Artificial intelligence (AI) and digital enhancements seem to be getting much of the attention in the manufacturing industry media. However, another game-changer is further advancing the industry by taking advantage of these two remarkable technologies. It’s called collaborative manufacturing, and the benefits it offers are becoming increasingly important for success in today’s manufacturing markets.
One thing needs to be clear – we are not talking about internal collaboration. That involves getting people and departments in your business to work together more efficiently and effectively, and that should be a given. Manufacturing collaboration is external. It’s a process of independent companies working together and sharing resources and capabilities to achieve goals they can’t achieve on their own.
External collaboration enables organizations to leverage the strengths of their collaboration partners. Shared resources and capabilities can range from technology, specialized knowledge, and market access to additional manpower and financial capital. If you’re willing to share the risks inherent in joint ventures, collaboration can help you tap into new markets by accelerating innovation through research development partnerships or strategic alliances.
The most common forms of external collaborations are strategic and transactional. Strategic collaborations are typically long-term and focused on the partners’ high-level strategies and objectives. Transactional collaborations generally aim for short-term operational goals driven by immediate business needs.
Why Small to Mid-Size (SMB) Manufacturers Need Collaboration
Compared to large companies, most SMBs have limited resources, which can impair their ability to grow the business. Large companies also have the advantage of being able to exert influence on their supply chains.
Collaborating with customers, suppliers, software developers, product designers, engineers, machine builders, and other industry related businesses enables manufacturers to co-design and co-create their business manufacturing processes and the products that result from them. Manufacturers can also gain access to new markets by creating industry alliances with other companies at the same supply chain level.
From an organizational learning perspective, manufacturing collaboration exposes companies to new perspectives, practices, and business cultures. This joint collaborative effort, knowledge exchange, and communication from many different sources improves the competitiveness of manufacturers by increasing operational efficiency and customer responsiveness.
Benefits of Collaborative Manufacturing
The benefits of collaborative manufacturing are many. Some of the most impactful include:
- Wider geographic support. Collaborating with external organizations in areas where you want to do business can result in a partner with more resources, who works on local time, and has a strong rapport with local customers. If you have overseas offices, partnering with companies in those areas can reduce supply chain costs.
- Less time to market, faster delivery. One way to reduce time to market and delivery problems is to have an international partner who can diminish or eliminate shipping requirements. Decreasing the effort needed to produce your products reduces time to market and facilitates faster delivery.
- New opportunities. Exploring new markets and developing new products can be a costly proposition. A trustworthy partnership can overcome many of the obstacles and reduce the risk by producing most of the local work as a subsidiary.
- Access to resources. One of the most valuable advantages of external collaboration is gaining access to new resources and technologies your business doesn’t have. However, don’t expect every potential partner to share their resources, systems, and methods, especially if they involve trade secrets.
- Better quality. Collaborative partnerships can significantly improve product quality and services by sharing resources, best practices, and new ideas. For example, Ford Motor Company shared its sustainability best practices with its suppliers, motivating them to take action and reduce their environmental footprints.
- Enhanced reputations. When one collaborative partner experiences a positive increase in their reputation and success, it usually translates to the other partner as well. Developing your brand in your partner company’s region builds your reputation and support for your business.
7 Steps to Successful Collaboration
Manufacturing collaboration needs to be approached with a well-defined strategy, trusting relationships, and open communication between partners.
- Select external stakeholders that fit with your collaboration. External stakeholders are individuals or organizations outside your company who have an interest in your organization’s decisions and activities. These can range from customers, suppliers, and competitors to regulators, investors, and industry groups.
- Define the collaborative structure based on your goals. External collaborations can be structured for the short-term and focused on an exchange, or for the long-term with more strategic objectives. It’s important to understand, however, that the structural collaborative practices within your business may not translate to external collaboration.
- Create formal documents to establish structure and protections. Detailed agreements are essential for aligning the scope of the partnership and protecting against unexpected surprises. These documents should include:
- Memorandums of understanding that delineate common ground and intentions to collaborate.
- Contracts to govern the project’s scope, deliverables, timelines and payment schedules.
- Non-disclosure agreements to protect the confidentiality of proprietary information for both partners.
- Statements of work that define specific services, responsibilities and acceptance criteria for contracted work.
- Service level agreements that contain service quality and performance standards the provider must meet.
- Documents can also include investment agreements, licensing contracts, joint venture terms, and other agreements in the interest of both partners.
- Implement external collaboration best practices. These best practices will build a solid foundation for your collaborative partnership:
- Establish straightforward objectives and success metrics upfront.
- Clearly define roles and responsibilities.
- Build trust with open communication between partners.
- Use external collaboration tools to organize information sharing.
- Create project plans that include timelines, dependencies, risks, and mitigation plans.
- Implement strong data security protections.
- Adhere to required regulatory compliance.
- Promote an environment of equal partnership.
- Respect cultural differences between partners.
- Regularly assess progress and gather feedback for process improvements.
- Take the collaboration one phase at a time. Trying to complete too much at once is a sure way to derail an otherwise workable collaboration. Address these phases in order:
- Initial discussions facilitated by third-party advisors.
- Evaluate risks, compliance factors, and organizational fit.
- Define project scope and objectives.
- Draft and negotiate agreements.
- Onboarding and integration.
- Execution of the plan.
- Monitoring and compliance management.
- Renewal, expansion or exit.
- Remember – open communication and building trust throughout each phase will drive positive external collaborations.
- Evaluate external collaboration tools. Collaboration software tools help align activities by centralizing communication and the flow of information. These tools can range from secure file sharing, project management, and permissions control to dashboards, chat and messaging software, and mobility tools to support collaboration from anywhere.
- Next steps. Assuming your initial manufacturing collaboration is successful, the next step is continuing to grow your organization’s external collaboration competencies. Assess current projects to determine which could benefit from new or expanded initiatives with external stakeholders. Then seek out collaborations that would drive innovation by merging complementary capabilities that exceed your current ability to implement them.
A Collaboration You Don’t Want to Miss
Smart manufacturers grow their companies with continuous improvement of their ERP skills. One of the most valuable collaborations occurs when their ERP provider hosts yearly on-site user conferences for their customers. These typically provide excellent networking opportunities with other ERP users in your industry.
The Future of Collaborative Manufacturing
Collaborative manufacturing has huge potential, but as a relative newcomer to the industry it also faces many challenges. External collaboration can be an uncertain process for manufacturers, and often needs new business models to promote the sharing of benefits. It relies on strict regulations to define and manage the rules of the partnership. Perhaps most important, it involves major changes that require new skills and often a shift in organizational culture.
Yet, the benefits of collaborative partnerships are becoming increasingly necessary to succeed in today’s global manufacturing markets. The continuing advances in data-driven technologies encourage further collaboration by making it easier to share insights with external partners. And as manufacturing continues to expand around the globe, partnerships will take on an increasingly important role. Ultimately, the future of manufacturing will be shaped by collaborative efforts. Is collaborative manufacturing right for you?