Abstract
The evolving field of supply chain management is rooted in the premise that traditionally independent firms need to work together in order to achieve supply chain success. This article outlines supply chain collaboration, which is a critical strategy for the field of supply chain management. While firms have traditionally operated in a manner that only considers their own well-being, a transition is occurring where open market relationships are diminishing and cooperation, coordination, and collaboration are becoming much more common. There are several key dimensions of collaboration that serve as drivers to its success, and firms that engage in these activities should experience closer relationships with channel partners and ultimately achieve higher levels of success. While this issue has been thoroughly covered in the logistics and supply chain management literature, its limited implementation and lack of widespread success provides evidence that the topic should continue to be a focal point in future research.
TopIntroduction
The field of supply chain management has developed in recent decades from the convergence of different functions within the firm, such as procurement, production, and logistics. Numerous definitions exist for the term (Mentzer et al, 2001), and a common theme among these definitions is the premise that collaboration and close relationships are an integral facet of the field. For example, the Council of Supply Chain Management Professionals (CSCMP), a leading organization for the supply chain profession, defines supply chain management as:
The planning and management of all activities involved in sourcing and procurement, conversion, and all logistics management activities. Importantly, it also includes coordination and collaboration with channel partners, which can be suppliers, intermediaries, third party service providers, and customers. In essence, supply chain management integrates supply and demand management within and across companies. Supply Chain Management is an integrating function with primary responsibility for linking major business functions and business processes within and across companies into a cohesive and high-performing business model. It includes all of the logistics management activities noted above, as well as manufacturing operations, and it drives coordination of processes and activities with and across marketing, sales, product design, finance and information technology. (Supply Chain Management Terms and Glossary, 2013)
As seen in the CSCMP description, some of these definitions even require collaboration. In other words, they posit that supply chain management may not truly exist without firms participating in close, boundary spanning relationships. The primary objective of this chapter is to clearly explain the criticality of supply chain management and collaboration. Supply chain management represents a way of managing the business and relationships with other members of the supply chain (Lambert et al/, 1998). All firms participate in the supply chain from the raw materials suppliers to the end customer (Lambert & Cooper, 2000). These firms working together are analogous to teammates competing against other supply chains on a worldwide scale. Since close relationships are so critical to the field of supply chain management, this article seeks to present a thorough and clear explanation of collaboration and its different characteristics.
TopBackground
In the global marketplace, companies do not compete – supply chains do (Christopher, 1997; Lambert et al., 1998; Burgess, 1998; Lummus & Vokurka, 1999; Lambert & Cooper, 2000; Christopher & Juttner, 2000; Duclos et al., 2003; Myers & Cheung, 2008). As a result, firms can no longer compete in isolation of their suppliers or other entities in the supply chain so they must seek understandings with other firms (Lummus & Vokurka, 1999; Leeuw & Fransoo, 2009). This is taken further by Christopher and Towill (2001) when they point out that to be truly competitive requires not just an appropriate manufacturing strategy, but an appropriate supply chain strategy. Thus, firms must focus on optimizing all aspects of their supply chains in order to create the greatest opportunity to gain a competitive advantage over time.
Key Terms in this Chapter
Just-in-Time (JIT) Inventory System: When a downstream customer takes delivery of materials required for production when they are needed rather than carrying inventory.
Bullwhip Effect: Common in supply chains that rely on forecasts, this occurs when variability continually increases as one progress upstream in a supply chain from the customer to the raw materials suppliers due to orders that are exaggerated in order to provide buffer stock.
Logistics: The planning and managing of all activities related to the storage and movement of physical goods between origin and consumption.
Vendor Managed Inventory: When an upstream supplier manages the inventory of its product at a downstream customer location.
Information sharing: The process in which supply chain partners share critical and often sensitive knowledge in order to create a more harmonized supply chain.
Decision Synchronization: The ability for channel partners to engage in decision making that considers the interests of the supply chain rather than any individual firm.
Supply Chain Collaboration: Occurs when boundary spanning relationships exist between mutually dependent firms who work together for joint success. The primary focus for these firms is the overall well-being and success of the supply chain.
Supply Chain Management: The process of managing all activities, ranging from the raw materials source to the customer, including sourcing, procurement, production, transportation, and logistics management.