Partnership alliance for supply chain collaboration Rosalin Zeltser and Samir Gupta

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1 Partnership alliance for supply chain collaboration Rosalin Zeltser and Samir Gupta Abstract It has been recognized, both from academic papers and from the marketplace itself that competition is no longer between individual companies, but between the supply chain networks that the organisations are a part. This project for Gourmet Kitchen and its key suppliers and customers, emerged in response to the idea that achieving better collaborative supply chain partnership alliances between members of its supply chain would improve the company s competitiveness. At the root of this issue are the factors of collaboration that may promote or hinder that type of relationship occurring. At the conclusion this project forms, in a sense, part of the ability for Gourmet Kitchen to show resistance against any factors that inhibit collaboration with partners and provides a ground to empower the relationship with knowledge on the issues involved. Introduction Business processes have evolved over time, from simple distribution channels to contemporary complex arrangements of today s supply chain concept. The way for businesses to achieve organizational excellence in the twenty-first century is through collaborative efforts along its supply chains. There are many characteristics which may impact on the success of collaborative efforts. This report considers the two characteristics that are critical for collaboration commitment and trust, within the scope of the dimensions of the relationship environment. The project undertaken was based on two methods of information gathering and assessment. The first was a literature review into collaboration and the characteristics of commitment and trust. The second method was through action research, using an organisation from within the Australian Dairy Manufacturing Industry and a selection of key supply chain partners. Literature on the topics of trust and commitment was readily available and the conclusion was drawn that parties will seek trustworthy exchange partners because commitment to collaboration entails vulnerability. Findings of the action research method yielded a clear picture of the position in which the host company, Gourmet Kitchen, was in with its supply chain partners. It became obvious, through discussions and questionnaire answers from the participants that there was a reluctance or lack of trust, yet a high level of commitment within the partnerships. A strategy was subsequently developed and implemented with the ambition of improving the vital collaborative characteristics between the host company and one of its chosen supply chain partners. The interviews revealed that there is very little or no joint-forecasting based on Gourmet Kitchen s scheduled promotional activities, new product launches and changing market 1

2 situations which the suppliers perceived as being due to a lack of trust and therefore reflected on the relationship in terms of commitment. The lack of trust inherent in this task was probably due to the perceived, relatively low barriers to entry into the business of Gourmet Kitchen and therefore a protection by the company, of information perceived as sensitive. The suppliers, together with management of Gourmet Kitchen showed a high level of interest in improving the level of collaboration within their respective relationships. Action Planning The second stage of the action research cycle involved considering alternative courses of action for solving the problem. The main problem identified was that Gourmet Kitchen needs to display more trust in terms of providing its key supply chain partners. To do this, information must be shared between relevant parties, without a breach of confidentiality of the information privy to the exchange partners. After consideration of several alternatives and keeping in mind the above mentioned barriers, allowing a representative of key suppliers to be present at the Gourmet Kitchen s Sales and Operations Planning (S&OP) meetings was chosen as the most suitable course of action, since it would allow the critical information required to become readily available to the supplier. This in turn will be expected to enable the supplier s agility in response to the impact of the market on Gourmet Kitchen. The strategy in effect, was made into a pilot trial with one selected key supplier from the project participants. Specifically, the strategy involved allowing a representative of the Plastic Tub and Lid manufacturer to attend one S & OP (Scheduling and Operations Planning) meeting per month, at the factory offices of Gourmet Kitchen. S & OP meeting were already taking place on a weekly basis. Therefore, a heavy investment of time and effort did not need to be incurred to alter the agenda to allow for the representative to take part. The agenda of each S & OP meeting at which the supply chain partner representative was to be present, was altered to emphasise such issues that are likely to bare a direct impact on the requirements of the Plastic Tub and Lid Manufacturer. Issues such as: Current stock holdings of Tubs and Lids at both Gourmet Kitchen and the Supplier; Scheduled up and coming promotional programs; Unexpected deviations in sales of certain products; Tentative plans for production runs for the following month; Any new products pending; Market fluctuations that may impact on sales for the following period; Revision of forecasts, based on the above topics of discussion. The researcher then discussed the capabilities of the solution with management of both Gourmet Kitchen and the chosen participative supplier and received a supportive response, along with questions of when the first meeting together was scheduled for. The relationship implications of the suggested action was to make one of Gourmet Kitchen S & OP meeting per month open to the presence of the representative of the Tub and Lid 2

