Supply chain collaboration: what's happening?

The Emerald Research Register for this journal is available at www.emeraldinsight.com/researchregister The current issue and full text archive of this journal is available at www.emeraldinsight.com/0957-4093.htm Supply chain collaboration: what’s happening? Soonhong Min, Anthony S. Roath, Patricia J. Daugherty, Stefan E. Genchev, Haozhe Chen and Aaron D. Arndt Supply chain collaboration 237 Division of Marketing and Supply Chain Management, Michael F. Price College of Business, The University of Oklahoma, Norman, Oklahoma, USA, and R. Glenn Richey Department of Management and Marketing, The University of Alabama,Tuscaloosa, Alabama, USA Abstract Purpose – Collaboration has been referred to as the driving force behind effective supply chain management and may be the ultimate core capability. However, there is a fairly widespread belief that few firms have truly capitalized on its potential. A study was undertaken to assess the current level of supply chain collaboration and identify best practice. Design/methodology/approach – Supply chain executives provided insights into collaboration. Survey data, personal interviews, and a review of the collaboration literature were used to develop a conceptual model profiling behavior, culture, and relational interactions associated with successful collaboration. Findings – Positive collaboration-related outcomes include enhancements to efficiency, effectiveness, and market positions for the respondents’ firms. Research limitations/implications – The small sample size represents a limitation, but is balanced by the quality of the respondent base and their expertise/experience. Another limitation involves securing input from only one party to the collaborative relationships. Developing a longitudinal study would help determine how collaboration-related factors and relationships change over time. Practical implications – Several respondents mentioned a “blurring of lines” between organizations contrasted to an “us vs them” approach. This was expressed in a number of different ways – treating the arrangements as if they both were part of the same operation, treating them as co-owned, and employing a new focus on the best common solution. Many of the respondents indicating rewards are not distributed evenly still admitted they get enough “out of” the collaborative arrangements to make it worthwhile. Originality/value – Real-world practical experiences are recounted involving many of today’s top companies. Keywords Supply chain management, Partnership, Resource efficiency Paper type Research paper Collaboration is one of the most talked about topics in business today (Barratt, 2004; Bowersox et al., 2003). Collaboration is defined as two or more companies sharing the responsibility of exchanging common planning, management, execution, and performance measurement information (Anthony, 2000). The general idea is that much can be gained from collaborating with supply chain partners. Collaboration has been referred to as the driving force behind effective supply chain management (Ellram and Cooper, 1990; Horvath, 2001) and, as such, may be considered the ultimate core capability (Sanders and Premus, 2005). However, there’s also fairly widespread belief The International Journal of Logistics Management Vol. 16 No. 2, 2005 pp. 237-256 q Emerald Group Publishing Limited 0957-4093 DOI 10.1108/09574090510634539 IJLM 16,2 238 that few firms have truly capitalized on the potential of collaboration (Barratt, 2003; Crum and Palmatier, 2004). Managers may talk about collaboration and its potential benefits as if it were part of their organization’s value structure, yet it seems that few companies are actually engaged in the level of integration that collaboration suggests (Fawcett and Magnan, 2004). Sabath and Fontanella (2002, p. 24) summed it up: “Collaboration arguably has the most disappointing track record of the various supply chain management strategies introduced to date”. Supply chain collaboration seems to have great potential, but further investigation is needed to understand its practical value. In order to gain greater insights in the area, a study was undertaken to examine supply chain collaboration through a qualitative research approach. The study makes important contributions by: . presenting data from an executive panel of top industrial companies; . utilizing an in-depth look at practitioners’ perspectives on collaboration as a foundation; and . developing a conceptual model of collaboration based upon the executive panel input as well as a synthesis of previous literature-based studies. The qualitative approach yielded valuable insights. Data obtained from the panel companies provided broader knowledge than would be obtained in a case study and deeper insights than typical quantitative studies. In the following sections, relevant literature is reviewed, the research background and methodology are discussed, and the proposed model of supply chain collaboration is introduced. This is followed by a discussion of the research findings, managerial implications, and conclusion and research limitations. Literature review Collaboration has been widely examined in recent years across disciplines including sociology (Powell et al., 2005), psychology (Stern and Hicks, 2000; Konczak, 2001), marketing (Gadde et al., 2003; Jap, 1999, 2001; Perks, 2000), management (Cross et al., 2002; Sawhney, 2002; Singh and Mitchell, 2005), and supply chain management (Holweg et al., 2005; Tuominen, 2004). The current research examined collaboration within a supply chain context. The fundamental rationale behind collaboration is that a single company cannot successfully compete by itself. Customers are more demanding; competition is escalating (Kotler, 1997). Thus many firms seek to coordinate cross-firm activities and work reciprocally over time to produce superior performance (Anderson and Narus, 1990; Stern and Reeve, 1980). Firms enter into interfirm collaborative arrangements in order to share risks and rewards. The objective is to secure higher performance than would be achieved by operating individually (Lambert et al., 1999). The marketing channels literature has frequently examined the phenomenon of ongoing relationships and the efficiency of these relationships through a relationship marketing perspective (Sin et al., 2005). Relationship marketing is characterized by reciprocal, interdependent, and long-term relationships. Included in this perspective are questions related to the interaction of organizations (e.g. buyers and sellers), how they cooperate and communicate, how they develop trust, and how organizations mutually develop the types of