Strategic Supply Chain Management: Sustainability of Collaboration - Literature review Example

OMGT2191 Strategic Supply Chain Management Sustainability Of Collaboration Assessment 3 Individual Research Report Table of Content Table of Content 2 1.0 Introduction 4 1.1 Aim and objectives of the research 4 1.2 Plan of the report 5 2.0 Why firms collaborate 6 3.0 Types and parties to collaborations 8 3.1 Internal and external collaboration 8 3.2 Vertical collaboration 9 3.3 Horizontal collaborations 10 4.0 Determining whom to collaborate with 11 5.0 Supply chain sustainability and collaboration 12 6.0 The Impacts relating to sustainability for the participant 15 6.1 Impacts relating to internal collaboration 15 6.2 Impacts relating to sustainability from collaboration with suppliers, manufacturers, distributors, carriers, retailers 16 6.3 Impacts relating to sustainability from collaboration with customers 17 6.4 Impacts relating to sustainability from collaboration with competitors 18 6.5 Impacts relating to sustainability from collaboration with other organizations 18 7.0 Conclusion 19 7.1 Current Status 19 7.2 Future direction 19 8.0 References List 20 1.0 Introduction The successful establishment of crucial relationships and closer alignment of strategic intent in modern supply chains is crucial for the sustainability of organizations. Current economic downturn has necessitated creative approaches to supply chain as firms identify opportunities to improve their competitive advantage. Vivek (2011) posits that the supply chain structure is undergoing rapid transformation because of pressure from consumers for lower process and higher quality of goods that has necessitated manufacturers, distributors and retailers seek ways of attaining increased cost-efficiencies, and improved lead-time to gain competitive advantage. One of the ways that manufacturers, retailers, and distributors have sought to acquire a competitive edge and attain their strategic objectives is through looking beyond the traditional logistic boundaries through formation of partnerships that are crucial for aiding in the seamless flow of information and goods from the supplier of raw materials to the end consumer (Vivek 2011). Modern supply chain management practices therefore reflect a shift from the traditional adversarial relationship towards modern collaborative approach. Barrat (2004) posit that collaboration is a very broad and encompassing term, which requires further clarification in the context of supply chains. In the context of supply chains, collaboration is founded on mutuality of benefits, sharing of risks and rewards, and exchange of information (Barrat 2004). Such collaborations also portend some risks especially in relation to sustainability with each of the participants in the collaboration resulting to various sustainability impacts. 1.1 Aim and objectives of the research The aim of the research is to identify and outline the impacts relating to sustainability of each participant associated with supply chain collaborations. The objectives of the research are to: Identify the different types of collaborations Identify the participants in collaborations Identify the impacts relating to sustainability for each of the participant identify future direction in collaboration 1.2 Plan of the report This paper begins with the identification of why organizations need to collaborate in the supply chain management, and specifically identifies the points that firms should collaborate and with which firms, and the type of activities that firm’s supply chain should collaborate. This is followed by identification of the different levels of collaboration that include vertical and horizontal collaboration. The paper also identifies the impacts relating to sustainability of each participant associated with collaborations. In conclusion, issues concerning current status and future direction in collaborations are addressed. 2.0 Why firms collaborate The question of why firms should collaborate is significantly addressed in various researches. According to Fawcet et al (2012) supply, chain collaboration is fundamental and dynamic capabilities that can help an organization attain differential performance. Baratt (2004) adds that supply chains that integrate demand and supply using collaboration are better able to deliver improved performance and benefit besides fostering closer relationships that may be a source of greater opportunities for improvement. Efficiency of internal supply chain activities has remained a major focus for most organizations. Such internal supply chain activities include manufacturing, logistics, and purchasing. Whereas many organizations have succeeded in improving the efficiency of the internal supply chain activities, when looked from the supply chain wide perspective, the successes and improvements are mostly interpreted as redistribution of inventory and costs up and down the supply chain (Barrat 2004). The functional nature of the supply chain activities has also meant that demand is disconnected from supply through stockpiles of inventory between the organization and the trading partners. Isolated planning and forecasting further compound the challenges that face organizations in aligning strategic intent with the supply chain management. Collaboration is crucial in such environment and especially in helping the organization to attain internal efficiency. Some other major reasons for collaboration include aiding the firm attain strategic objectives and attain competitive advantage. Elkington (2004) asserts that with the challenging economic environment where customers place increasing demand on the suppliers concerning costs and quality of service, collaboration is fast becoming a critical leveraging attribute and enabler to the successful servicing of customers demands. Collaboration enables or facilitates cost reductions and service improvement besides helping address the various challenges that are associated with sustainability and delivery of the bottom line objectives. 