3 Manufacturer and Supplier; and improve the collaborative supply chain partnership alliance between two supply chain partners. Participation in the research was voluntary, although all participants in from the first, diagnosing stage of the project were interested to participate. It was agreed that the researcher would be responsible for coordinating the S & OP meetings to facilitate the altered agenda on a monthly basis. Action Taking The third stage of the action research cycle involved selection of a course of action and implementation of that course of action chosen. The new meeting scheduled and agenda was implemented for a six-monthly period. As the schedule was being finalized, the researcher undertook unstructured interviews with the anticipated attendees of the S & OP meetings. The feedback indicated good support and commitment for the project. Evaluating This fourth stage, involved with studying the consequences of the action taken, saw the researcher conducting informal interviews with participants and observe how the information exposed to the representative of a key supplier changed the relationship. During this period there was a total of approximately three months encompassing three S & OP meetings at which the Account Manager from the Tubs and Lids Supplier was present. Different concerns were voiced depending on whether the participant belonged to the upper management of Gourmet Kitchen, middle-ranks of Gourmet Kitchen, or a supply chain partner to Gourmet Kitchen. Management of the organisation indicated that there will exist varied levels of trust and varied levels of commitment, depending on which supply chain partner is under analysis and that supplier s relationship with the direct competitors of Gourmet Kitchen. This fourth stage, involved with studying the consequences of the action taken, saw the researcher conducting informal interviews with participants and observe how the information exposed to the representative of a key supplier changed the relationship. During this period there was a total of approximately three months encompassing three S & OP meetings at which the Account Manager from the Tubs & Lids Supplier was present. Differing concerns were voiced depending on whether the participant belonged to the upper management of Gourmet Kitchen, middle ranks of Gourmet Kitchen, or a supply chain partner to Gourmet Kitchen. Management of the organisation indicated that there will exist varied levels of trust and varied levels of commitment, depending on which supply chain partner is under analysis and that supplier s relationship with the direct competitors of Gourmet Kitchen. That is, because the Tubs & Lids supplier to Gourmet Kitchen also supplies the two main market competitors, then Gourmet Kitchen s willingness to trust the supplier with sensitive information is not of a high level. Concerns were voiced from the upper management of Gourmet Kitchen about the potential leakage of market sensitive information through the presence of a company outsider, being the Tubs & Lids supplier s representative. The researcher revised the agenda to ensure that topics of discussion that management felt to be sensitive were left for the second part of the meeting, after 3

4 the departure of the outsider. When this option was discussed with the other participants, they were supportive of having all meeting attendees privy to the topics of discussion with the idea that each topic will bear some impact on the supplier. They also commented that if there was something that management felt was too confidential to be discussed at that meeting, there were all of the other weekly meetings without outsiders for such discussions. The general theme which echoed throughout the supply chain partner surveys and discussions is that Gourmet Kitchen must trust their key supply chain partners enough to share more sensitive information that would be useful in achieving better collaboration. The company s commitment was not evidently of any concern. Specifying The final stage of the action research cycle, involved specifying what had been learnt during the project. Participants, including the upper management of Gourmet Kitchen approved of the strategy proposed to have a member of a key supplier an attendee of regular S&OP meetings. This indicates that they wanted to promote those factors which are likely to support collaborative supply chain partnership alliances between Gourmet Kitchen and each participating supply chain partner. Approval was given for a revised agenda to be drawn up for those meetings, once a month, at which the outsider was to be present as it aligned with the participant s visions of collaboration. Upper management were trying through the trust structure to display their desire in achieving collaborative supply chain partnership alliances through commitment and trust. They were willing to show leadership and participate in the project. Discussion Research with the participants prior to the implementation of the strategy revealed that despite Gourmet Kitchen s investment in assets, such as graphic plates, tools and other parts specific to the exchange, indicating a healthy level of commitment to their relationships, the organisation s trust level is where the problem lay. Thus, the task became an assessment of the reasoning behind Gourmet Kitchen s mistrust of key supply chain partners and developing ways to overcome this issue. This study throws into question whether a medium-size private enterprise, linked in its supply chain with partners ranging from small private enterprises to national conglomerates, is able to initiate a strategy that will allow the development of a collaborative supply chain partnership alliance with a key supply chain partner. Although the positive effects accruing from the implementation of a strategy based on increased trust and commitment sounds viable on paper and in discussions, there was still the risk that it would be more difficult to obtain these benefits in social situations. As was presented earlier in the report, from the researcher s viewpoint, the supply chain consists of an entire coalition of companies varying in their size and competencies, and is a social structure in its own right. Therefore it is important to understand the social environment within which the developed strategy was trialed. This report has explored the social and supply chain context within which the developed strategy was trialed. This report has explored the social and supply chain context within which the strategy was implemented, showing how the upper management of Gourmet Kitchen achieved a trust level with a key supplier that in turn made 4