governance structures that contribute to efficiency. Organizations have long recognized that better relationships lead to better performance. Based upon this, researchers have examined the elements of relationships associated with better supply chain management (Lambert et al., 1999). Collaborative practices have been argued to be vital to the creation of firm capabilities and/or performance outcomes. Such practices have been examined in many different ways in different contexts. In the literature, for example, two primary conceptualizations of collaboration have surfaced: collaboration as an interorganizational business process and collaboration as a foundation of interorganizational relationships. First, collaboration has been viewed as a business process whereby collaborative partners work together toward common goals that mutually benefit the partnering firms (Stank et al., 2001; Mentzer et al., 2001). Collaborative processes include joint decision-making (Stank et al., 2001) and joint-problem-solving (Spekman et al., 1997) as a natural extension of sharing information among independent supply chain partners (Sabath and Fontanella, 2002; Stank et al., 1999). As such, a collaborative supply chain involves “two or more independent companies (that) work jointly to plan and execute supply chain operations with greater success than when acting in isolation” (Simatupang and Sridharan, 2002, p. 19). Second, collaboration has been portrayed as the formation of interfirm linkages or partnerships in which the parties involved work together and share information, resources, and certain degrees of risk in order to accomplish mutual objectives (Bowersox et al., 2003; Golicic et al., 2003; Ellram and Edis, 1996; Sriram et al., 1992). Typically close relationships first develop across functional areas within an organization. This internal functional interdependence establishes the foundation for functional interdependence extending into the partner firm. The result is an integration of intra and interfirm activities. Participants become functionally interdependent and, therefore, pursue mutually beneficial outcomes (Jap, 2001). Supply chain entities create cross-organizational linkages because they have something to gain. In other words, firms “voluntarily agree to integrate human, financial, or technical resources in order to create a better business model” (Bowersox et al., 2003, p. 22). Successful collaboration requires a change from standard business practice, particularly relating to information exchange (Stank et al., 2001). Free exchange of data, operating plans, and financial information is needed to gain the full benefits of collaboration (Quinn, 1999). Realistic, informed, and detailed information sharing contributes to improved decision-making and supply chain efficiency. While collaboration facilitates information and knowledge transfer, the creation of new knowledge is one of the primary objectives of collaboration (Simonin, 1997; Hardy et al., 2003). Verespej (2005, p. 21) summarized the challenge in relation to information sharing: You need to use information in the supply chain to change the decision-making process and to get people involved on a proactive basis in order to capitalize on opportunities – not just prevent problems. Concerning the expected outcomes of supply chain collaboration, the literature suggests the following benefits: . Supply chain capabilities that include better demand planning (McCarthy and Golicic, 2002), inventory visibility (Sabath and Fontanella, 2002; Stank et al., 2001, 1999), and new knowledge and skills (Verespej, 2005); Supply chain collaboration 239 IJLM 16,2 . . 240 Supply chain efficiency measured in reduced inventory and cost savings (Sabath and Fontanella, 2002; Stank et al., 1999); and Supply chain effectiveness including improvements in customer responsiveness (Sabath and Fontanella, 2002) and better access to target market segments (McCarthy and Golicic, 2002). Firms engage in collaboration to develop, maintain, and even enhance supply chain capabilities that contribute to enhancing firm performance and, ultimately, competitive advantage (Hardy et al., 2003). Research background and methodology Much of the published work relating to supply chain collaboration and collaborative relationships focuses on formation/set-up of the arrangements, roles and responsibilities, and guidelines for their operation (Manrodt and Fitzgerald, 2001). There has also been a focus on case histories of specific collaborative ventures (Batenburg and Rutten, 2003; Ellram and Edis, 1996; Esper and Williams, 2003; Lambe et al., 2002). An in-depth qualitative analysis approach was used to further develop the body of knowledge on supply chain collaboration. Qualitative analysis methods are gaining ground in logistics/supply chain management research (Lambert et al., 2004; Rogers et al., 2004; Christopher and Peck, 2004; Payne and Peters, 2004; Lemke et al., 2003; Pfohl and Buse, 2000). The purpose of the current study is to confirm and/or expand previous research findings. This will be accomplished by means of an integrative model of supply chain collaboration. Qualitative interviews with management executives and panel survey data provide the foundation of this model. The current study is based on practitioner views of supply chain collaboration and, as such, reflects the current state of supply chain collaboration practice. A survey was developed following a review of the literature and exploratory interviews with key business people. The survey relied primarily upon open-ended questions to explore respondents’ views on collaboration. Each respondent was asked to select a collaborative relationship believed to be the most important to his/her company’s future success. The survey was e-mailed to 100 members of the Council of Supply Chain Management Professionals, who are also members of The University of Oklahoma Logistics/Supply Chain Executive Panel. The majority of respondents held Director-level or higher positions (Vice President, etc.) within their firms. Job titles indicated direct involvement in logistics and supply chain operations. A total of 62 completed surveys were received (62 percent response rate). Of those, seven respondents indicated their firms did not have a collaborative relationship with a trading partner. The remaining 55 firms – those indicating they do have a collaborative relationship with one or more trading partners – were used for analysis purposes. The Appendix provides a list of 52 respondent companies; three surveys were returned anonymously. The 55 respondent firms included 29 manufacturers, 11 third-party logistics firms, 5 retailers, and 10 “other” types of firms. The