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Supply chain
collaboration
237
R. Glenn Richey
Department of Management and Marketing, The University of
Alabama,Tuscaloosa, Alabama, USA
Abstract
Purpose Collaboration has been referred to as the driving force behind effective supply chain
management and may be the ultimate core capability. However, there is a fairly widespread belief that
few firms have truly capitalized on its potential. A study was undertaken to assess the current level of
supply chain collaboration and identify best practice.
Design/methodology/approach Supply chain executives provided insights into collaboration.
Survey data, personal interviews, and a review of the collaboration literature were used to develop a
conceptual model profiling behavior, culture, and relational interactions associated with successful
collaboration.
Findings Positive collaboration-related outcomes include enhancements to efficiency, effectiveness,
and market positions for the respondents firms.
Research limitations/implications The small sample size represents a limitation, but is
balanced by the quality of the respondent base and their expertise/experience. Another limitation
involves securing input from only one party to the collaborative relationships. Developing a
longitudinal study would help determine how collaboration-related factors and relationships change
over time.
Practical implications Several respondents mentioned a blurring of lines between
organizations contrasted to an us vs them approach. This was expressed in a number of different
ways treating the arrangements as if they both were part of the same operation, treating them as
co-owned, and employing a new focus on the best common solution. Many of the respondents
indicating rewards are not distributed evenly still admitted they get enough out of the collaborative
arrangements to make it worthwhile.
Originality/value Real-world practical experiences are recounted involving many of todays top
companies.
Keywords Supply chain management, Partnership, Resource efficiency
Paper type Research paper
Collaboration is one of the most talked about topics in business today (Barratt, 2004;
Bowersox et al., 2003). Collaboration is defined as two or more companies sharing the
responsibility of exchanging common planning, management, execution, and
performance measurement information (Anthony, 2000). The general idea is that
much can be gained from collaborating with supply chain partners. Collaboration has
been referred to as the driving force behind effective supply chain management (Ellram
and Cooper, 1990; Horvath, 2001) and, as such, may be considered the ultimate core
capability (Sanders and Premus, 2005). However, theres also fairly widespread belief
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that few firms have truly capitalized on the potential of collaboration (Barratt, 2003;
Crum and Palmatier, 2004). Managers may talk about collaboration and its potential
benefits as if it were part of their organizations value structure, yet it seems that few
companies are actually engaged in the level of integration that collaboration suggests
(Fawcett and Magnan, 2004). Sabath and Fontanella (2002, p. 24) summed it up:
Collaboration arguably has the most disappointing track record of the various supply
chain management strategies introduced to date. Supply chain collaboration seems to
have great potential, but further investigation is needed to understand its practical
value.
In order to gain greater insights in the area, a study was undertaken to examine
supply chain collaboration through a qualitative research approach. The study makes
important contributions by:
.
presenting data from an executive panel of top industrial companies;
.
utilizing an in-depth look at practitioners perspectives on collaboration as a
foundation; and
.
developing a conceptual model of collaboration based upon the executive
panel input as well as a synthesis of previous literature-based studies.
The qualitative approach yielded valuable insights. Data obtained from the panel
companies provided broader knowledge than would be obtained in a case study and
deeper insights than typical quantitative studies.
In the following sections, relevant literature is reviewed, the research background
and methodology are discussed, and the proposed model of supply chain collaboration
is introduced. This is followed by a discussion of the research findings, managerial
implications, and conclusion and research limitations.
Literature review
Collaboration has been widely examined in recent years across disciplines including
sociology (Powell et al., 2005), psychology (Stern and Hicks, 2000; Konczak, 2001),
marketing (Gadde et al., 2003; Jap, 1999, 2001; Perks, 2000), management (Cross et al.,
2002; Sawhney, 2002; Singh and Mitchell, 2005), and supply chain management
(Holweg et al., 2005; Tuominen, 2004). The current research examined collaboration
within a supply chain context.
