Ellingsworth 1

Sabastina Ellingsworth

Narkon and Lancaster

Contract Management

19 March, 2018

Case Study on Issues Facing Supply Chain Management Departments

Today’s market is highly competitive, and it is important for companies to think of

innovative ways to collaborate, restructure their operations, increase efficiencies, and optimize

productivity to stay ahead of the competition. High demands of customer expectations,

information, and communication technologies, as well as global procurement markets, force

Supply Chain Management (SCM) departments to reconsider their strategies and commitment to

supply chain collaboration. However, issues with lack of commitment have limited SCM

departments from collaboratively working together. Incorporating commitment can enhance

supply chain collaboration among SCM departments.

In the opinion of Simon, et al. defined SCM as “the integration of key business processes

from end user through original suppliers that provides products, services and information that

add value for customers and other stakeholders.” SCM departments are focusing on supply chain

collaboration relationships to a unified business entity to improve and manage costs, product

quality, risk, and performance. Supply chain collaboration means “sharing joint objectives,

intellectual agility, trust, respect, and commitment, in order to get the best outcome for each

member” (Mamillo). Even though supply chain collaboration gives numerous benefits for SCM

Departments, suppliers, buyers, and end users, their joint initiatives often do not work out due to

the lack of commitment.

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Commitment plays an important role in supply chain collaboration. SCM departments

need the assurance of commitment from the supplier, buyers, and customers to perform and

deliver efficiently and effectively as promised. Chao, et al. say “Commitment involves continuity

or long-term cooperation between parties to maintain the relationship and helps increase the

efficiency and effectiveness of relationships among supply chain members.” SCM departments,

buyers, or customers may, for example, lack the commitment they need from the upper

management to drive supply chain collaborations, or the message that the supply chain

collaboration is important may be missed. According to Kwon and Suh, “successful supply chain

performance is based on a high level of trust and a strong commitment.” Commitment and trust

foster positive performance, but broken trust cannot enhance commitment to supply chain

collaboration.

Similarly, commitment can be lacking in SCM departments’ collaboration due to the

suppliers or buyers’ unwillingness and the fear of lack of reliability and competence in terms of

delivering a quality product or honoring their promises. SCM departments’ reliability is based on

the previous contact with a buyer or experience, whether they honored their promise and

delivered quality performance. Repeated interaction among SCM departments and time lead to

high level of confidence, consistency, and commitment from the supplier. Reliability must be

based on integrity or honesty to be effective.

However, reliability based on pressure or intimidation eventually creates unhealthy or

broken-down relationships, leading to lack of commitment on the part of suppliers, buyers, or

customers. Lack of competency can prevent a supplier commitment to supply chain

collaboration. Suppliers and buyers must be able to do what they say they are going to do.
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Competency shows how suppliers and buyers perform their assigned tasks in a given situation.

SCM departments need the assurance of their buyers or customers’ skills, capability, and fitness

to perform effectively and efficiently as promised. In this way, the suppliers, buyers, and

customers’ competencies are very important for the commitment to supply chain collaboration

for SCM departments.

Another constraint regarding commitment to supply chain collaboration is a lack of

confidentiality. One of the responsibilities of supply chain management is to provide information

to suppliers involved in new product development. “Effective information sharing is heavily

dependent on trust beginning within the firm and ultimately extending to supply chain partners”

(Kwon and Suh). SCM departments, suppliers, buyers, and consumers want their information,

innovative ideas, or intellectual property to be kept confidential or protected. SCM departments’

commitment to sharing information, innovative ideas, and other personal data can create

opportunities for SCM departments or firms to collaboratively remove supply chain

inefficiencies and effectively work together. However, the need for confidentiality regarding

information such as financial or product information or intellectual property is the most

important reason why firms do not commit to closer supply chain collaboration. In the opinion of

Li and Zhang, “lack of confidentiality is one of the greatest obstacles to supply chain information

sharing.” For this reason, suppliers are sometimes reluctant to share critical information,

intellectual properties, or innovative ideas with partners with the fear that information may be

sold to their competitors. This is because there is also the possibility that a supplier is a direct

competitor, or may become one in the future, or a supplier can be misled by poor information.

The reputation of a buyer and supplier or business is crucial to its survival. SCM

departments rely on the past performance of their suppliers and buyers to decide whether to be
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fully committed to supply chain collaboration or not. “Every individual's reputation depends on

its past cooperative actions and this information is taken into account by the rest of players in the

next time step” (Pedroza-Gutierrez and Hernandez). However, a bad reputation is another

challenge regarding the commitment to a supply chain collaboration relationship. A bad

reputation can extend to a corporate brand’s reputation and performance as well. Some of the bad

reputations might include abuse of child labor in other countries to manufacture a cheaper

product, not obeying the environmental rules, bad performance on deliveries, product quality, or

lead time. Moreover, lack of consistency, lack of response to a crisis, and lack of transparency

can quickly destroy the reputation of a firm; hence, commitment to supply chain collaboration

becomes hard.

For SCM departments to have effective and efficient supply chain collaboration, it will

require commitment. For commitment to exist among SCM departments and their suppliers, trust

must exist. Trust is an important factor among suppliers, buyers, consumers, and SCM

departments. Trust has been described by Petersen, et al. as “the confidence the buying firm has

that the supplier will behave fairly and honestly in their business dealings.” If trust is present, it

can improve the chances of a successful supply chain relationship; if not, transaction costs can

rise through poor performance. “A lack of trust among trading partners often creates a condition

where every transaction has to be scrutinized and verified, thereby increasing the transaction

costs to an unacceptably high level” (Kwon and Suh). Suppliers committing to each other and

establishing trust can eliminates the condition of scrutinizing each other.