annual firm sales ranged from a minimum of $30 million to a maximum of $28 billion with average annual firm sales of $4.4 billion. The respondent firms averaged 16,095 employees and ranged from 85 employees to 110,000 employees. Following receipt of the completed survey, selected respondents were contacted and asked to participate in follow-up in-depth interviews to gain further insights into their collaborative experiences. The information obtained during those interviews has been used to supplement the basic survey data and is incorporated into the research analysis. A qualitative analysis method was utilized for data analysis and subsequent development of a conceptual model of supply chain collaboration (Silverman, 2000). Throughout the iterative and time-intensive data analysis process, four of the seven co-authors served as coders to identify codes (i.e. reoccurring words, concepts, or ideas); integrate them into categories according to emergent, common properties; and develop a cause-and-effect model of collaboration. The analysis process started with coding five sample transcripts in a joint session to develop a common coding procedure and to reach agreement on a single codebook with common codes and categories. Then, the coders coded the data independently in the four rounds of the reiterating data analysis process. Coding differences were reconciled through negotiations among the coders until they reached inter-coder agreements; the lead author performed the mediating role. The inter-coder reliability was assessed by calculating the simple percentage of the agreement among coders in four different rounds. The repeated coding-recoding process helped achieve the highest possible degree of post-negotiation inter-coder reliability (perfect consensus) as well as internal validity (a proper understanding of the phenomenon) (Carter and Ellram, 2003). The inter-coder reliability showed 87.10 percent in the first round, 94.19 percent in the second round, and 98.39 percent in the third round until consensus was reached in the fourth round. Supply chain collaboration 241 A model of supply chain collaboration Figure 1 shows a conceptual model of supply chain collaboration which was developed based upon the empirical data – the responses to the survey supplemented with interview material. The proposed model covers the progression of such relationships including antecedents, collaboration, and consequences. Each is discussed and supported with data from the surveys. Follow-up interviews were conducted with Figure 1. A conceptual model of supply chain collaboration IJLM 16,2 242 a select group of respondents to gain increased insight into collaboration. The respondents were chosen based upon their answers to the survey. For example, if individuals provided detailed comments on questions related to the interaction with their partners, they were asked more questions and encouraged to elaborate further. Additionally, if the initial response indicated unique or interesting collaborative experiences, the respondents were contacted for follow-on interviews. Finally, a few respondents were chosen at random to further explore their thoughts and relationship experiences. The interviews with the panel members revealed greater insights concerning the collaboration process at their organizations. Antecedents of collaboration The responses to the question about what’s involved in developing a collaborative relationship centered in the following areas – strategic intent, internal alignments, relationship orientation, investments, free flow of information/heightened communication, and formalization. These areas are described in greater detail. Strategic intent The survey respondents indicated that clear strategic intent leads to successful collaborative arrangements. For example, a firm’s objective to grow, capture market share, and/or improve service offerings with the help of collaborative partners can drive the entire supply chain collaboration process. Clear strategic intent provides focus for the collaborative relationship and shapes interactions to gain the greatest cross-firm rewards/improvements. Without such a roadmap, optimal results cannot be achieved. Internal alignments Supply chain collaboration requires firms to adopt a completely new business model and to work closely with a limited set of supply chain partners. The selection of the right supply chain partners is critical. One respondent recommended process mapping to define step-by-step supply chain processes. Process mapping can help to determine what can be done internal to the organization and what needs to be accomplished with an external partner. Creating internal alignments (and ultimately external alignments) can yield additional dividends by helping to streamline operations in basic areas such as manufacturing cycles, forecasting methods, customer service, sales, logistics, and information systems. Such alignments (that is matching) can create a seamless customer value delivery process. This may result in reconfiguration for the collaboration partners. A cautionary observation from the respondents noted that intended reconfigurations inside the firm could not be accomplished without top management support. As the respondents pointed out “only the top management’s attention to changes” will drive the necessary adjustments toward external collaboration. Relationship orientation Many of the respondents expressed the need to emphasize the development of a relationship (versus a transactional orientation) and understanding of each other’s business. Of course, that’s to be expected. However, the responses also gave an indication of what relationship development means in practice. The common thread was ongoing, long-term interactions built on mutual trust and commitment. One respondent likened a collaborative relationship to a work-in-progress: Supply chain collaboration We’ve executed an evergreen business contract that assumes our relationship will be ongoing in order to eliminate the need to annually review and rewrite the entire agreement. An underlying theme throughout the discussion of collaborations seems to be a focus on cooperation and joint efforts with a feeling of “we are in this together”. The impacts that collaborative actions will have on both parties are taken into account when making decisions. This contrasts to a traditional supplier-customer relationship with an “us vs them” approach. As one respondent stated: This is not a “Do (what) I say” type of relationship, but one in which both parties work out solutions that are mutually beneficial. Several respondents noted that mutual trust can provide a foundation between collaborative partners and