chapter 9 partnerships in the supply chain. content choosing the right relationships 1. partnerships...

Chapter 9

Partnerships in the supply chain

Content

Choosing the right relationships1.

Partnerships in the supply chain2.

Supplier networks3.

Supplier development4.

Implementing Partnerships5.

Choosing the right relationships

Key issues

1111What types of relationships can be observed in supply chains?

2222How can each type of relationship be tailored to different types of product?


The essential of supply chain is collaborationThe essential of supply chain is collaboration


trust

Arm’s-length

PartnershipStrategi

c alliance

Almost none

Inter-person

al

Inside system Inter-

organizational

Joint venture

Vertical integratio

n

Relationship styles continuumRelationship styles continuum


Bottleneck items

Non-critical items

Leverage items

Strategic items

weaknesslarge

strength

little

Buyer power

No. o

f availa

ble

su

pp

lier

Reducing dependence on these items through diversification of suppliers and substitute products

Using strength carefully to draw suppliers into a relationship that ensures supply in the long term

Not jointly developed; Unbranded; Do not affect performance and safety in particular; have required low investment in specific tools and equipment

Reducing prices and pushing for preferential treatment

Content



Supplier networks3.




1111What are partnerships?

2222What are partnerships’ advantages and disadvantages?

Key issues


Lower level of collaboration results in Lower level of collaboration results in information block and inefficiencyinformation block and inefficiency


The characteristics of partnershipsThe characteristics of partnerships Sharing of information Trust and openness Coordination and planning Mutual benefits and sharing of risks A recognition of mutual interdependence Shared goals Compatibility of corporate philosophies


Partnership type

Activities Time horizonScope of activities

Cooperation Fewer supplier;

Longer-term contract

Short-term Single functional area

Coordination Information linkages;

WIP linkages;

EDI exchange

Long-term Multiple functional areas

Collaboration Supply chain integration;

Joint planning;

Technology sharing

Long-term with no fixed date

Firms see each other as extensions of their own firm

Characteristics of partnership typesCharacteristics of partnership types


Economic justification for partnershipsEconomic justification for partnerships Inter-firm relation-specific assetsInter-firm relation-specific assets

• Duration of safeguards• Volume of inter-firm transactions

Knowledge-sharing routinesKnowledge-sharing routines• Partner-specific absorptive capacity• Incentives to encourage transparency and discourage

free riding

Complementary resources and capabilities Effective governance

• Employ informal governance mechanisms


Advantages of partnershipsAdvantages of partnerships Save cost of negotiations Reduce monitoring of supplier soundness Increase productivity

Disadvantages of partnershipsDisadvantages of partnerships Inability to price accurately qualitative matters such

as design work Need for organizations to gather substantial

information about potential partners on which to base decisions

Risk of divulging sensitive information to competitors

Potential opportunism by suppliers

Content



Supplier networks3.



Supplier networks

Key issuesKey issues

1111What are supplier associations?

2222What is Japanese Keiretsu?

Supplier networks

Supplier associationsSupplier associations The network of a company’s important

suppliers brought together for the purpose of coordination and development. Through the supplier association forum this company provides training and resource for production and logistics process improvements. The association also provides the opportunity for its members to improve the quality and frequency of communications, a critical factor for improving operational performance. (Aitken, 1998 )

Supplier networks

Supplier associationsSupplier associations

Automaker Founding year Total members (1990)

ToyotaKyohokai

1939 229

NissanTakarakai

Shohokai

1954

1966

174

MitsubishiKashiwakai

1971 262

MazdaYokokai

1981 180

IsuzuKyowakai

1962 284

Supplier networks

Supplier networks

Japanese keiretsuJapanese keiretsu Japanese business consortia based on Japanese business consortia based on

cooperation, coordination, joint ownership cooperation, coordination, joint ownership and control.and control.

The keiretsu’s controlling baseThe keiretsu’s controlling base• Equity exchange between supply chain members

Supplier networks

Content



Supplier networks3.



Supplier development

Key issue

1111How can upstream supply processes be integrated to improve material flow?


Integrated processesIntegrated processes Collaborative planning and strategic

development• New product development• Material replenishment• Payment


Integrated processesIntegrated processes


Synchronous productionSynchronous production The approaches to improve

synchronous supply chain processes• Transparency of information upstream and

downstream• Vendor-managed inventory (VMI)

Content



Supplier networks3.



Implementing partnerships

Key issueKey issue

1111What are the barriers to achieving partnerships in the supply chain?


Open market negotiations

cooperation

Coordination

collaboration


Barriers to build partnerships Power Self-interest Focus on negative implications of partnership Opportunism Focus on price

chapter 9 partnerships in the supply chain. content choosing the right relationships 1. partnerships...

Documents

supply chain slide

partnerships advantages

essential of supply

collaboration slide

inefficiency slide

supply chains

types of relationships

preferential treatment