The fundamental rationale behind collaboration is that a single company cannot
successfully compete by itself. Customers are more demanding; competition is
escalating (Kotler, 1997). Thus many firms seek to coordinate cross-firm activities and
work reciprocally over time to produce superior performance (Anderson and Narus,
1990; Stern and Reeve, 1980). Firms enter into interfirm collaborative arrangements in
order to share risks and rewards. The objective is to secure higher performance than
would be achieved by operating individually (Lambert et al., 1999).
The marketing channels literature has frequently examined the phenomenon of
ongoing relationships and the efficiency of these relationships through a relationship
marketing perspective (Sin et al., 2005). Relationship marketing is characterized by
reciprocal, interdependent, and long-term relationships. Included in this perspective
are questions related to the interaction of organizations (e.g. buyers and sellers), how
they cooperate and communicate, how they develop trust, and how organizations
mutually develop the types of governance structures that contribute to efficiency.
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Supply chain efficiency measured in reduced inventory and cost savings (Sabath
and Fontanella, 2002; Stank et al., 1999); and
Supply chain effectiveness including improvements in customer responsiveness
(Sabath and Fontanella, 2002) and better access to target market segments
(McCarthy and Golicic, 2002).
Firms engage in collaboration to develop, maintain, and even enhance supply chain
capabilities that contribute to enhancing firm performance and, ultimately, competitive
advantage (Hardy et al., 2003).
Research background and methodology
Much of the published work relating to supply chain collaboration and collaborative
relationships focuses on formation/set-up of the arrangements, roles and
responsibilities, and guidelines for their operation (Manrodt and Fitzgerald, 2001).
There has also been a focus on case histories of specific collaborative ventures
(Batenburg and Rutten, 2003; Ellram and Edis, 1996; Esper and Williams, 2003; Lambe
et al., 2002).
An in-depth qualitative analysis approach was used to further develop the body of
knowledge on supply chain collaboration. Qualitative analysis methods are gaining
ground in logistics/supply chain management research (Lambert et al., 2004; Rogers
et al., 2004; Christopher and Peck, 2004; Payne and Peters, 2004; Lemke et al., 2003;
Pfohl and Buse, 2000). The purpose of the current study is to confirm and/or expand
previous research findings. This will be accomplished by means of an integrative
model of supply chain collaboration. Qualitative interviews with management
executives and panel survey data provide the foundation of this model. The current
study is based on practitioner views of supply chain collaboration and, as such, reflects
the current state of supply chain collaboration practice.
A survey was developed following a review of the literature and exploratory
interviews with key business people. The survey relied primarily upon open-ended
questions to explore respondents views on collaboration. Each respondent was asked
to select a collaborative relationship believed to be the most important to his/her
companys future success. The survey was e-mailed to 100 members of the Council of
Supply Chain Management Professionals, who are also members of The University of
Oklahoma Logistics/Supply Chain Executive Panel. The majority of respondents held
Director-level or higher positions (Vice President, etc.) within their firms. Job titles
indicated direct involvement in logistics and supply chain operations.
A total of 62 completed surveys were received (62 percent response rate). Of those,
seven respondents indicated their firms did not have a collaborative relationship with a
trading partner. The remaining 55 firms those indicating they do have a
collaborative relationship with one or more trading partners were used for analysis
purposes. The Appendix provides a list of 52 respondent companies; three surveys
were returned anonymously. The 55 respondent firms included 29 manufacturers,
11 third-party logistics firms, 5 retailers, and 10 other types of firms. The annual firm
sales ranged from a minimum of $30 million to a maximum of $28 billion with average
annual firm sales of $4.4 billion. The respondent firms averaged 16,095 employees and
ranged from 85 employees to 110,000 employees. Following receipt of the completed
survey, selected respondents were contacted and asked to participate in follow-up
in-depth interviews to gain further insights into their collaborative experiences. The
information obtained during those interviews has been used to supplement the basic
survey data and is incorporated into the research analysis.