can lead to sharing of critical market-based data. However, building trust is not easy. Trust between partners must be earned. One respondent defined the requirements: trust comes only after the other party proves its abilities to offer solutions and also demonstrates loyalty. Another respondent expressed this issue stating: We have entrusted our supplier with our most sensitive internal operations, which is the hardest step in the collaborative relationship. A trust-based, long-term relationship also requires commitment from the parties involved. Commitment implies the parties are tolerant of each other’s deficiencies (within reason) and that each will cooperate and not act opportunistically. This is important because most collaborative partners are not equal in terms of clout or bargaining power. If a partner is to be trusted, that partner cannot take advantage of a relatively stronger position. For example, one respondent acknowledged that even though one of his company’s customers is somewhat captive, his company works hard to meet the customer’s needs in a collaborative, mutually beneficial arrangement. Relationship-specific investment Sustainable collaborations must be supported with sufficient resource investments. Financial and non-financial investments including time, money, training, technology up-dates, and other resources are required. Respondents also talked about a different type of investment – top management’s attention. Unless support is provided by people with power within the organizations, the long-term outcome is at risk. The return on investments at the respondent firms seems to be positive. Several respondents explicitly stated building and maintaining relationships and then dedicating personnel to managing the relationships, the processes, and the information was worth the effort. They also pointed out that collaborative relationships do not thrive unless they are encouraged and supported through sufficient commitment of management time. Time may be the costliest investment. Free flow of information and heightened communication Information sharing between the collaborative partners occurs in a variety of forms that include point-of-sale (POS) data, promotion plans, insights into inventory levels, etc. Information sharing was described as a “two-way street”. 243 IJLM 16,2 They share with us their movement and we use our market knowledge and add our sensitivity to the numbers. Information sharing at many of the respondent firms seems to be so rich, frequent, and in-depth that it could almost be termed a co-mingling of information. One respondent offered an attention-grabbing example: 244 My company assumes a great deal of liability for maintaining inventory levels at the customer locations and, as a result, my company has better knowledge of customer needs and ordering habits than the customers themselves. Several respondents referred to a heightened communication between collaborative partners. To differentiate heightened communication from the information exchange discussed above, the emphasis is more on how collaborative partners interact. This involves more frequent meetings on a regular basis and other forms of interactions at the senior management level. The intent of the heightened communication is to identify opportunities and areas for improvement. Formalization An interesting study finding is that formalization is necessary for successful collaboration execution. Formalization is defined as the extent to which decision-making is regulated by explicit rules and procedures (Dwyer and Oh, 1987). Approximately one-third of the respondents (20 of the 55 respondents that returned the surveys) consider formalization an essential part of the collaboration process. The areas of formalization suggested by the respondents include: . co-developing performance metrics – key performance index, scorecard, product/service deliverables – and the resulting incentive; . prior agreements on collaboration goals or objectives; . determining roles and responsibilities of each partner as well as reporting mechanisms in the relationship; . laying out collaborative implementation plans; . standardizing information technology; . specifying information to be shared; and . aligning collaboration schedules. In this context, a respondent described a collaborative arrangement as a “long-term contract”. Table I summarizes the antecedents of collaboration that emerged during data analysis. The nature of collaboration The respondents were not provided with a definition of collaboration. They were asked to explain what collaboration means within their organization. The definitions of collaboration offered by the respondents deal with three major constructs: behaviors, culture, and relationship interaction. First, the majority of the respondents described collaboration as “working together”. Second, some of the respondents defined collaboration a “culture of sharing”. The remaining respondents considered collaboration to be a “partnering relationship”. The respondents referred to Strategic intent Internal alignment Relationship orientation Relationship-specific investment Information flow Formalization Capability-based functional integration Process mapping Streamlining internal operation Ongoing Relational Long-term oriented Time Personnel Employee training Physical resources Information technology Free flow of information and communication Performance metrics Goals and objectives Roles, responsibilities, and reporting mechanisms Collaborative planning and scheduling Collaborative technology Type of shared information “joint planning, management, and measurement”, “sharing goals, objectives, benefits, resources, information, and risks with partners”, “dividing tasks among firms for specialization”, as well as “building close relationships with other firms”. Thus, it is suggested that collaboration should be defined as a firm’s culture of working together with other firms toward a common set of goals that bring mutual benefits to a partnering relationship. The principal features of collaboration are discussed below. Shared information is at the center of collaboration According to the survey respondents, shared information is an essential ingredient of day-to-day operations as well as more strategic collaborative activities. Information covering a wide range of activities is shared among various partners. Shared information provides a common base for partners and triggers the flows of products, services, funds, and feedback between the partners. Information sharing is frequent and exchanges become a matter of routine that encompasses multiple levels across the firms. Information sharing may occur formally in periodic