Issues of Trust in Sc PPT

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ISSUES OF TRUST IN SC

NAME: MEHWISH ALI AKBER

ID NO# 18893

SUBJECT: SCM SAT (3-6)

SUBMITTED TO:

SIR MASOOD SUBZWARI

DATE: 21ST APRIL 2012

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TOPIC

ISSUES OF TRUST IN SC

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AGENDA

Introduction & History of Issues of Trust in SC

Five Components Of Trust In Supply Chains:

Logistics and Supply Chain Relationship Supply Chain Trust is Within Your Grasp

Model for Supply Chain Collaboration

Importance of Trust In Supply Chain Management

Conclusion

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Introduction & History of Issues of Trust in SC

The topic of trust is not new and has been extensively studied

in the fields of psychology, sociology and even economics.

Its study, however, has largely been focused at the individual

level.

Supply chain research on trust, however, extends the domain

of applicability to that of the firm and this represents fertile

ground for research that is relevant to todays business

environment.

While economists such as Williamson (1985) and Arrow

(1974) lead the discussion on the impact of trust on firm

behavior, research in a supply chain context only began in

earnest about 15 years ago.

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Five Components Of Trust

In Supply Chains:

More specifically, Riddalls, et. al. (2002) identify fivetrust components in supply chains:

1. Integrity (honesty)

2. Fairness

3. Loyalty

4. Openness / frankness in dealing with the partnership

5. Competence (supply chain partners reliability,dependability, quality of product, meeting deadlines,requirement fulfillment, accurate demand forecasts,etc.)

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Logistics and Supply Chain Relationship

In the 1980s and 90s, partnerships and alliances beganto be more prominent in supply chain research. Earlyresearch examined what contributes to successfulalliances and partnerships.

The focus on alliances and partnerships graduallyevolved into the more general topic of collaboration.Initial research sought to define collaboration andestablish its benefits. Empirical research followed thatidentified antecedents to collaboration and also the

three constructs of behaviors, culture and relationshipinteraction. Though much has been done, Daughertyoutlines numerous opportunities for further research.General ideas on the following topics are:

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CONT..

1. Partnerships/alliances/collaborative relationshipsThough many of these work, many

others fail or fall short.

2. proving chances of successSelective matching is already known to be an important factor.

3. Has the issue of power gone away?Are there principles that can be used to safeguard the

smaller partner and still encourage good relationships?

4. Metrics and monitoringWhat are the most important metrics in measuring trust? static orvariable over time? Monitoring requires accountability.

5. InnovationThere is a surprising lack of literature on logistics-focused innovation. One area

of potential interest is the science of service and service innovation (Ostrom et al 2010).

6. TechnologyThis includes research into how to prepare for future technologies and how to

best use current ones.

7. Focus on serviceMany current models focus on products rather than services, yet many

economies depend more on service related industries. Research could examine the pricing and

valuing of service, service branding, creating a service culture, and all of the relationships

involved in these processes. This area invites collaboration with researchers outside of the

business department.

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Supply Chain Trust is within Your Grasp

Trust is recognized as a key factor in improving supply chain collaboration.

The Performance DimensionFor trust to exist, there must be performance. This means that

companies must consistently fulfill commitments.

The Information-Sharing DimensionAll information pertinent to a relationship or project

must be openly shared for true trust to exist. This includes sharing sales data, forecasts,

production plans and new product information. The Behavioral DimensionBehaviors that foster trust include the sharing risks and benefits

and investment in a partners capabilities, In fact, how well risks and benefits are shared is one of

the most powerful indicators of trust.

The Personal DimensionTrust inherently relies on personal relationships. Buyers and

suppliers may not trust each others respective companies, but they must trust each other. These

types of relationships can be encouraged through more one-on-one interaction, customer andsupplier visits, and stable account management teams.

The Two-Worlds DimensionThis dimension describes the fact that suppliers are generally

more dissatisfied with the level of trust than buyers. The reason? Power. When power is skewed,

trust is harder to establish.

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Model for Supply Chain Collaboration

The first stage is called unfreeze this includes the initialawareness of the need for change and a conscious willingnessto do so. Often such awareness arises out of crises orleadership change.

The second stage is called movement and is the unsteady,transformational state where a firm begins its initial foray intothe change. Pilot projects are often used to vet out the pros andcons of the change and also generate the needed evidence sothat management can more effectively evangelize the virtuesof the proposed change.

The third and final phase is called refreeze and is theprocess by which the change becomes institutionalized andrefined.

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Importance of TrustIn Supply Chain Management

One of the most critical factors in a committed and collaborative relationship between supply chainpartners is trust. If trust is present, it can improve the chances of a successful supply chainrelationship; if not, transaction costs can rise through poor performance.

Organizations need trust in order to be flexible and agile. However, establishing trust can beelusive and even harder to maintain. It is also true that trust is both individual and institutional.Trust in a supply chain evolves based upon commonalities among the partners and can takepatience and time to develop.

There is both risk and interdependence in a supply chain relationship and there must be an implicitagreement not to exploit the partners vulnerabilities. This takes development, honesty andopenness to be successful.

In fact, the main components in trust in supply chains are honesty, loyalty, fairness, openness andcompetence.

Companies must be careful to optimize this trust as it can take resources from other aspects ofthe supply chain (and risks) to develop this. So they must be careful not to over or under invest indeveloping trust. The value of the specific relationship must first be made clear so that it can be

determined what effort will be put forth in developing this trust.

It is apparent that trust only exists when both parties think it exists, that it is critical to treat supplychain partners like they are important, information needs to be shared freely, and that partnersneed to follow through with promises made.

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Issues of Trust in Sc PPT

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