3.0 Types and parties to collaborations There are various type supply chain relationships and collaborations ranging from those that involve suppliers and customers, which are also known as vertical integration to those involving competitors and similar organizations within the supply chain structure (Barrat 2004). Collaborations also exist in a continuum relationship that spans from arms length to vertical integration that is highly collaborative (Lambert et al 2004). 3.1 Internal and external collaboration There are different types and partners involved in supply chain collaborations. Internal collaboration occurs where an organization achieves internal integration of its activities. Few companies have attained internal integration such as manufacturing-purchasing-marketing-logistics and instead most have integrated various internal interfaces such as manufacturing and purchasing and logistics and marketing (Barrat 2004). Such forms of integration are predominantly based on interaction where functional departments aim to share information but lacking in joint goals. Internal collaboration is crucial for internal integration and the successful outcome of strategy since it involves functional departments espousing shared goals, resources and a common vision (Barrat 2003). Internal collaboration however is not just about developing closer relationships and integrating processes between the supply-chain related processes such as logistics, manufacturing and purchasing but also should include the commercial and marketing functions, introduction of new products and services, research and development activities and so on (Barratt 2004). In addition, collaboration should not only be about information exchange relationship at an operational level of activities and instead should be implemented at the strategic and tactical levels across the supply chain in an organization (Barrat 2004). This is because whereas organizations can integrate their processes at the operational level, lack of integration of the strategic and tactical levels, there are limited benefits of integration accrued to the organization in comparison to an organization where these are integrated level portend significant benefits to an organization although there is no clarity of the gaps in the strategic integration External collaboration on the other hand occurs between an organization and outside parties. The partners to an external collaboration include customers, competitor’s external suppliers, and other organizations. Barrat (2004) asserts that there are two major forms of collaborations, which are the vertical and horizontal collaboration. 3.2 Vertical collaboration Barrat (2004) describes vertical collaboration as the collaborations that occurs internally across functions in an organization. These collaborations may involve various parties in the organization such as the customers and the suppliers. In the downstream customer side of the vertical supply chain collaboration, potential opportunities include customer relationships management, collaborative planning that may include collaborative forecasting, demand replenishment and shared distribution (Barrat 2003). On the vertical collaboration under the upstream side of the supply side, supplier relationship management, which is also referred to as supplier development presents opportunities for production scheduling and supplier planning in addition to collaborative design that may lead to innovation and development and introduction of new products besides collaborative transportation (Barrat 2003). 3.3 Horizontal collaborations Barrat (2004) describes horizontal collaboration as collaboration that may involve competitors, which is internally and with other organizations including non-competitors, such as manufacturers whom the organization can share the manufacturing capacity. Langley (2008, p. 116) asserts that horizontal collaboration captures the relationship that may exist between firms that may have parallel or cooperating positions within the supply chain. For instance, such collaboration may exist between a supplier and a competitor. 