review sessions or informally between collaborative partners. One manufacturer stated, “Our contact and I speak fairly frequently although it is not pre-planned or formal”. A packaged food manufacturer and its major customers arrange quarterly meetings to discuss various issues including customer demand, package size changes, new item development, in-store display support, cost-benefit analysis between different logistics efficiency programs (e.g. direct plant ship vs inventory carrying costs), and lead times. A retailer respondent provided a detailed explanation of the nature of shared information in a collaborative relationship. His company shares information relating to marketing planning, performance evaluations, forecasting, and replenishment of hundreds of SKUs. Forecasting data (e.g. demand forecasting, materials requirements, etc.) are considered essential elements of shared information due to the strong impact on production and shipping scheduling as well as inventory management. In addition, production schedules and the resulting materials requirements are routinely shared by Supply chain collaboration 245 Table I. Antecedents of collaboration IJLM 16,2 246 their key collaborative partners. The forecasting data provided by the retailer drive the vendor’s subsequent scheduling. Also, marketing planning in the form of sales promotions and market intelligence (e.g. market trends, customer preferences, and competitor activities) is shared with their partners. This helps collaborative partners jointly work on new business development. How is information shared? Many survey participants mentioned automated information exchange via information technology such as electronic data interchange (EDI), database (e.g. Wal-Mart’s shared database called RetailLink), data warehouse and data mining techniques, and the internet to illustrate their communication channels. A distributor emphasized that shared information provides supply chain visibility that can trigger immediate, corrective actions relating to the flows of raw materials, finished goods, and services as needed. One of the aspects of the arrangements is detailed track and trace of containers from China to a variety of ports in North America, east and west coast. We have the ability to redirect specific containers from their original ship-to-locations when they are 72 hours out from port. Providing this track and trace detail information is a small marginal cost to the manufacturers, but will have a significant impact on providing visibility to product in the delivery pipeline and driving re-handling and re-shipping costs out of our value chain. Joint planning The next component of collaboration, joint planning, is closely related to and dependent upon information sharing. Information drives collaboration that starts with joint business planning between collaborative partners. A manufacturer stated: We routinely share information regarding our volume projections, and they in turn are quick to contact us regarding anticipated changes in their capacity outlook. Joint planning is required to co-align operations as well as capacities of each collaborative partner. A well-known packaged food manufacturer involves major customers (including Wal-Mart, Kroger, and Target) in the strategic planning process. During the planning process, the manufacturer and its customers jointly prioritize goals and objectives based on individual company goal expectations. Joint problem solving Collaborative partners must also work together to solve supply chain problems. For example, a manufacturer described how the company worked with customers to create store-ready pallets of product in order to minimize handling at the customer’s distribution centers. Another manufacturer recounted how channel-level product movement information is reviewed and suppliers are consulted in order to develop the proper mix of products to maximize sell-through. Similarly, a durable goods manufacturer reported on joint cost reduction efforts as well as process improvements covering delivery of product involving his company and its distributors. A 3PL respondent reported on how projects are managed jointly via a project web site. The 3PL firm assigns a leader to work with the client to manage the process, changes, up-dates, and solves problems as necessary. Joint problem solving can result in mutually developed process improvement ideas. For example, a retailer recounted the following: We brainstormed with our current suppliers on ways to reduce cost by changing their process and/or our requirements. We came up with a change in delivery schedule to streamline their operations (we carried a little more inventory) and we secured backhauls for them to spread their transportation cost. We also used our existing carrier base to move the product from their location enroute to pick up deliveries for us. Respondents indicated that joint problem solving is frequently accomplished through the formation of cross-functional teams or by co-locating each other’s personnel. One example included development of an “Alliance Team” consisting of people from each organization representing various functional areas. The Alliance team meets regularly to solve issues ranging from quality control to distribution operations. Joint problem solving often results in breaking down boundaries between collaborative partners. Forming cross-functional, cross-organizational teams and co-locating may evolve into a virtual integration of the supply chain process. The following description of the relationship between a 3PL and its client provides an idea of how “intertwined” the collaborative partners have become. The client’s representative (employee) is deeply involved in the 3PL’s operations: . The representative proactively informs the 3PL provider of current liability issues that may influence the provider’s coverage. . The representative helps the 3PL build a direct relationship with the primary liability carrier to minimize costs as well as risks. . The representative speaks for the 3PL regarding interactions with equipment manufacturers on out-of-warranty equipment problems and steers the company away from equipment not suitable for the company’s working environment. . The representative works with the 3PL to facilitate injured employees’ return to work after receiving proper medical care. Joint performance measurement The success of collaborative efforts cannot be assured unless performance is properly monitored and measured. The majority of the respondents stated that common metrics should be developed and used to determine rewards (e.g. amount and timing, etc.) for successful collaborative efforts and also to identify performance gaps