To resolve the issue of bad reputation, suppliers need to first establish trust in their

commitment. Thus, they need to keep every word or promise no matter what in terms of

providing services, paying suppliers when due, and keeping promises to customers. This will
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help set and build credibility with both SCM departments and customers. Next, SCM

departments or buyers need to be responsive, returning calls and answering emails promptly,

letting each party know their importance to the SCM departments and the firm. They also should

be able to resolve errors and mistakes. It is not healthy to make excuses or place blame on others

if the issue is the fault of the firm. It is always best to own up to mistakes committed, render an

apology, and come up with a better solution to resolve that issue. It is always best for suppliers

and buyers to communicate effectively and transparently with SCM departments. Doing so, both

SCM departments and buyers can build their reputations, increase profit, and establish

commitment among themselves in the supply chain market.

It is also important to acknowledge the source of the mistrust. If a buyer and supplier is

seeking to repair broken trust, this implies that there has been an event or some variable factor

that has undermined the strength of the relationship. Where a ‘wrong’ has been perceived, the

buyer must recognize the supplier’s side. Where necessary, buyers should feel confident in

apologizing. Finally, invest in the future of the relationship. Certainly, trust is an important

component in a company’s market reputation, and it is best to invest in the future of relationship

if deemed valuable. In SCM departments collaborative relationships, the future is more important

than the past. If a supplier feels as though the partnership has genuine prospects, then they will

commit to pursuing a future relationship.

To address the concern about confidentiality, some strict measures could require SCM

departments and other parties involved to sign appropriate confidentiality agreements relating to

any intellectual or innovative ideas. This can eliminate the fear among SCM departments and

suppliers about having their information or intellectual property stolen or being sold to their
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competitors. It will improve the trust among suppliers, buyers, and customers and confidence

level would rise.

As SCM departments are finding ways to improve their commitment in supply chain

collaboration with buyers, they should note that reliability, competency, reputation, and

confidentiality are essential when it comes to commitment to supply chain collaboration. For

commitment to exist between SCM departments and buyers, trust must be present. Recognizing

and working towards that would enhance their commitment in trustworthiness and in good faith.

Learning about commitment in SCM department collaborations teaches the value of trust,

transparency, and cooperation. Furthermore, learning about commitment in SCM departments

also teaches the important for companies to think of innovative ways to collaborate, restructure

their operations, increase efficiencies, and optimize productivity to stay ahead of the competition

and to meet customers’ expectations.

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Works Cited

Chao, Cheng-Min, et al. “Trust and Commitment in Relationships among Medical Equipment

Suppliers: Transaction Cost and Social Exchange Theories.” Social Behavior and

Personality: An International Journal, vol. 41, no. 7, 2013, p. 1057+. Academic OneFile,

http://link.galegroup.com.proxy.chemeketa.edu:2048/apps/doc/A346926110/AONE?u=or

egon_chemeke&sid=AONE&xid=41617b23. Accessed 28 February, 2018.

Kwon, Ik-Whan G., and Taewon Suh. “Factors Affecting the Level of Trust and Commitment in

Supply Chain Relationships.” Journal of Supply Chain Management, Spring 2004, p. 4+.

Academic OneFile,

http://link.galegroup.com.proxy.chemeketa.edu:2048/apps/doc/A117253290/AONE?u=or

egon_chemeke&sid=AONE&xid=422e3691. Accessed 26 February, 2018.

Li, Lode, and Hongtao Zhang. “Confidentiality and Information Sharing in Supply Chain

Coordination.” Management Science, vol. 54, no. 8, 2008, p. 1467+. Academic OneFile,

http://link.galegroup.com.proxy.chemeketa.edu:2048/apps/doc/A184299036/AONE?u=or

egon_chemeke&sid=AONE&xid=5acd825a. Accessed 28 February, 2018.

Mamillo, Denisa. “Supply Chain Collaboration Under Uncertainty in The Albanian Beer

Market.” Management Dynamics in the Knowledge Economy, vol. 3, no. 1, 2015, p. 99+.

Academic OneFile,

http://link.galegroup.com.proxy.chemeketa.edu:2048/apps/doc/A410905047/AONE?u=or

egon_chemeke&sid=AONE&xid=4730d10b. Accessed 13 March, 2018.

Pedroza-Gutierrez, Carmen, and Juan M. Hernandez. "Social Networks, Market Transactions,

And Reputation as A Central Resource. The Mercado del Mar, A Fish Market in Central

Mexico." PLoS ONE, vol. 12, no. 10, 2017, p. e0186063. Academic OneFile,
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http://link.galegroup.com.proxy.chemeketa.edu:2048/apps/doc/A508945255/AONE?u=or

egon_chemeke&sid=AONE&xid=e949a18f. Accessed 13 March, 2018.

Petersen, Kenneth J., et al. “An Examination of Collaborative Planning Effectiveness and Supply

Chain Performance. “Journal of Supply Chain Management, Spring 2005, p. 14+.

Academic OneFile,

http://link.galegroup.com.proxy.chemeketa.edu:2048/apps/doc/A132891979/AONE?u=or

egon_chemeke&sid=AONE&xid=d0202b1b. Accessed 26 February, 2018.

Simon, Alexandre Tadeu, et al. "Evaluating Supply Chain Management: A Methodology Based

on A Theoretical Model." RAC - Revista de Administracao Contemporanea, vol. 19, no.

1, 2015, p. 26+. Academic OneFile,

http://link.galegroup.com.proxy.chemeketa.edu:2048/apps/doc/A400785542/AONE?u=or

egon_chemeke&sid=AONE&xid=443379a7. Accessed 13 March 2018.