Relationships, across supply chain

We have pointed out that information sharing along the supply chain is difficult for many reasons. Inside the walls of a single company, department boundaries are barriers. S OP is an effort to overcome this barrier. The barriers are no less difficult across companies. Also, the traditional arm s length relationship between buyer and seller makes many reluctant to share information. Technologically, the means to share can also be difficult. The system at the supplier may not talk to the system at the buyer. 

This chapter is the first of four that address our second supply chain task. Implementing Collaborative Relationships. This task encompasses the roles of players within the organization in improving supply chain functions. A subsequent section (Chapters 14-20) covers approaches for partnering with companies across the supply chain. 

The modified Kraljic matrix is a model that can help any firm determine how to evaluate, refine, and enhance its buying strategies and build the kind of longer-term relationships necessary to optimize supply chain management conditions. It can be modified to meet the actual needs and circumstances of any firm or market environment. When developed, it must include the participation of other functions and certainly should be worked out across business units to create the kind of consistent features that characterize leading procurement efforts. Soliciting the advice of a few friendly and trusted suppliers only improves the effectiveness of whatever matrix is implemented. 

The two main areas where this industrial sector can have a significant impact are in the use and recovery of these elements within their processes (Figure 5.1). For many elements, sustainable supply chains currently do not exist or are uncertain. A close relationship is required between extractors, manufacturers, users (pharmaceutical sector) and those involved in elemental recovery. Such strategic partnerships could help the pharmaceutical industry move towards a circular economic model. This will require significant investment in research and development, and better dialog across the whole elemental supply chain. 

Supply chain management by definition is about the management of relationships across complex networks of companies that, whilst legally independent, are in reality interdependent. Successful supply chains will be those that are governed by a constant search for win-win solutions based upon mutuality and trust. This is not a model of relationships that has typically prevailed in the past. It is one that will have to prevail in the future as supply chain competition becomes the norm. 

Underlying much of the cost of complexity in the supply chain is the Pareto Law (the so-called 80 20 rule). Vilfredo Pareto (1848-1923) was an Italian industrialist, sociologist, economist and philosopher. In 1909 he identified that 80 per cent of the total wealth of Italy was held by just 20 per cent of the population. Thus was born the 80 20 rule that has been found to hold across many aspects of social and economic life. In Chapter 2 it was suggested that an 80 20 relationship exists with regard to customers and products, i.e. typically 80 per cent of the profit derives from 20 per cent of the customer and likewise 80 per cent of the profit comes from just 20 per cent of the products. Generally this 80 20 relationship applies across most elements of the supply chain and is a key contributor to complexity and hence cost. 

The ability to see from one end of the pipeline to another is essential. It is important to be able to see the changes that are on the horizon both upstream and downstream. Information sharing provides a powerful platform on which to build collaborative working relationships across the supply chain. 

In the context of a supply chain, process decisions include transportation, contractual relations with suppliers, supplier monitoring, warehousing, distribution, and postponement. Process decisions also include service levels, delivery schedules (e.g., just-in-time), vehicle routing, and crew planning. Product characteristics that may affect these processes are the degree of commonality across components, the way in which the components interact with each other, and the type of the interfaces between the components. For example, supplier relationships, service levels, and delivery frequencies, are all impacted by the number and type of components a product is made of. 

To implement collaboration in a relationship, partners must agree on the purpose of collaboration and means of achieving it. Collaboration may necessitate certain changes in how the companies operate. It should be tailored to specific business processes such as, order placement, order fulfillment, logistics, and payment. Cisco Systems coordinated supply and demand across its supply chain with an intelligent-software for early detection of conflicts and their resolutions (Lee and Whang 2004). 

The types of supply chain activities that benefit from Web 2.0 include marketing and advertising collaborating and strengthening relationships with customers and suppliers information and knowledge transfer and networking for research. These activities may be classified as either internal such as communications within and across departments, or external such as communicating with customers, suppliers, and partners. 

Future studies can also examine the proposed relationships by incorporating some contextual variables into the model, such as organizational size and production systems. For example, it will be interesting to investigate how supply chain collaboration differs across organization size. It will also be interesting to examine the impact of production systems (e.g., make-to-order and make-to-stock) on supply chain collaboration and performance. 

In this study, composite measures are used to represent each construct, and only the construct-level stractural model is tested using LISREL. However, the nature of relationships among sub-constructs across different variables will be more interesting. For example, what components of collaborative culture have more impact on supply chain collaboration What differing roles of three components of lOS appropriation on supply chain collaboration What dimensions of supply chain collaboration has more impact on collaborative advantage By assessing these relationships at the sub-construct level, many alternative models can be explored and the findings will be more useful for decision makers. 

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