that need to be addressed. Key performance indicators (KPIs) are fairly common and typically cover specific targets on costs, productivity, and savings goals. KPIs are modified at least annually. One respondent provided more specific guidelines for the timing of performance evaluations. A routine process was recommended involving: . daily capacity planning meetings; . monthly KPI status review; . quarterly executive business reviews; and . continual up-dating of key metrics/goals. The collective information obtained (from the four components) can be used to expand the collaboration in scope and boundary. In the specific instances cited, the performance evaluation results were used to redefine operational processes and re-assign personnel to help accomplish mutual goals. Regular business reviews identify appropriate changes to tactical situations that may have long-term implications. Supply chain collaboration 247 IJLM 16,2 248 Leveraging resources and skills A manufacturer stated that the expected outcome of collaboration is the identification of ways to “grow” individual business and obtain desired rewards. This often involves mutually leveraging each other’s resource base and skills. For example, a manufacturer explained how the company’s international supplier leverages its distribution network with the other’s market reach to distribute non-competitive products in the US market. Another example involves a 3PL and its client in which slots on all vessels and terminal operations at seaports are shared between the partners and decisions on all service lanes are made jointly. This allows greater utilization of potentially slack resources. Leveraging skills is made possible by specialization. A respondent illustrated this well: We trade “work” between us. That is, the things I do well are the things I do. And the things my supplier does well are the things my supplier does. Table II provides a concise summary of the key collaborative activities – information sharing, joint planning, joint problem solving, joint performance measurement, and leveraging resources and skills. These activities provide the framework for successful collaboration and can be used to guide daily operations as well as longer-term strategic planning. Consequences of collaboration Collaboration-associated benefits are not likely to be immediately visible; however, potential long-term rewards are enticing. Information sharing Joint planning Joint problem solving Joint performance measurement Table II. Key collaboration activities Leveraging Forecasting Customer demand Materials requirement Marketing planning Production capacity and scheduling Mutual sales and performance targets Budgeting Prioritizing goals and objectives Product development/redesign Logistics issues (shipping, routing, backhauling, pallet size, packaging, etc.) Marketing support (marketing materials, delivery schedule, store display, etc.) Quality control Cost-benefit analysis (inventory carrying cost, lead time, customer service, etc.) Performance reviews on a regular basis Measuring KPI (customer service, cost savings, productivity, etc.) Determining rewards and taking corrective actions Resources and capacity Skills and knowledge Specialization Efficiency, effectiveness, and profitability In terms of the specific outcome of collaborative efforts, as expected, the responses centered in traditional performance areas. For example, efficiency and effectiveness were frequently mentioned. Efficiency is the measure of how well expended resources are utilized; effectiveness refers to the extent to which goals are accomplished (Mentzer and Konrad, 1991). The survey respondents reported benefits such as efficiency (e.g. cost reduction, reduced inventory, shortened lead-time, streamlining supply chain process, etc.), effectiveness (improved customer service, increased market share, increased sales, new product development, etc.), and profitability. For example, a manufacturer and its customer developed store-ready pallets of product to minimize handling issues at the customer’s distribution centers. Another example is found in new product development. Several manufacturers commented that collaboration with their customers generated a better, more profitable marketing mix as well as new product ideas. These benefits can also be achieved by leveraging potential synergistic effects associated with achieving economies of scale and/or acquiring complementary resources and capabilities. For instance, two respondents indicated collaboration has helped their companies maximize asset utilization (e.g. truckload transportation, transportation capacity sharing, etc.) resulting in substantial capital relief. In addition, several panel members acknowledged that designing/redesigning logistics processes optimized product/service flows and reduced retail store inventory levels. Respondents reported numerous examples to illustrate how collaboration can be financially rewarding through the coordination of procurement activities. One retailer was able to reduce thermopackaging-related costs by 12 percent and their vendor partner boosted profit by 8 percent as a result of adjusting sourcing scheduling. Another retailer talked about his company’s decision to allocate more sales promotion dollars to their collaborative trading partner. The decision resulted in significantly increased transaction volume between the two collaboration partners. Reinforcement and expansion of the relationship True collaboration evolves over time as the partners explore the potential for mutual benefits. The respondents mentioned the need to understand and share each other’s value systems in order to build a strong base for collaboration. Firms usually work with a very limited set of potential partners to test the waters. This typically requires a series of exploratory sessions to discuss expectations and to determine whether there is sufficient fit between the organizations to warrant further exploration. If both parties are satisfied with the relationship, collaboration involvement is likely to escalate as they begin to trust each other. One respondent described reaching a level of comfort after the collaborative partner had met all agreed upon contractual performance requirements. As a result, “more doors were opened” with respect to information sharing and resource commitment. The openness of a collaborative relationship can establish a hotline between collaboration partners, link each other’s information systems, promote candid input from trading partners, encourage development of mutual business plans, and – in extreme cases – result in opening “the books” to each other. Another manufacturer talked about outsourcing more