4.0 Determining whom to collaborate with Barrat (2004) argues that there is a need for scalability in collaboration in addition to the view that individuals cannot collaborate with everyone. The fact that collaborations are often resource intensive initiatives means that organizations should focus their attention on only a few and close relationships. The decision to collaborate or operate under an arms-length cost based relationship is determined by whether the collaboration would create any benefit or value with relationships that may not contribute to additional value maintained as cost based. Additionally, organizations should strive to collaborate with only a few and strategically important customers and suppliers in the external vertical integration. Tang and Gatttoma (2003) regard it as the segmentation approach that is crucial in successful collaboration. The approach is based on the assumption that customers make the purchase decision in various ways 5.0 Supply chain sustainability and collaboration Sustainability in supply is a critical concern within the supply chain field. Carter (2008) describes sustainability as what meets the present needs without compromising the ability of future generation to meet their needs.” The triple bottom line, which considers and balances the economic, environment and social goals, is an important concept that is extrapolated in supply chain sustainability literature and it suggests that organizational sustainability at broader level consists of three key attributes: society, economic performance, and natural environment. Based on the triple bottom line, at the intersection of social, environmental, and economic performance, there are activities that organization can engage in that affect the natural society and the competitive advantage and long-term economic benefits of an organization (Carter 2008). Other aspects of sustainability include transparency, risk management, culture, and strategy. Carter (2008) defines risk as the ‘probability of variation surrounding an anticipated outcome’. Supply chain risk is defined as the ‘potential occurrence of an inbound supply incident which leads to the inability to meet customer demand. Such risks may result from poor forecasting of demand, failure to coordinate demand requirements, poor supplier quality, and poor social and environmental performance and so on. Sustainability of the supply chain is partly dependent on the transfer of capabilities and knowledge from some of the players in a supply chain (Cheung 2011). Enhancing relationships and managing communication between parties to collaboration is one crucial approach that can be effectively deployed to increase supply chain sustainability. The impact of the various parties to collaboration to sustainability is often explored within the context of organizational culture, organizational commitment, and organizational structuring. The need to overcome the intensely ingrained adversarial attitudes that predominate most of the interactions in the supply chain is necessitated by the fact that there is need to effectively manage the supply chain for it to be sustainable. Such an approach will foster cooperation and enhance communications and relationships between different parties in the supply chain. Such an approach is based on the underlying principle that collaboration and open communication in addition to joint problem solving is crucial in developing the supply chain into a sustainable system in economic, social, environmental and safety and health aspects (Cheung 2011). Highly collaborative relationships for instance are not only costly, but also resource intensive and often unpredictable. Sustainability is also impacted by various collaborations challenges that include lack of trust, the unwillingness to share information, additional responsibilities and work, lack of symmetry and mutuality, mistrust in regard to costs, risks and fairness of benefits, risk sharing among other challenges that also lend to the complexities in collaboration (Sabath & Fontanela 2002). Research on the supply chain collaboration terrain over the recent years has indicated that collaboration has proved difficult to implement (Sabath & Fontanela 2002). Collaboration has also faced the challenge of overreliance on technology in attempts at implementation of collaboration. Thirdly, there has been marked failure in differentiating the partners to collaborate with evidenced in segmentation of suppliers and or customers (Sabath & Fontanela 2002). Barrat (2004) posits that if collaboration is to be sustainable, various strategic elements must be available. Such elements should include commitment and resources, corporate focus, technology, demonstration of role of business case, and intraorganizational support. Organizations should be willing to commit its resources considering that collaborations are significantly resource intensive especially in the early stages of development and in the long term during when collaboration is rolled out across relevant customers and suppliers (Barrat 2004). Intraorganizational support is also required for the sustainability of collaboration. These is required in two unique forms, which include through senior management support and in gaining support of other organization parts such as manufacturing (Barrat 2004). This is crucial for process focus and the degree of intra-organizational support likely to determine the extent of process alignment and in essence the extent of success of the supply chain collaboration. The corporate focus is also a crucial determinant of the sustainability of the supply chain collaboration. Barrat (2004) argue that