A qualitative analysis method was utilized for data analysis and subsequent
development of a conceptual model of supply chain collaboration (Silverman, 2000).
Throughout the iterative and time-intensive data analysis process, four of the seven
co-authors served as coders to identify codes (i.e. reoccurring words, concepts, or
ideas); integrate them into categories according to emergent, common properties; and
develop a cause-and-effect model of collaboration. The analysis process started with
coding five sample transcripts in a joint session to develop a common coding procedure
and to reach agreement on a single codebook with common codes and categories. Then,
the coders coded the data independently in the four rounds of the reiterating data
analysis process. Coding differences were reconciled through negotiations among the
coders until they reached inter-coder agreements; the lead author performed the
mediating role. The inter-coder reliability was assessed by calculating the simple
percentage of the agreement among coders in four different rounds. The repeated
coding-recoding process helped achieve the highest possible degree of post-negotiation
inter-coder reliability (perfect consensus) as well as internal validity (a proper
understanding of the phenomenon) (Carter and Ellram, 2003). The inter-coder
reliability showed 87.10 percent in the first round, 94.19 percent in the second round,
and 98.39 percent in the third round until consensus was reached in the fourth round.
Supply chain
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Figure 1.
A conceptual model of
supply chain collaboration
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was ongoing, long-term interactions built on mutual trust and commitment. One
respondent likened a collaborative relationship to a work-in-progress:
Supply chain
collaboration
Weve executed an evergreen business contract that assumes our relationship will be ongoing
in order to eliminate the need to annually review and rewrite the entire agreement.
Several respondents noted that mutual trust can provide a foundation between
collaborative partners and can lead to sharing of critical market-based data. However,
building trust is not easy. Trust between partners must be earned. One respondent
defined the requirements: trust comes only after the other party proves its abilities to
offer solutions and also demonstrates loyalty. Another respondent expressed this issue
stating:
We have entrusted our supplier with our most sensitive internal operations, which is the
hardest step in the collaborative relationship.
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They share with us their movement and we use our market knowledge and add our
sensitivity to the numbers.
Information sharing at many of the respondent firms seems to be so rich, frequent, and
in-depth that it could almost be termed a co-mingling of information. One respondent
offered an attention-grabbing example:
244
My company assumes a great deal of liability for maintaining inventory levels at the
customer locations and, as a result, my company has better knowledge of customer needs and
ordering habits than the customers themselves.
Strategic intent
Internal alignment
Relationship orientation
Relationship-specific investment
Information flow
Formalization
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Table I.
Antecedents of
collaboration
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their key collaborative partners. The forecasting data provided by the retailer drive the
vendors subsequent scheduling. Also, marketing planning in the form of sales
promotions and market intelligence (e.g. market trends, customer preferences, and
competitor activities) is shared with their partners. This helps collaborative partners
jointly work on new business development.
How is information shared? Many survey participants mentioned automated
information exchange via information technology such as electronic data interchange
(EDI), database (e.g. Wal-Marts shared database called RetailLink), data warehouse
and data mining techniques, and the internet to illustrate their communication
channels. A distributor emphasized that shared information provides supply chain
visibility that can trigger immediate, corrective actions relating to the flows of raw
materials, finished goods, and services as needed.
One of the aspects of the arrangements is detailed track and trace of containers from
China to a variety of ports in North America, east and west coast. We have the ability to
redirect specific containers from their original ship-to-locations when they are 72 hours
out from port. Providing this track and trace detail information is a small marginal cost
to the manufacturers, but will have a significant impact on providing visibility to product
in the delivery pipeline and driving re-handling and re-shipping costs out of our value
chain.
Joint planning
The next component of collaboration, joint planning, is closely related to and
dependent upon information sharing. Information drives collaboration that starts with
joint business planning between collaborative partners. A manufacturer stated:
We routinely share information regarding our volume projections, and they in turn are quick
to contact us regarding anticipated changes in their capacity outlook.