transportation requirements to a preferred carrier as “confidence” in the 3PL increased. In return, the 3PL partner lived up to its verbal commitment and ended up with hundreds of thousands of dollars Supply chain collaboration 249 IJLM 16,2 250 of increased revenue. As a result, the partners became more willing to share potential gains and potential risks because of the long-term opportunities associated with the relationship. In describing a similar arrangement, a 3PL respondent noted that “a successful collaboration has changed how our client views our company as a partner”. The complex dynamics of the supply chain mean that expectations of collaborative partners change – usually escalate – over time. As expectations and the relationship are examined, a new focus often emerges. This commonly prompts a re-evaluation of goals, objectives, performance metrics, and rewards. A respondent pointed out that when a collaborative arrangement grows and succeeds, all parties feel a sense of ownership. As such, mutual cooperation is strengthened. This is consistent with commonly proposed best business practice. One of the primary motives for working together through collaborative efforts is to gain operational and competitive advantages such as decreased cycle times, lower inventory and operating costs, and increased efficiencies in process activities (Dahlstrom et al., 1996). One final benefit of collaboration is a refocusing of strategic resources and efforts. This is shown with a feedback loop in Figure 1. As collaborative partners learn from the ongoing relationship, they modify business practices to better meet each other’s needs. Such calibration ensures that the relationship remains dynamic, adaptable, and valuable to the involved parties. Ideally, the second component of the collaboration model, which defines the nature of collaboration, becomes fluid. Outcomes of the relationship and interactive feedback are used to make improvements. The potential benefits of collaboration are summarized in Table III. Discussion Based upon practitioners’ views on supply chain collaboration, the previously introduced conceptual model of supply chain collaboration was developed to help provide better understanding of collaboration as well as its antecedents and consequences. First, concerning the nature of collaboration, two essential components of collaborative arrangements (e.g. cooperation and information sharing) were observed. The respondents recounted their experiences of working together to plan, implement, and monitor supply chain activities to integrate cross-firm operations, and to focus on Mutuality Efficiency Effectiveness Profitability Reinforcement and expansion of the relationship Table III. Consequences of collaboration Mutually beneficial and synergistic Cost reduction Reduced inventory Shortened lead-time Streamlining supply chain process Improved customer service Increased market share Better pricing New product development Return on investment Sales per target segment Trust Commitment Interdependent Mutual involvements common goals. The respondents stressed that sharing information went beyond routine data to incorporate confidential or proprietary information. The respondents also emphasized the need for a systemic course of action: collaboration partners must act on the information in a way that helps business operations. Second, the survey respondents placed emphasis on the need to formalize collaboration arrangements (e.g. detailing of performance metrics as well as goals and objectives) as an important prerequisite and foundation for collaboration. Third, collaborations that are successful often result in the development of a new culture and operating atmosphere. One respondent mentioned working in an environment that encouraged the “spirit of achieving a mutually profitable relationship”. Another said that collaborative relationships should “bring the greatest good to the greatest number of people in an honest and mutually beneficial manner”. Within this context, several of the respondents pointed out that collaboration evolves over time as the parties get to know one another. Jointly shared experiences can help them “learn how to leverage certain areas to create and exploit opportunities”. These cultural changes forge supply chain relationships that, in turn, reinforce collaborative efforts. Managerial implications Several respondents mentioned a “blurring of lines” between organizations in contrast to an “us vs them” approach. However, there is still accountability on both sides along with an awareness that they are “in this together”. This idea was expressed in a number of different ways – treating the arrangements as if they both were part of the same operation, treating them as co-owned, and employing a new focus on the best common solution. As such, collaboration is about integration within and outside the boundaries of individual firms, which makes collaborative efforts hard to accomplish. The following discussion focuses on the key managerial implications that emerged from the research. Collaborations are typically “tailored” towards the customer. Customers generally initiate the efforts and design the arrangement. There is a feeling among many of the respondents that customers have benefited the most. This unevenness is somewhat balanced by the potential for gain. Many of the respondents indicating rewards are not distributed evenly still admitted they got enough “out of” the collaborative arrangements to make it worthwhile. Collaboration is good, but – in reality – it is only as good “as you make it”. You must invest efforts to make it work. Collaboration goals often center on supply chain efficiency (figuring out better ways to do things) and better inventory control. Examples of good progress were noted including increased business volume, inventory reductions, decreased lead time, and higher service levels. Different industries have different degrees of collaboration and cooperation. To date, the food industry has probably been the best at developing and benefiting from collaboration. Conclusion and limitations This research was undertaken to provide a profile of current collaborative practices. While a relatively small group of companies participated in the research, many top companies are represented. Therefore, although the sample size represents a limitation, Supply chain collaboration 251 IJLM 16,2 252 that limitation is balanced by the quality of the respondent base and their expertise/experience in the area. Another limitation is that input was secured from only one party to the collaborative relationship. Future research can add to the knowledge base by using a dyadic approach and talking