with many organizations focused on shareholders, they are distracted from focusing on collaborative initiatives and supply chain, which may be regarded as unnecessary expenditure. The early delivery of promised benefits may help an organization gain momentum and hence foster organizational support. In order for the organization to build commitment and support from the senior management, organizations should develop a business case for collaboration. Finally, one of the major criticisms that face collaboration is the wide assumption among supply practitioners that supply chain collaboration need to be based on technology. Barrat (2003) argues that collaboration must not always be based on technologies as the excessive obsession with the technology is one of the greatest barriers to collaboration. 6.0 The Impacts relating to sustainability for the participant 6.1 Impacts relating to internal collaboration According to Barrat and Green (2001), one of the potential dangers of internal collaboration is the fact that attainment of internal integration may result to a larger albeit organizational silo. whereas the external collaboration is crucial for the supply chain sustainability, the internal collaboration is central to the attainment of the external collaboration. Barrat (2004, p.31) asserts that for a company that seeks to attain competitive advantage using the external collaborations should also be focused internally. This means that optimization of inter-organizational processes will require inter-organizational or internal collaboration. The benefits of external collaboration and the sustainability impacts relating to external collaboration are therefore evidently closely aligned with the internal collaboration. This can be illustrated by a simple example, where delivery between the customer and supplier is erroneous. In this case, the supplier may deliver the wrong quantity if the wrong quantity was ordered in the first instance due to poor alignment of external collaboration with the internal processes. This makes internal collaboration key to sustainability of external collaborations. Impacts relating to external collaboration VERTICAL COLLABORATION 6.2 Impacts relating to sustainability from collaboration with suppliers, manufacturers, distributors, carriers, retailers Collaborations with suppliers manufacturers, distributors, carriers, and retailers are a major factor that may influence the supply chain sustainability. Katherine (2010) argues that in most cases, consumers regard the brand owners as the face of packaging and thus look upon them to take responsibility for environmental impacts. However, most retailers only have about 5% direct control for the environmental impact of packaging with over 95% of the control indirect as it fall sunder the suppliers. Collaboration between the brands owners with the suppliers for instance can be used to reduce the environmental impact. Katherine (2008) argues that brand owners through collaboration with the suppliers can participate in goal setting, data collection, and implementation and such information may facilitate in the management and communication concerning the packaging sustainability. This is in addition to the areas under the direct control of the brand owners who may dictate aspects of the packaging material-specification and packaging-design. Retailers and brand owners can influence the supply-chain operations to better respond to consumers by understanding that where the materials are sourced and packaging is manufactured influences the sustainability attributes of the packaging. Retailers can for instance participate in a goal setting collaborations where there together the supply-chain partners can deliberate on the metrics for baseline performance and measurement of progress towards attainment of identified collaborative goals (Katherine 2008). Information sharing between the supply chain partners including supplier’s manufacturers, distributors, carriers, and retailers in vertical collaboration is crucial in sustainability as it can be effectively used to leverage on process integration leading to synchronized operations that result to competitive advantages including efficient delivery, ability to address safety concerns and so on (Sandberg, 2005, p. 4). Collaboration with suppliers for instance could be attained through collaborative planning, forecasting and replenishment and countries such as Wal-Mart have successfully used such collaborations to drive down inventory holding costs, ensure timely replenishments, maintain quality standards, improve service delivery among other ways. These have led to competitive advantages that have resulted to increased sustainability for the organization. Nonetheless, there are indications that despite the expected benefits of collaboration, other than saving on costs, most organizations are unable to reap the benefits of collaboration including reduction in stock turnouts, reduced damage of goods, reduced return of goods and reduced refusal of goods besides lower inventory levels that have faster returns. 