From Supply Chain ‘Egosystem’ to Ecosystem

By Pierfrancesco Manenti | October 01, 2021 | 1 Comment

Supply ChainBeyond Supply ChainSupply Chain Strategy, Leadership and Governance

Too many companies still think of “egosystem” when they say ecosystem. These enterprises focus on a set of partner interactions that is centered on driving value for itself — joint actions like improving lead times, cost, quality and visibility are often examples of improving one’s “egosystem,” rather than improving for mutual benefit.

So what is a “true” ecosystem and what is the potential business value? A supply chain ecosystem is a community of organizations that shares and combines capabilities and develops equitable relationships to generate and exchange value to all participants. The network of relationships within a supply chain ecosystem amplifies the common value, which is not proprietary to an individual participant but shared across all participants.

Deepening Relationship With Trading Partners

Although the majority of supply chains are already connected with some trading partners, the nature, breadth and extent of the connections today are often limited. The majority of supply chain organizations have established digital connections necessary to run their supply chain efficiently, linking with Tier 1 suppliers that directly serve their operations and with 3PL service providers that can move their products. However, connections with critical partners such as end customers or contract manufacturers are less common, while just a minority extends their ecosystem to Tier 2 suppliers or competitors and beyond.

A number of supply chain ecosystem models are emerging that can enable the creation of joint value: end-to-end supply chain efficiency, innovative customer services, preventing risk and increasing agility, fostering innovation and achieving a broader and higher purpose.

Today’s most common business driver to digitally connect with partners is aimed at creating a cost-efficient, optimized supply chain. Over the next three years, CSCOs are planning to change gears and exchange much more value out of their ecosystem of partners. Over 40% of CSCOs are planning to integrate the ecosystem of partners to increase agility, innovation and purpose. Right now, the most appealing driver for ecosystem creation is connecting with partners to manage risk and increase agility across the end-to-end supply chain. The interest for this ecosystem model stems from the essential need to secure supply chain capabilities in the aftermath of the 2020-21 COVID-19 pandemic and ahead of an increasing number of risk events, from global trade wars and tariff changes to intense climate change events.

Leading supply chain organization are already there:

  • Schneider Electric has developed a supply chain data platform as part of its end-to-end control tower transformation, which integrates its internal data with data from partner ecosystems. Multiple echelons of key suppliers, 3PLs and vendors, along with all factories and distribution centers, share their data in near-real-time. This way, Schneider Electric gets full visibility of the end-to-end supply chain, allowing the company to be more agile.
  • General Mills orchestrates an ecosystem of partners to realize its higher purpose of implementing regenerative agricultural practices on 1 million acres of farmland by 2030. This higher purpose can be only achieved through partnership with farmers. The company is using its scale, influence and funding to help farmers accelerate the adoption of regenerative agriculture, including investments in education, mentorship and peer networking.

The Depth of Value Exchange

Participating in an ecosystem means exchanging value across participants. The value exchanged for the most common ecosystem models is less critical. Connecting for efficiency requires sharing operational capabilities, such as production or transportation capacity. The value exchanged for connecting for service refers to products and services that partners combine to benefit end customers.

However, most advanced ecosystem models require the exchange of more critical values. To connect for risk and agility, partners must share risk information that might include suppliers’ risk scores, disruption predictions or market intelligence. Connecting for innovation requires sharing intellectual property, while connecting for higher purpose calls for the ecosystem to work toward a common purpose rather than an individualistic one.

Many organizations are hesitant to share these values as they are often considered a competitive differentiation. Traditional organizations tend to be protective of these kinds of values. However, the essence of participating in an ecosystem is to open up and exchange such values for mutual benefits. This traditional and protective view totally misses the opportunity of multiplying the effect of value exchanges through an ecosystem. As the saying goes: “The whole is greater than the sum of its parts.”

CSCOs must blaze a clear path as they set their strategy to create or participate in multiple supply chain ecosystem models. CSCOs shouldn’t try to develop all models altogether. Rather, they should assess the readiness of their organization to be willing to exchange that critical value with others. Success of an ecosystem directly depends on this readiness.

CSCOs should increase the understanding within the organization of the different ecosystem models by socializing the different values shared. They should overcome internal resistance to share critical and competitive value with the ecosystem by building a business case clarifying the value the ecosystem will provide.

We explore supply chain ecosystems and their business value in the September executive report (available to Gartner clients) and in the accompanying podcast, which is available on Spotify, Apple Podcasts and Google Podcasts.

Pier Manenti
VP Analyst
Gartner Supply Chain

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