Collaborative supply chain innovation

Breakthrough operational and supply chain innovations have traditionally remained siloed within individual companies—despite the clear benefits for all participants and the broader industry. A recent study by McKinsey & Company estimates that nearly $300 billion per year is invested in R&D related to supply chain innovation. Democratizing and platformization of these technologies will push the envelope in creating end-customer value, drive down costs linearly, create efficiencies, build a competitive moat, and unlock customer value by tapping into unmet demand. This approach also allows players the opportunity to influence and design future industry standards.

In this article I explore why to democratize technology, ways to execute such collaboration, and frameworks to keep in mind when deciding to platformize new technologies.

Democratizing supply chain innovation

Over a decade ago, Amazon began putting its years-long research to use in efficient inbound processing (license plate receive) technology. The goal was simple: reduce the number of touches required to process a shipment, lower inbound costs, and position inventory closer to customers. It built out a set of vision tunnels in the warehouse and compliance requirements for vendors. Successful implementation meant more inventory available for sale on the website sooner, at a lower cost, and at better conversion.

This technology worked well when Amazon controlled the entire process for its own retail inventory and worked with larger vendors. But things got more complex when it wanted to scale this for Fulfillment by Amazon (FBA), its marketplace seller inventory. Here, third-party sellers—not Amazon— were responsible for the cost of transportation and fulfillment. To succeed, sellers had to change their warehouse operations to explicitly provide the contents of each box. Sellers did not understand the value proposition initially and what the long-term value of complying with this requirement was.

To tackle this friction, and to extend the benefits of this efficient receive, Amazon engaged in seller education and a product strategy to make this easy to adopt. In the product path, it introduced a two-pronged approach: sellers were given the option and tools to efficiently inbound and receive and lower costs, or to pay additional fees (at what it would cost Amazon) if they wanted Amazon to handle their inventory. This was a direct reflection of Amazon’s guiding principle. Give partners tools to utilize the lowest cost of supply chain but give an option to opt out for a fee—make the tradeoffs clear. In this case, it was a smart, scalable example of how to platformize technology in a way that benefits everyone in the value chain. This, in turn, reduces the price the customer pays, thereby accelerating sales, scale or flywheel as Amazon would call it.

Approach to democratizing technology

Open platform approach. An open platform approach allows a company to open their technology to let other players in the value chain take advantage of this shared innovation for mutual benefit and create end-customer value. This helps reduce overall supply chain costs by:

• Spreading access to tools, infrastructure, and defining industry standards.
• Encouraging early adopters to join the ecosystem and build a group of advocates while not expecting significant investment from these adopters toward the technology.
• Increases platform stickiness, as it helps participants align their future growth with these new technology operations. It reinforces the value by improving warehouse and fulfillment operations through increased volume and consistency.

Shopify is a strong example of this open platform approach to supply chain technology. Instead of building a closed, vertically integrated system (as in the above instance with Amazon), Shopify developed the Shopify Fulfillment Network (SFN) and opened it up to independent merchants. It offers plug-and-play logistics services—storage, picking, packing, and shipping—through a network of 3PL partners. Developers can build on Shopify’s APIs to extend logistics capabilities even further. This reduces fulfillment complexity for small businesses, lets them scale faster, and lowers cost per unit through shared infrastructure. Shopify reduced costs up to 10% for its sellers, thereby reducing churn and retention on its platform.

Shared R&D approach.  In capital-intensive or fragmented industries, players often struggle to invest heavily in R&D on their own. One effective strategy is to collaborate and share R&D costs across multiple partners. in 2020, Toyota and Panasonic formed a joint venture called Prime Planet Energy & Solutions to develop prismatic lithium-ion batteries for electric vehicles (EVs). This helps by creating:

• Shared investment: Both companies invested in R&D, manufacturing, and IP—cutting costs and risks for each individually.
• Complementary capabilities: Toyota brought automotive expertise; Panasonic brought battery tech.
• Supply chain benefits: The collaboration aimed to secure a reliable and scalable battery supply chain, especially important as EV demand grew.

The shared R&D approach works well in transitional markets (like EVs), where innovation is fast-moving and cost-intensive. This collaboration allowed both companies to compete more effectively against larger players like Tesla, who have integrated R&D and supply chains.

Pitfalls to keep in mind

While there is a strong use case to democratize supply chain technology, there are a few pitfalls to watch out for. When not considered, it tends to make several or all players worse off than not adopting the new process or technology.

1. Low confidence in the technology or speculative benefits. Partners may hesitate if they perceive the technology as unproven or if the projected benefits seem overly optimistic.
2. Too many changes or moving parts in a short span that put a cognitive overload on the partners in the supply chain.
Rapid transitions can overwhelm partners, leading to mistakes and a resistance to change.
3. Lack of integration and alignment across systems and standards.
If partners are using disparate systems or have misaligned expectations regarding data security and process standards, it can lead to operational inefficiencies. Inconsistent data formats, incompatible technologies, or varied risk management protocols can negate the expected benefits of the innovation or have a long time-period to realize the benefits

In summary, by democratizing access to cutting-edge technologies, industry leaders amplify operational agility, create stickiness to the platform, and ultimately deliver better value to consumers and other players in the value chain— demonstrating how collaborative innovation can uplift the entire ecosystem—truly proving that a rising tide lifts all boats.

About the author:

Venkat Srinivasan leads last mile delivery platform technology teams at Walmart and has previously led critical supply chain products at Amazon.

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