6.3 Impacts relating to sustainability from collaboration with customers Collaboration with customers can also influence the supply chain sustainability. One significant area where customers can influence the sustainability of the supply chain is concerning the demand planning. Through use of collaborative demand planning, improvement customer service may be achieved along with reduced stock-outs, lower inventory levels, and so on (Sandberg, 2005, p. 3). The customers may provide information that may lead to better products that may reduce an organization cost of research and development and thereby saving the organizations various expenses, which may lead to economic benefits such as higher profits hence improved sustainability for an organization. HORIZONTAL COLLABORATION 6.4 Impacts relating to sustainability from collaboration with competitors One aspect relevant to sustainability is the measure of risk. Carter (2008) posits that within the literature of sustainability, organizations should manage risk factors such as harm from products and financial risks besides public safety, environments and worker safety. Collaboration with competitors can reduce the risk by setting standards for the industry thereby reducing the risk exposure that is faced by an industry and hence increasing the sustainability of the organization. For instance, industries may have a negative reputation because of actions of competitors thereby leading to a public outcry that may lead to increased legislation over the industry or loss of customers and hence leading to unsustainability. In addition, lack of transparency by competitors may lead to demand by local communities and external stakeholders for improvement in transparency and in some instance may result to legitimacy issues that may impact negatively on the supply chain (Carter 2008). Collaboration with the competitors may reduce such risks. Sandberg (2005) for instance suggests that there is need for developing an atmosphere of mutual trust, sharing risks and rewards besides extensive information sharing, which can prevent sub optimization within the supply chain. 6.5 Impacts relating to sustainability from collaboration with other organizations Collaboration with other organizations may influence the supply chain sustainability. Various companies have employed strategies that address issues of sustainability such as production of greenhouse, carbon footprint, and global change in climate. For instance, Rowzie (2008) posits that producers have moved beyond the traditional approaches to environmental improvement to focus on innovative and new ways that are geared towards helping the customers meet their sustainability goals. Improvement in transportation efficiency for raw materials and finished products is one effective way that organizations are deploying to reduce greenhouse emissions. Rowzie (2008) gives the example of verso Paper Corp that collaborated with the strategic supply chain partner, Safe Handling Inc, a bulk transport company, to reengineer the company’s approach to transportation of chemicals and in the process contributing to reduction in greenhouse emissions by up to 90% and transport costs by up to 50%. 7.0 Conclusion 7.1 Current Status Presently, few organizations have attained internal integration and collaboration, as most forms of internal integration have remained interactional in nature within the functional departments. Such collaboration lacks shared goals, visions, and resources. Collaborations have also been faced with mixed success with most of the recent research indicating that few organizations have truly attained effective collaborations nor acquired the benefits accrued from such collaborations. Besides cost savings, most organizations have failed to benefit from other potential benefits that include reduced damage to products and so on (Sandberg, 2005, p. 8). 7.2 Future direction Successful internal integration will require that internal collaboration be aligned with external collaboration in terms of developing and integrating closer relationships, processes and sharing formation with suppliers and customers for more successful collaboration thereby avoiding experiencing the potential pitfalls. 8.0 References List Sandberg, Erik. 2005. Logistics collaboration in supply chains: A survey of Swedish manufacturing companies. IMIE. Sehgal, V 2011, ‘Supply chain as strategic asset’, The key to reaching business goals, New York: John Wiley and Sons. Quayle, M 2003, ‘A study of supply management practice in UK industrial SMEs’, Supply chain management: An international Journal, 8, 1, 79-86. Halldorsson, A., Kotzab, H., & Tage, S 2009, ‘Supply chain management on the crossroad to sustainability: a blessing or a curse’, Logistic Research, 1, 15-25. Barratt, M 2004, ‘Understanding the Meaning of Collaboration in the Supply Chain’, Supply Chain Management: an International Journal, 15, 1, 30-42. Carter, C. & Rogers, D 2008, ‘A framework of sustainable supply chain management moving toward new theory’, International Journal of Physical Distribution & logistics Management, 38 95, 360-387. Cheung, Y & Rawlinson, S 2011, ‘Supply chain sustainability: a relationship management approach’, International Journal of Managing Projects in Business, 4, 3, 480-497. Rowzie, K 2008, ‘Driving sustainability throughout the supply chain’, Pulp and Paper, 82, 10, 21-23. O’Dea, K 2010, ‘Supply chain collaboration does matter’, Packaging digest, 47, 3, 21. Read More