to two (or more) parties/organizations involved in a collaborative arrangement. Also, since collaboration suggests a time-oriented process, another area for future research could be the development of a longitudinal study associated with the panel members to determine whether and/or how the antecedents and collaboration factors change throughout the relationship. The participants shared their experiences and their hopes regarding collaboration. It became clear that they are committed to collaborative relationships and they are hopeful about what can be accomplished through focused inter-company efforts. For the most part, they recounted positive outcomes including improved efficiency, effectiveness, and enhanced market positions. The respondents reported on the collaborative relationship that was most important to their continued company success. Considering that, on average, the respondent firms had only been involved in the relationships slightly less than five years, they are receiving a good return on their investment. It will be interesting to see how they move forward. The researchers intend to continue to work in this area to better define how firms can truly exploit the maximum benefit from collaborations. 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Cooper Tire CVS Del Monte Foods Dean Foods Company EAS Emerson Fleischmann’s Yeast Freese and Associates Inc. Galderma Laboratories, L.P. GENCO Supply Chain Solutions Godiva Chocolatier Inc. Harley-Davidson Heinz North America Ingersoll-Rand Company International Paper IR Productivity Solutions Louisville Slugger Mattel, Inc. Menlo Worldwide Mercury Marine Michael Foods Mighty Auto Parts Murphy Warehouse Company NCR Corporation New World Pasta Company New York City Housing Authority Oce USA Inc. Papa Johns International PEGASUS Logistics Group Pinnacle Foods Sabath Supply Chain Consultants Sargento Foods Inc. Standard Corporation Standard Register Steven Myers & Associates The Revere Group Thomson Learning Transplace Unilever Unisource Worldwide Inc. VICS Volvo Logistics North America Williams-Sonoma, Inc. Table AI. IJLM 16,2 256 (Soonhong Min is an Assistant Professor of Marketing and Supply Chain Management, Michael F. Price College of Business at The University of Oklahoma. He has published in Journal of Business Logistics, Journal of Retailing, International Journal of Physical Distribution & Logistics Management, International Marketing Review, Journal of Marketing Theory and Practice, and the E-Business Review and co-authored a book, Supply Chain Management. He holds a PhD from The University of Tennessee and can be reached at The University of Oklahoma, Division of Marketing and Supply Chain Management, Michael F. Price College of Business, 307 West Brooks Suite 1, Norman, OK 73019. Tel.: 405-325-0430, E-mail: [email protected] Anthony S. Roath is an Assistant Professor of Marketing and Supply Chain Management, Michael F. Price College of Business at The University of Oklahoma. His research interests include international supply chains, relational management/governance, and logistics modeling and simulation. He holds a PhD from Michigan State University and can be reached at The University of Oklahoma, Division of Marketing and Supply Chain Management, Michael F. Price College of Business, 307 West Brooks Suite 1K, Norman, OK 73019. Tel.: 405-325-5893, E-mail: [email protected] Patricia J. Daugherty is Division Director and Siegfried Chair in Marketing and Supply Chain Management, Michael F. Price College of Business at The University of Oklahoma. She has published extensively in logistics journals and has co-authored two books. Her current research interests include supply chain relationships and reverse logistics. She holds a PhD from Michigan State University and can be reached at The University of Oklahoma, Division of Marketing and Supply Chain Management, Michael F. Price College of Business, 307 West Brooks Suite 1H, Norman, OK 73019. Tel.: 405-325-5899, Fax: 405-325-7688, E-mail: [email protected] Stefan E. Genchev is a PhD Candidate in Marketing and Supply Chain Management, Michael F. Price College of Business at The University of Oklahoma. He holds a MBA from The University of Oklahoma. He has published in Business Horizons, Industrial Marketing Management, International Journal of Physical Distribution & Logistics Management, Journal of Business Logistics, and Transportation Research: Part E. Before joining the PhD program, he worked for DHL International for four years in Bulgaria. He can be reached at The University of Oklahoma, Division of Marketing and Supply Chain Management, Michael F. Price College of Business, 307 West Brooks Suite 1, Norman, OK 73019. Tel.: 405-325-3561, E-mail: [email protected] Haozhe Chen is a PhD student in Marketing and Supply Chain Management, Michael F. Price College of Business at The University of Oklahoma. He holds a MBA from The University of Alabama. He has published in Business Horizons, Industrial Marketing Management, and Transportation Research: Part E. His industry background includes eight years of managerial experience in international trade business. He can be reached at The University of Oklahoma, Division of Marketing and Supply Chain Management, Michael F. Price College of Business, 307 West Brooks Suite 1, Norman, OK 73019. Tel.: 405-325-3561, E-mail: [email protected] Aaron D. Arndt is a PhD student in Marketing and Supply Chain Management, Michael F. Price College of Business at The University of Oklahoma. He holds a MBA from Washington State University. He has published in Business Horizons and Journal of Personal Selling and Sales Management. Prior to joining the PhD program, he worked in finance for two years as a salesman and as a loan processor. He can be reached at The University of Oklahoma, Division of Marketing and Supply Chain Management, Michael F. Price College of Business, 307 West Brooks Suite 1, Norman, OK 73019. Tel.: 405-325-3561, E-mail: [email protected] R. Glenn Richey is an Assistant Professor of Marketing and Supply Chain Management at The University of Alabama. He has published supply chain research in academic journals including International Journal of Logistics Management, International Journal of Physical Distribution & Logistics Management, Journal of Business Logistics, and Transportation Research: Part E. His current research interests include collaboration, reverse logistics, technological readiness, and supply chain quality management. He holds a PhD from The University of Oklahoma and can be reached at The University of Alabama, Department of Management and Marketing, 129 Alston Hall, Tuscaloosa, AL 35487. Tel.: 205-348-8922, E-mail: [email protected])