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Article Excerpt
Companies whose success necessarily is linked to the efficiency of their supply chains should consider sharing more than information. Joint decision-making and strategic planning can increase competitiveness. However, the transition to joint decision-making needs to be planned and executing carefully. A framework for the transition involving four phases--for limited to full collaboration--can help managers plan and implement supply chain integration to the extent appropriate for their business situation. Privacy and security issues pose potential but not necessarily insurmountable problems to address.
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Introduction
Supply chain collaboration has emerged as one of the most promising paradigms for creating long-term competitiveness. Integrating previously independent organizations is, indeed, largely attributable to supply chain collaboration; information technology (IT) significantly enhances both internal and external coordination while improving information sharing. The primary objectives of such integration are increased information exchange, greater joint planning, and, ultimately, greater profits. Research shows that information sharing and long-term collaboration enhance a firm's ability to manage their supply chain through more accurate planning, cost transparency, and improved visibility (Beamon and Xu, 2006; Bowersox, Closs, and Drayer, 2005; Cokins, 2003; Maccoby, 2006; and Sanders and Premus, 2005).
Supply chain collaboration requires increased interaction among trading partners. Integration efforts are dampened when trading partners limit their contribution and expectations to information sharing. However, collaboration can create a substantial competitive advantage if it moves beyond information sharing to joint decisionmaking (JDM) and benefits sharing. In reality, very few collaborative partnerships pursue JDM. Supply chain synchronization is normally reserved only for the most powerful trading partners.
This research proposes an implementation framework to initiate the transition from a simple information sharing agreement to a fully functional JDM collaboration. Establishing controls and performance measures is critical to successfully synchronize the entire supply chain. Performance measures must gauge the integration strength throughout the transition process while setting the foundation for the next stage. The complexity of this transition requires an incremental effort from all supply chain entities as they try to adopt a set of essential initiatives required at each phase. This framework identifies critical milestones on the path toward supply chain synchronization while creating a common understanding of each party's roles and responsibilities in the process.
The primary audience for this paper is supply chain decision-makers who are currently considering how to extend their collaborative capabilities and also IT managers responsible for designing and implementing the IT infrastructure to support these partnerships. This paper does not address in great detail how to select firms to collaborate with; the assumption is that they have already been chosen, so this paper elaborates on "how." After reading this paper, individuals should know how to initiate the transition towards JDM. In addition, they should be able to design a structured plan that considers critical features necessary to achieve full integration of supply chain members.
Literature Review
Collaborative supply chain management focuses on joint planning and execution of supply chain activities (Ayers, 2006). These supply chain activities include not only logistics, but also product development and strategic planning (Ayers, 2006). Historically, organizations have concentrated on improving the efficiency of their internal operations (Ellinger, 2002; Fawcett and Magnan, 2002). The success of these efforts came at the expense of other links in the supply chain. Though the primary focus of the initiatives was functional, demand was completely disjointed from supply. Reductions in inventories were achieved at an organizational level by redistributing it somewhere else within the supply chain (Ireland and Bruce, 2000; Horvath, 2001). Therefore, these efforts have seldom improved the performance and competitiveness of the entire chain. However, with the changing focus of improvement initiatives from being functional to more consumer-centric, it is increasingly critical for companies to strengthen their relationships with suppliers (Happek, 2005).
The growing complexity and variability of the supply chain has completely transformed the way business value is created. Competition is no longer between companies; it has more to do with how one supply chain performs compared to another. Effectiveness of individual links is no longer the driving force. The chain that brings customer-desired products to the market faster and cheaper will emerge as the winner (Taylor, 2004). To make this happen, companies in a supply chain work together to better integrate and synchronize all four flows--cash, products, information, and returns. It is imperative to design a supply chain that facilitates collaboration, often by exploiting technology, resulting in a new level of operational excellence (Bowersox, Closs, and Drayer, 2005). When the success of one company depends on the success of others in the chain, it becomes critical for the supply chain partners to engage in more strategic collaboration, a type of collaboration that would make the chain behave as a single system, coordinated with each element of the chain and aligned with a jointly established supply chain goal (Taylor, 2004). A 2004 Accenture study of 600 of the world's largest companies concluded that those with the best supply chains had stock market capitalization growth rates at seven to 26 points above industry averages (Shoemaker, 2004). Superior supply chain performance not only facilitates efficient inventory turns, enhanced revenue,...
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