5 available to that supplier, important and sometimes sensitive, information. With this information and the key supplier s commitment to the relationship, collaboration has the potential to allow Gourmet Kitchen, together with its key supply chain partners, to be more agile and competitive in the marketplace. Broader cross-organizational forces such as the desire to manage those factors necessary to establish and maintain a collaborative supply chain partnership alliance influenced participants interpretation such that their involvement caused them to re-evaluate their own supply chain partner relationships. Although all of the participants were keen to encourage a situation where collaboration could prevail, the upper management of Gourmet Kitchen required time and evidence to modify their fears of the associated risks to a trusting and committed relationship. In defense of the upper management of Gourmet Kitchen, controlling and managing risks associated with supply chain collaboration is an essential part of their role within the organisation. In other words, one of the norms of business culture worldwide is that high ranking officers of an organisation are expected to manage the organisation in such a way that the risks associated are minimal. Referring back to the literature review which was done as a preliminary step towards this research, two significant issues should be brought to light when conclusions are drawn based on the contribution of the participants of the research. The first one, conflict between the action research and the bureaucracy of the business organisations involved seemed to have been overcome through the express permission of the organisations participating. Never the less, each participant did seem to be most interested in their own organisation, as expected, thus leading on to the other issue. This being, the expression of more bias than usual when making their points, thus distorting the outcome. In fact, this did not appear to be the case. On the contrary, the exaggeration which was obviously the result of bias (particularly from the retailer) assisted the researcher to understand the situation better. There are certain risks pertaining to collaboration that were presented ion the literature review performed. Of these, the risk of losing competitiveness was essentially at the core of Gourmet Kitchen upper management concerns, which prevented prior collaborative efforts. The concerns were subdued over the course of the project and exposed the other risks that may affect either the collaborative supply chain partnership alliance which was at the centre of tjhis project, or that may prevail in future collaborative supply chain partners. Specifically, there was the risk of conflict that may be brought about when there is power-imbalance in the exchange relationship. In particular if the party with superior power will act in an opportunistic fashion. Of course the risk of low effort level came to fruition, in this project, with the unwillingness of the two nonparticipating organisations to give the time and energy required and to which they promised commitment. Conclusion Overall, it has been recognized, both from academic paper and from the marketplace itself that competition is no longer between individual companies, but between the supply chain networks that the organisation are a part. This project for Gourmet Foods and its key suppliers and customers, emerged in response to the idea that achieving better collaborative supply chain 5

6 partnership alliance between members of its supply chain would improve the company s competitiveness. At the root of this issue are the factors of collaboration that may promote or hinder that type of relationship occurring. At the conclusion this project forms, in a sense, part of the ability for Gourmet Kitchen to show resistance against any factors that inhibit collaboration with partners and provides a ground to empower the relationship with knowledge on the issues involved. References Anderson, E. and B. Weitz (1992). The use of pledges to build and sustain commitment in distribution channels Journal of Marketing Research 29: Awuah, G. B. (2001) A firm s competence development through its network of exchange relationships Journal of Business and Industrial Marketing 16(7): Barratt, M. (2004) Understanding the meaning of collaboration in the supply chain Supply Chain Management: An International Journal 9(1): Cassivi, L. (2006) Collaboration planning in a supply chain Supply Chain Management: An International Journal 11/3: Kampstra, R.P., J. Ashayeri, J.L. Gattorna (2006) Realities of supply chain collaboration The International Journal of Logistics Management 17(3): Spekman, R. E., J. Soear, et al. (2002) Supply chain competency: learning as a key component Supply Chain Management: An International Journal 7(1): Susman, G. I. and R. D. Evered (1978) An assessment of the specific merits of action research Administrative Science Quarterly 23(4):