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Driving Forces of Collaboration in Supply Chain: A Review Salma Ahmad
Department of Business Administration, Aligarh Muslim university, Aligarh, U.P, India
Asad ullah
Department of Business Administration, Aligarh Muslim university, Aligarh, U.P, India
Authors biography:
Dr Salma Ahmed is an Associate Professor of Supply Chain Management and
Management Information System at Department of Business Administration, Aligarh
Muslim University. She has over 18 years of teaching experience and has supervised many
doctoral theses and dissertations. She has published in a number of academic journals and
has authored a book entitled “How to write and Analyze Cases”. Salma Ahmed is the
corresponding author.
Mr. Asadullah is a Research Scholar in the Department of Business Administration,
Aligarh Muslim University, Aligarh, India. He has an Economics background with an
M.B.A in International Business. His areas of interest include Supply Chain Management;
Retailing and International Marketing etc.
Abstract
Purpose – To examine different aspects of collaboration in supply chain over the last 19
years with the objective of developing theory for supply chain collaboration.
Design/methodology/approach – The paper is based on the review of 80 studies from
1990 to 2009.
Findings – Major findings shows that supply chain collaboration can be applied into
different areas like process, planning, forecasting, transportation / distribution and the
prime motivating factors behind the manufacturing companies entering into collaboration
are trust, leadership, commitment, interdependence, organisational compatibility and
infrastructure/technology.
Research limitations/implications – As the study is based on the review of literature
covering many sectors, the findings of the study needs to be tested across select or specific
sectors.
Practical implications – This study is a compilation of the work related to collaboration
in supply chain, therefore it can be used for developing theories and identifying the driving
forces for various industries leading to logistic collaboration in supply chin.
Originality/value – The review provides a clear understanding of the current state of
research in supply chain collaboration.
Key words: Supply chain, collaboration, driving forces.
Paper type: Literature review.
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Introduction:
The wide spread use of web based technologies and increase in competition has given rise to
supply chain collaboration across many industries especially the automotive sector (Bagchi
and Skjott-Larsen, 2005; Ireland, 1999). Over the years the concept of collaboration has made
a significant transition from being purely theoretical to highly adopted practice in supply
chain and as a result it has become popular among both the practitioners and academicians
(Simatupang and Sridharan, 2005). According to Pagell (2004) collaborative practices in
supply chain have become a well established research domain. Many companies have started
getting benefited by their collaborative initiatives, as suggested by the growing literature on
the subject (Narasimhan and Jayaram, 1998;Sanders, 2007, 2008; Shin et al., 2000;
Simatupang and Sridharan, 2005;Vereecke and Mylle, 2006).
However recent researches have acknowledged the complex role of collaboration and its
mixed results; for example, Sanders (2007) has indentified that intra-firm collaboration had a
direct impact on firm performance whereas inter- firm had an indirect impact. Similarly,
Stank et al., (2001) in his empirical study for assessing the effects of internal and external
collaboration on logistics service performance have found the evidence which suggest that
internal collaboration led to the improvement of logistical service performance whereas
external collaboration did not. Another study done by Vereeck and Mylle (2006) has
concluded that collaboration improved the performances of the firms only marginally. The
basic purpose of the researcher behind mentioning the above study is to provide the
contextual clarity and the beginning of the review.
Supply Chain Collaboration (Operational Definition):
According to Min et al., (2005) the concept of collaboration has been widely examined across
disciplines like Psychology (Konczak, 2001; Stern and Hicks, 2000); Marketing (Gadde et
al., 2003; Jap, 1999, 2001; Perks, 2000); Management (Cross et al., 2002; Sawhney, 2002;
Singh and Mitchell, 2005); Sociology (Powell et al., 2005) and Supply Chain Management
(Holweg et al., 2005; Tuoninen, 2004). However, in this study the concept of collaboration
has been reviewed within the supply chain context.
Collaborative practices in SCM have established itself as successful and sustainable business
operations (Attaran and Attaran, 2007). Also, as per the survey conducted by SCM review
and computer science corporation (SCMR and CSC, 2004) collaboration has been cited as the
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most important issue. It is being increasingly promoted like “Silver Bullet” in many areas of
SCM (Kampstra et al., 2006). Hence, there is no denial of the fact that collaborative practices
in the logistics area have become the source of efficiency and decision–makers in the
manufacturing and retailing industry have understood it.
In SCM, Collaboration is a dominant concept aimed at gaining benefits and sharing results
with the trading partners (Speakman et al., 1998). According to (Bowersox and Closs, 1996;
Chan et al., 2003) the emphasis on the effectiveness of Supply Chain in its entirety has
eliminated the boundaries of the single firms and has promoted them for collaboration
between supply chain partners, leading to the establishment of strong relationships with each
other. Therefore, Myhr and Speakman (2005) have described it as “A Critical linking pins, as
greater specialization brings in more of integration in the overall supply chain”. Taking the
broader view Bahinipati et al., (2009) has defined it as “A business agreement between two or
more companies at the same level in the Supply chain or network in order to allow greater
ease of work and cooperation towards achieving a common objective”.
