Collaborative supplychain partnerships built upon trust and electronically mediated exchange

In order to emphasise core skills, companies assume narrow and specialised roles in supply chains while they ally themselves with supply chain partners, who have complementary skills, for mutual benefits. Collaborative supply chain partnerships have become the critical linking pins as higher degrees of specialisation have brought an increased need for integration across the overall supply chain. When constellations of organizations in one supply chain deliberately collaborate, they can out-compete other, less collaborative supply chains.

Trust is a key partnership characteristic that fosters collaboration. For example, a buyer and supplier who trust each other are more likely to share detailed cost breakdowns. Open access to such information enables partners to identify and manage inefficiencies and potential redundancies and reduce the total costs incurred in supply chain relationships.

But trust alone is not sufficient. Mechanisms must also be in place so that information can readily be exchanged among the partners. One such mechanism is electronically mediated exchange, where partners communicate through electronic media such as the internet, intranets, electronic mail or electronic data exchange. Electronically mediated exchange is particularly helpful for people at the operational level who need up-to-date information in order to carry out their roles in supply chain relationships. However, to some degree, it is the process of information exchange and not the content of the exchange that is important. Trust is based, in part, on the seamless and accurate exchange of information. Nothing replaces personal interaction in the early stages of relationship building. At the same time, electronically mediated exchange and its technology should be seen as enablers and complementors.

Through research involving 157 supply chain relationships drawn from international subsidiaries of Nordic multinational companies, Myhr and Spekman find that both trust and electronically mediated exchange foster collaboration. Trust seems to establish a base-line level of collaboration that is enhanced and reinforced through the use of electronically mediated exchange.

The research also indicates that electronically mediated exchange more readily enhances collaboration in exchange relationships involving standardized products, while trust seems to play a larger role in fostering collaboration when customized products are being exchanged. Supply chain relationships transacting standardized products require frequent information exchanges because of the typically high volume of goods being transacted. Also, much of the information exchanged in such supply chain relationships is routine in nature and neither complex nor sensitive. Both high frequency and routine-type information exchanges can be conducted by electronically mediated exchange. While trust, in these cases, is not harmful, it is not really necessary given that routine information shared with the other company tends not to be of a sensitive nature. However, the exchange of customized products is a complex and idiosyncratic process, typically requiring partners to share critical and sensitive information across organizational boundaries. This is something only trusting partners would be willing to do.

Also, trust makes it more likely that the receiver of the information finds it credible and acts upon it in a collaborative manner.

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