We brainstormed with our current suppliers on ways to reduce cost by changing their process
and/or our requirements. We came up with a change in delivery schedule to streamline their
operations (we carried a little more inventory) and we secured backhauls for them to spread
their transportation cost. We also used our existing carrier base to move the product from
their location enroute to pick up deliveries for us.
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Information sharing
Joint planning
Joint problem solving
Table II.
Key collaboration
activities
Leveraging
Forecasting
Customer demand
Materials requirement
Marketing planning
Production capacity and scheduling
Mutual sales and performance targets
Budgeting
Prioritizing goals and objectives
Product development/redesign
Logistics issues (shipping, routing, backhauling,
pallet size, packaging, etc.)
Marketing support (marketing materials, delivery
schedule, store display, etc.)
Quality control
Cost-benefit analysis (inventory carrying cost, lead
time, customer service, etc.)
Performance reviews on a regular basis
Measuring KPI (customer service, cost savings,
productivity, etc.)
Determining rewards and taking corrective actions
Resources and capacity
Skills and knowledge
Specialization
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of increased revenue. As a result, the partners became more willing to share potential
gains and potential risks because of the long-term opportunities associated with
the relationship. In describing a similar arrangement, a 3PL respondent noted that
a successful collaboration has changed how our client views our company as a
partner.
The complex dynamics of the supply chain mean that expectations of collaborative
partners change usually escalate over time. As expectations and the relationship
are examined, a new focus often emerges. This commonly prompts a re-evaluation of
goals, objectives, performance metrics, and rewards.
A respondent pointed out that when a collaborative arrangement grows and succeeds,
all parties feel a sense of ownership. As such, mutual cooperation is strengthened. This is
consistent with commonly proposed best business practice. One of the primary motives
for working together through collaborative efforts is to gain operational and competitive
advantages such as decreased cycle times, lower inventory and operating costs, and
increased efficiencies in process activities (Dahlstrom et al., 1996).
One final benefit of collaboration is a refocusing of strategic resources and efforts.
This is shown with a feedback loop in Figure 1. As collaborative partners learn from
the ongoing relationship, they modify business practices to better meet each others
needs. Such calibration ensures that the relationship remains dynamic, adaptable, and
valuable to the involved parties. Ideally, the second component of the collaboration
model, which defines the nature of collaboration, becomes fluid. Outcomes of the
relationship and interactive feedback are used to make improvements.
The potential benefits of collaboration are summarized in Table III.
Discussion
Based upon practitioners views on supply chain collaboration, the previously introduced
conceptual model of supply chain collaboration was developed to help provide better
understanding of collaboration as well as its antecedents and consequences.
First, concerning the nature of collaboration, two essential components of
collaborative arrangements (e.g. cooperation and information sharing) were observed.
The respondents recounted their experiences of working together to plan, implement,
and monitor supply chain activities to integrate cross-firm operations, and to focus on
Mutuality
Efficiency
Effectiveness
Profitability
Reinforcement and expansion of the relationship
Table III.
Consequences of
collaboration
common goals. The respondents stressed that sharing information went beyond
routine data to incorporate confidential or proprietary information. The respondents
also emphasized the need for a systemic course of action: collaboration partners must
act on the information in a way that helps business operations.
Second, the survey respondents placed emphasis on the need to formalize
collaboration arrangements (e.g. detailing of performance metrics as well as goals and
objectives) as an important prerequisite and foundation for collaboration.
Third, collaborations that are successful often result in the development of a new
culture and operating atmosphere. One respondent mentioned working in an environment
that encouraged the spirit of achieving a mutually profitable relationship. Another said
that collaborative relationships should bring the greatest good to the greatest number of
people in an honest and mutually beneficial manner. Within this context, several of the
respondents pointed out that collaboration evolves over time as the parties get to know one
another. Jointly shared experiences can help them learn how to leverage certain areas to
create and exploit opportunities. These cultural changes forge supply chain relationships
that, in turn, reinforce collaborative efforts.
