedures at different level of business transactions and support decisions at strategic, tactical and operational levels. Ultimately, supply chain management can support sustainable organization growth in increasingly competitive market. These days, no single organizational unit takes the sole responsibility for the competitiveness of products or services. In fact, products and services are the result of a number of functional efforts. Collaboration and coordination among supply chain members is important to result in a collective effort to sustainable in increasingly competitive market.

Collaboration within the supply chain aims to develop and design better flows of information and goods for an efficient and effective network support for partners (Poirier, C. C, & Reiter S. E, 1996). It is a way of working together within supply chains and supporting each other for a wide range of functions like product development, cost competitiveness and information sharing; resulting in improved customer satisfaction and in a strong hold for the firms in the market. The way of sharing information or co-ordination among firms within the value chain is called supply chain collaboration.

Collaboration could be between two firms or a series of firms. Firms may link through direct or indirect relationship with its suppliers; through different tiers. Coordination between business partners or supply chain collaboration provides a competitive advantage in today's highly competitive marketplace. 'Collaboration' is evident in concepts such as the extended enterprise and the virtual enterprise. Since early 1970s, market mechanism has been redesigning to improve competitiveness. It is the process of coordination, cooperation between internal and external operations and strategic decisions on what activities should be performed, and what activities should be performed by another firm that yields better output (Miles & Snow, 2007). That is a way to achieve specialization concentrating on core competence.

Collaborative planning is an approach that engages trading partners harmonizing, to sharing information and taking decisions jointly in order to improve efficiency. By sharing information on forecasts of consumer demand and especially of the effects of planned events such as new product launches, promotions and store openings, retailers and consumer goods suppliers can together plan for future production, stock and distribution requirements. Procedures for dealing with the exceptions to the forecasts that inevitably arise are also mutually agreed in advance in this case (Stadtler, H. & Kilger, C., 2005).

Collaborative planning provides the possibility to meet customer demands more effectively while at the same time reducing stock levels. It also results in cost reduction advantage in merchandising and logistics (Petersen et. al., 2005).

Application of the supply chain management (SCM) concepts and implementation of collaborative planning have yielded impressive improvement in the organization (Kenneth et al, 2005). Although there are examples of firms, where supply chain management implementation failed or did not produce the expected result (Boddy, D., 1998), success is strong believed within many professionals and academic scholars if the SCM concept is fully understood and properly planned and its consequences are anticipated. This project gives a comprehensive insight into the fundamentals of supply chain management and tools and techniques for collaborative planning.

Literature Review

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This chapter is dedicated to literature evaluation. According to study plan, main source of knowledge is based in theories available in journals, articles and books. This part of the study is divided in three major parts. Definitions and concepts are explored in first part. Second part gives models and initiatives of supply chain collaboration. Last part gives major requirement and issues for successful collaboration.


Supply Chain Collaboration

Supply chain Collaboration is defined as a: "process in which organizations exchange information, alter activities, share resources and enhance each others capacity for mutual benefit and a common purpose by sharing risks, responsibilities and rewards" (Huxham,1996). SCM helps global industries organise and synchronize their activities including strategic, tactical and operational decisions. Initially supply chain evolution focused on efficiency on operations carried out throughout the organization. In the second phase, along with efficient operation, intension shifted to effectiveness because giant firm start ruling with new ideas and expertise cooperation with their supplier and business partners (Miles & Snow, 2007).

Managing the supply chain has become more complicated and crucial for the companies. For example, a retail business depends on supply chains for its hundreds of supplier. An automobile company relies on complicated network of supply chain for its components and services require in vehicles making. Each item or component of supply has its role in profit, competition and company reputation.

A Supply chain can be defined as a network of facilities to deliver product or service to customer. It is similar to the extended enterprise as defined, a tightly coupled, highly integrated group of organisations where management issues are focused on ultimate target of the business such as customer relationship, sales chain and new product or business development. The virtual enterprise is a group of autonomous organizations cooperating to act as a single unit sharing common interests.

By 1960s & 1970s firms were realising the importance of a collaborative environment and of using technological advancement to focus on the ultimate target of business success such as improvement of customer service (Chou, 2004). During 1980s, interest in collaborative planning increased steadily when firms saw the benefits of collaboration (Lummus & Vokdurka, 1999). Supply chain collaboration is effective and efficient not only to reduce cost of the product but it gives sustainable competitive advantage to improve customer service, increase revenue, better utilization of the resource and allows firms to use the infrastructure better for sustainable business. Supply Chain Management Review and Computer Science Corporation (SCMR and CSC, 2004) carried out a survey and found the supply chain collaboration issues and importance around the businesses. It showed the collaboration has been gaining strategic importance however; it is not well-understood (Ganttorna et al, 2006).

