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Relationship Development and Management

Overview of Relationship Development and Management

Development and

management of internal logistics relationships

Development and

management of supply chain relationships


Development And Management Of

Internal Logistics Relationships

1. Functional

2. Shift from function

to process
3. Virtual organization

4. Leading

organization change

Sample Historical View Of Dispersed And Fragmented Logistics Responsibility

Figure 15.1 Traditional Organization of Logistically Related Functions


Illustration Of High Functional Aggregation In Logistics Organization

Figure 15.2 Logistics Functional Aggregation


Functional Aggregation
is the combination of logistics functions into a single managerial group


Motivated by belief that grouping logistics

into a single organization would

Increase likelihood of integration Improve knowledge of how operational changes

impacts performance in other areas

Comprehensive aggregation in organizations

is still rare, but

Trend is towards strategic management of all

forms of inventory movement and storage for maximum benefit of the enterprise
Development of logistics information

systems enabled functional integration of organizations


From Function To Process

a) Process

organization structure b) Barriers to process integration c) The great divide


Illustration Of Process-orientated Supply Chain Organization

Figure 15.4 Process Organization



Factors Enabling The Process Structure

Development of a highly involved work

environment with self-directed teams Improved productivity results found in organizations that started managing processes rather than function Ability to rapidly share accurate information

Challenges Of Managing From A Process Perspective

All effort must be focused on

value added to the customer All skills necessary to complete the work must be available to the process owner Critical skills not shared can disrupt workflow and create bottlenecks Work performed by processes should stimulate synergism in the

B) Barriers to process integration

Functional organization

structure Department budgets Measurement & reward systems Functional performance Inventory use Traditional positioning supports functional performance Infocratic structure Information content and flow follow traditional functions


C) The great divide

reflects an organizational gap in

achieving end-to-end integration

Figure 15.3 The Great Divide: The Challenge of Managing across Functional Boundaries


Virtual Organization
provides integrated

performance but is not on the organization chart


How can an

organization be structured so that it can manage a complex global logistics process without becoming too bureaucratic?
Focus on work flow

rather than structure Link remote teams through information networks


Disaggregation As An Organizing Principle

Power of information

technology facilitates performing and managing logistics work without combining functions into a formal organization unit
Belief that logistical

functionality need not be grouped as a special organization

Performance can still be

efficiently and effectively coordinated using


Leading Organizational Change

General types of change
Strategic change involves implementation of

new and improved ways to service customers Modifications in a firms operational structure Changes in human resource and organization structure
Critical to avoid a quick-fix mentality about

change Consider organizations capacity to absorb new operational practices

Typically less than most change managers

Development And Management Of

Supply Chain Relationships

Supply chain perspective places more emphasis on external relationships.

Multi-enterprise coordinated effort focused

on supply chain efficiency improvement Belief that cooperative behavior will reduce risk and greatly improve efficiency Belief that opportunity exists to eliminate waste and work effort


1. Risk, power and

leadership 2. Range of extended supply chain relationships 3. Supply chain integrative framework 4. Developing trust

Essential Concepts To Understanding Dependency

A. Risk Disproportionate risk among channel members Collaborative role of member is based on risk within a specific supply chain


B. Power Retailers have increased in power over the last decade Powerful firms tend to link together into supply chain arrangements Category dominance vs. brand power
C. Leadership No dominate model for how firms gain leadership responsibility Greater commitment to the relationship when leaders use rewards and expertise to exercise power

Range Of Extended Supply Chain Relationships

Figure 15.5 Relationship Classification Framework


Value Creation From Supply Chain Integration Is Focused On Flows

Figure 15.6 Supply Chain Flows


Integrative framework showing supply chain flows, competencies and context

Figure 15.7 Supply Chain Framework


Relationship Of Capabilities To Competencies And Context Of The Supply Chain

Table 15.1 Supply Chain Context, Competencies, and Supportive Capabilities

Set of capabilities that defines the Customer Integration competency


Competencies Needed For

The Operational Context

Operational context involves processes that

facilitate order fulfillment and replenishment Customer integration builds on the activities that develop intimacy
Internal operations integration are joint

activities within a firm that coordinate functions related to procurement, manufacture and customer accommodation Supplier integration creates operational linkages with material and service providers

Competencies Needed For

The Planning And Control Context

Planning and control context involves

monitoring, controlling and facilitating overall supply chain performance Technology and planning integration involves the design, application and coordination of information Measurement integration is the ability to monitor and benchmark functional and process performance Both within the firm and across the supply chain


Competency Needed For

The Behavioral Context

Behavioral context involves the quality of

basic business relationships between supply chain partners

Relationship integration involves the

commitment needed by people to build and develop successful long-term collaborative relationships Managers are often far more experienced in competition than they are

Initiating Relationships
Alliances are often initiated by the firm that

was the customer in the relationship The initiating firm should perform an indepth assessment of its internal practices, policies and culture
Will key alliance contacts be empowered to

manage the relationship? Does alliance involve a number of facilities that operate under different conditions, capabilities or competitive requirements?

Implementing Relationships
Partners should have
Compatible cultures A common strategic vision Supportive operating philosophies

Start small to foster early wins

Acknowledge early wins To motivate key contacts To build confidence about alliance

Implement the alliance in its simplest form
Fine tune arrangement when improvement

will add substantial value


Maintaining Relationships Is Dependent On

Three Key Activities

1. Mutual Strategic

And Operational Goals

2. Two-way

Performance Measurements
3. Formal And



Developing trust
Real collaboration

requires meaningful trust Power arrangements are often temporary and create resistance to deeper collaboration How can trust be developed?

Reliability And Character:

Two Aspects Of Trust
Reliability-based trust is grounded in

perception of actual behavior and operating performance

Firms perceived as incapable of delivering as

promised are perceived as unreliable Unreliable firms are unworthy of trust in a relationship
Character-based trust is based on culture

and philosophy
Perception that partners are interested in

each others welfare Trusting partners believe that each other will protect the others interest


Building Trust In Relationships

Trust develops over time and

repeated interactions among organizations First step is to demonstrate reliability in its operations Second step is a full and frank sharing of all information necessary for the effective functioning of the relationship Firms that hoard information are not likely to be trusted Trust can be maintained by sharing