Managerial implications
Several respondents mentioned a blurring of lines between organizations in contrast
to an us vs them approach. However, there is still accountability on both sides along
with an awareness that they are in this together. This idea was expressed in a
number of different ways treating the arrangements as if they both were part of the
same operation, treating them as co-owned, and employing a new focus on the best
common solution. As such, collaboration is about integration within and outside the
boundaries of individual firms, which makes collaborative efforts hard to accomplish.
The following discussion focuses on the key managerial implications that emerged
from the research.
Collaborations are typically tailored towards the customer. Customers generally
initiate the efforts and design the arrangement. There is a feeling among many of the
respondents that customers have benefited the most. This unevenness is somewhat
balanced by the potential for gain. Many of the respondents indicating rewards are not
distributed evenly still admitted they got enough out of the collaborative
arrangements to make it worthwhile.
Collaboration is good, but in reality it is only as good as you make it. You
must invest efforts to make it work.
Collaboration goals often center on supply chain efficiency (figuring out better ways
to do things) and better inventory control. Examples of good progress were noted
including increased business volume, inventory reductions, decreased lead time, and
higher service levels.
Different industries have different degrees of collaboration and cooperation. To
date, the food industry has probably been the best at developing and benefiting from
collaboration.
Conclusion and limitations
This research was undertaken to provide a profile of current collaborative practices.
While a relatively small group of companies participated in the research, many top
companies are represented. Therefore, although the sample size represents a limitation,
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that limitation is balanced by the quality of the respondent base and their
expertise/experience in the area. Another limitation is that input was secured from only
one party to the collaborative relationship. Future research can add to the knowledge
base by using a dyadic approach and talking to two (or more) parties/organizations
involved in a collaborative arrangement. Also, since collaboration suggests a
time-oriented process, another area for future research could be the development of a
longitudinal study associated with the panel members to determine whether and/or
how the antecedents and collaboration factors change throughout the relationship.
The participants shared their experiences and their hopes regarding collaboration.
It became clear that they are committed to collaborative relationships and they are
hopeful about what can be accomplished through focused inter-company efforts. For
the most part, they recounted positive outcomes including improved efficiency,
effectiveness, and enhanced market positions. The respondents reported on the
collaborative relationship that was most important to their continued company
success. Considering that, on average, the respondent firms had only been involved in
the relationships slightly less than five years, they are receiving a good return on their
investment. It will be interesting to see how they move forward. The researchers intend
to continue to work in this area to better define how firms can truly exploit the
maximum benefit from collaborations. The contributions of the current research
in-depth knowledge of working collaborative relationships, insights from top
industrial companies, and a proposed conceptual model of collaboration will
provide the base for future research.
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Supply chain
collaboration
255
Mattel, Inc.
Menlo Worldwide
Mercury Marine
Michael Foods
Mighty Auto Parts
Murphy Warehouse Company
NCR Corporation
New World Pasta Company
New York City Housing Authority
Oce USA Inc.
Papa Johns International
PEGASUS Logistics Group
Pinnacle Foods
Sabath Supply Chain Consultants
Sargento Foods Inc.
Standard Corporation
Standard Register
Steven Myers & Associates
The Revere Group
Thomson Learning
Transplace
Unilever
Unisource Worldwide Inc.
VICS
Volvo Logistics North America
Williams-Sonoma, Inc.
Table AI.