In the competitive edge, neither an individual firm survives alone nor can it beat others. To over come tough time, firms need to find another way of survival and growth. Therefore, they support each other working in groups. Now, competitions are in between group of firms…a network of supply chain compete each other in this environment. The collaboration among multiple firms has been developing to offset other rivals collaborations (Christopher, 1992; Fine, 1998). The management of the supply chain has been considered as complex (Akkermans, et al, 2004) because the individual processes of the supply chain run and managed by separate firms. SCM has been extensively under examination by academia and professionals.

The basic of collaboration is sharing information among members of the supply chain. Information system technology have influenced on the evolution of supply chain management. As a result of technological advances, supply chain members' work in coordinated and co-operative environment to minimise cost and provide better service to customers, which ultimately gives return for every member of supply chain. Passing information of inventory, sales, demand forecast, order status, and production schedule to upstream/downstream of the chain has done this. Information sharing and utilizing IT infrastructure have improved management disperse members of supply chain (Hau, 2000).


Collaboration among firms gives the edge to respond customers efficiently. Four areas, efficient replenishment, efficient, promotion, efficient product introduction and efficient store assortment have been recognised by Efficient Consumer Response (ECR) Movement in 1992. Before the ECR concept, in 1980s, information sharing was introduced in supply chain for the collaboration purpose. However, since late 1990s, collaboration has become more promising for success in business. Common planning and synchronisation of activities & business process have been supported by collaboration (Jagdev & Thoben, 2001). The out-come of collaboration needs better co-ordination and frequent face-to-face meetings.

Several organizations such as Supply-Chain Council, Voluntary Inter-Industry Commerce Standards have taken initiative to guide industrial collaboration. Their attempt is to create a common understanding for various collaborations and to provide "best practices" in supply network and process design and accelerate the implementations of these practices by encapsulating their findings into process reference models.

To develop a complete sense of collaborative concept implementation, SCOR model provides a process overview or the "what", the CPFR business model describes "how" companies can implement collaborative processes as reviewed following (Noekkentved, C., Hedda, L., 2000).

Research Design and Data Collection

The purpose of the study is to present issues, tool, and techniques associated with collaborative planning in supply chain (CPSC) and propose a framework for collaborative development and improvement. The study presents basic concept supply chain concept as well as a collaborative environment to sustain in the market. Finally the framework is presented to design and develop which measures current position of the organization, assess its financial and product development. As a result, strategic decisions are taken for collaboration and its improvement. Traditionally, individual firm used to be responsible for supply and demand. Microeconomics theories would be enough to run efficiently in these circumstances. As traditional technique is not enough to achieve potential competitive advantage in recent market, so the field of supply chain management (SCM) has been rapidly progressing to give edge for organization. No more competition is limited among firms rather among supply chains.

SCM importance has been increasing during last decay however no specific research technique has been developed for SCM research. On the other side, it can be realised as a freedom of use any research method. The key characteristics of SCM are similar to other business functions. An operation research method has been applied here. However, what should be exactly research method for SCM? It cannot be answered here however this paper will be able provide a platform as a tool, a concept and a theory collection for supply chain collaborative planning. It is result of practical observation and academic theory synthesis. Observation is collection of information for the working environment. It is like a database of information being for improvement. It can be called Knowledge Base System.

Research Methods

The study is an empirical and theoretical investigation for collaborative planning in supply chains within real-business context. The literature on establishment of collaborative planning in supply chains emerges from both economic and behavioural theories. Three theories have been kept in mind to justify collaborative planning. Transaction cost analysis (TCA), which is on economic advantage based and two behavioural based, resource dependence view and relational exchange theory. Behavioural base Relational exchange theory that is base on.

Limitations of the Research Methods

Collaborative planning in supply chains needs in-depth background knowledge of theories and practical knowledge. Collaborative planning can be called as 'thinking' and implement in the field needs good command over operation management and decision-making. This research is complete in sense, it gives comprehensive knowledge of supply chain and how collaborative planning can be done. However it is not design to use as manual for collaborative planning. Shapiro, 2001 admitted the drawback of supply chain professionals as; they are neither pure operations experts nor pure IT personnel. Further studies should be carried out to show a full practical exposure of collaborative planning and real life implication.

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