IJLM
16,2
256
(Soonhong Min is an Assistant Professor of Marketing and Supply Chain Management, Michael
F. Price College of Business at The University of Oklahoma. He has published in Journal of Business
Logistics, Journal of Retailing, International Journal of Physical Distribution & Logistics Management,
International Marketing Review, Journal of Marketing Theory and Practice, and the E-Business
Review and co-authored a book, Supply Chain Management. He holds a PhD from The University of
Tennessee and can be reached at The University of Oklahoma, Division of Marketing and Supply
Chain Management, Michael F. Price College of Business, 307 West Brooks Suite 1, Norman, OK
73019. Tel.: 405-325-0430, E-mail: smin@ou.edu
Anthony S. Roath is an Assistant Professor of Marketing and Supply Chain Management,
Michael F. Price College of Business at The University of Oklahoma. His research interests include
international supply chains, relational management/governance, and logistics modeling and
simulation. He holds a PhD from Michigan State University and can be reached at The University of
Oklahoma, Division of Marketing and Supply Chain Management, Michael F. Price College of
Business, 307 West Brooks Suite 1K, Norman, OK 73019. Tel.: 405-325-5893, E-mail: asroath@ou.edu
Patricia J. Daugherty is Division Director and Siegfried Chair in Marketing and Supply Chain
Management, Michael F. Price College of Business at The University of Oklahoma. She has
published extensively in logistics journals and has co-authored two books. Her current research
interests include supply chain relationships and reverse logistics. She holds a PhD from Michigan
State University and can be reached at The University of Oklahoma, Division of Marketing and
Supply Chain Management, Michael F. Price College of Business, 307 West Brooks Suite 1H,
Norman, OK 73019. Tel.: 405-325-5899, Fax: 405-325-7688, E-mail: pdaugher@ou.edu
Stefan E. Genchev is a PhD Candidate in Marketing and Supply Chain Management, Michael
F. Price College of Business at The University of Oklahoma. He holds a MBA from The University of
Oklahoma. He has published in Business Horizons, Industrial Marketing Management, International
Journal of Physical Distribution & Logistics Management, Journal of Business Logistics, and
Transportation Research: Part E. Before joining the PhD program, he worked for DHL International
for four years in Bulgaria. He can be reached at The University of Oklahoma, Division of Marketing
and Supply Chain Management, Michael F. Price College of Business, 307 West Brooks Suite 1,
Norman, OK 73019. Tel.: 405-325-3561, E-mail: sgenchev@ou.edu
Haozhe Chen is a PhD student in Marketing and Supply Chain Management, Michael F. Price
College of Business at The University of Oklahoma. He holds a MBA from The University of
Alabama. He has published in Business Horizons, Industrial Marketing Management, and
Transportation Research: Part E. His industry background includes eight years of managerial
experience in international trade business. He can be reached at The University of Oklahoma,
Division of Marketing and Supply Chain Management, Michael F. Price College of Business, 307
West Brooks Suite 1, Norman, OK 73019. Tel.: 405-325-3561, E-mail: haozhechen@ou.edu
Aaron D. Arndt is a PhD student in Marketing and Supply Chain Management, Michael
F. Price College of Business at The University of Oklahoma. He holds a MBA from Washington
State University. He has published in Business Horizons and Journal of Personal Selling and Sales
Management. Prior to joining the PhD program, he worked in finance for two years as a
salesman and as a loan processor. He can be reached at The University of Oklahoma, Division of
Marketing and Supply Chain Management, Michael F. Price College of Business, 307 West
Brooks Suite 1, Norman, OK 73019. Tel.: 405-325-3561, E-mail: aarndt@ou.edu
R. Glenn Richey is an Assistant Professor of Marketing and Supply Chain Management at The
University of Alabama. He has published supply chain research in academic journals including
International Journal of Logistics Management, International Journal of Physical Distribution &
Logistics Management, Journal of Business Logistics, and Transportation Research: Part E. His
current research interests include collaboration, reverse logistics, technological readiness, and
supply chain quality management. He holds a PhD from The University of Oklahoma and can be
reached at The University of Alabama, Department of Management and Marketing, 129 Alston Hall,
Tuscaloosa, AL 35487. Tel.: 205-348-8922, E-mail: grichey@cba.ua.edu)