In the words of Whipple et al., (2002) it means partners working together, in a trustful, loyal
and mutual environment aimed at reducing costs and improving performance. It is seen as a
powerful instrument in achieving effective and efficient supply chain management (Fu and
Piplani, 2004; Mentzer et al., 2000). Collaboration in supply chain has been conceptualized in
various ways by researchers, as it can range from very shallow transactional focused to
highly integrated close relations (Goffin et al., 2006); from collaborative communication to
supplier development ( Oh and Rhee, 2008) or from inward facing to outward facing
(Frohlich and Westbrook, 2001). Some definitions of collaboration in supply chain are
presented in the table 1 below:
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Table. 1. Various definitions of Supply Chain collaboration:
Authors Definition
Bowersox et al., (2003) Emerges when two or more firms voluntarily
agree to integrate human, financial, and/or
technical resources in an
effort to create a new, more efficient, effective
or relevant business mode.
Crum and Palmatier (2004) Characterized as “cooperative behaviour” or
“joint decision making” between companies,
and represents a willingness, versus a
requirement, to engage in inter organizational
efforts.
Finley and Srikanth (2005) Diverse entities working together, sharing
processes, technologies, and data to maximize
value for the whole group and the customers
they serve.
Kahn et al., (2006) A process based on trust, mutual respect,
information sharing, joint ownership of
decisions, and collective responsibility for
outcomes.
Min et al., (2005) adapted from
Anthony (2000)
Two or more companies sharing the
responsibility of exchanging common
planning, management, execution, and
performance measurement information.
Sanders and Premus (2005) adapted
from (Schrage, 1990)
An affective, mutually shared process where
two or more firms work together, have mutual
understanding, have a common vision, share
resources, and achieve collective goals.
Simatupang and Sridharan (2002)
and Whipple and Russell (2007)
Two or more companies working together to
create a competitive advantage and higher
profits than can be achieved by acting alone.
Simatupang and Sridharan (2005) The close cooperation among autonomous
business partners or units engaging in joint
efforts to effectively meet end customer needs
with lower costs.
Skjoett-Larsen et al., (2003) Two or more parties in the supply chain jointly
planning a number of promotional activities
and working out synchronized forecasts, on the
basis of which the production and
replenishment processes are determined.
Stank et al. (2003) A process of decision making among
interdependent parties, involving the joint
ownership of decisions and collective
responsibility for outcomes.
Source: Operational collaboration between shippers and carriers in the transportation
industry (Fugate et al, 2009).
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Different terms such as co-ordination, cooperation, collaboration and integration are
considered to be similar in supply chain, Arshinder and Deshmukh (2008). However,
Kampstra et al., (2006) considers it as a sequence of business initiatives carried out by like
minded collaborating partners and has divided it into four levels.
Level 1: “Communication”- here the goal of the partners is to achieve improvement in
productivity and sharing of information through simple IT applications.
Level 2: “Co- ordination”- It involves intra and inter entity co-ordination of processes and
its main purpose is the synchronisation of flows and automation of certain routine decision
making processes for improving speed and accuracy. Here, the main focus remains on
dealing with physical and policy constraints and additional investment in IT infrastructure
becomes a necessity.
Level 3: “Intensive Collaboration”- It involves collaborative members intensively for
improving the strategic decision making and enhancement of innovation in the supply chain.
Level 4: “Partnerships”- It involves extended financial linkages like sharing of investments
and also profits.
In order to innovate within their supply chain firms enter into relationships. Various authors
have called these types of relationships by various name like inter- organizational
collaboration as joint ventures (Doz and Hamel, 1998); Strategic alliances (Vyas et al., 1995)
, inter –firm cooperation and virtual collaboration etc.
These terms have been described in brief as under:
(i) Joint Ventures:
They are used to develop new market opportunities where the local party contributes in the
form of market knowledge, labor and networks and the firm looking for new market provides
goods and services, marketing strategies and financial resources (Collins and Doorley, 1991).
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(ii) Strategic Alliances:
These are type of long term inter- firm relationship in which two or more partners indulge in
sharing of resources, knowledge and capabilities with the objective of enhancing the
competitive position of each partner (Spekman and Sawhney, 1990).
(iii)Co- operative arrangements:
Co- operative arrangements are sought by many organizations with other organizations due to
fast technological changes, organizational strategies, and competitive environment (Ring and
Van De Ven, 1992). According to Cousins (2002) the rationale behind cooperative efforts lies
on sharing of both tangible and intangible resources, collaboration and business goals like
efficiency, competitive advantage and survival, through redesigning of process and products.
According to Bowersox et al., (2000) due to ever changing global market and fierce
competition, the traditional arm‟s length relationships are no longer considered to be
effective. Therefore, it is not surprising that most of the companies quickly adopted
themselves to this emerging trend of supply chain collaboration, which Lapide (1999) has
classified into three major types.
In manufacturer supplier collaboration, manufacturer collaborates with suppliers and can reap
the benefits in the areas of new product development, order fulfillment and capacity planning.
In manufacturer customer collaboration, collaborative relationships develop between
manufacturers and customer or manufacturer with distributors, wholesalers and retailers.
Such collaboration can take place in the areas of demand planning and inventory
replenishment.
While focusing jointly on planning of logistics activities, collaboration between companies
and third party logistics (3PL) providers and fourth party logistics providers can take place.
Further, elaborating on the levels and types of collaboration found in the SCM literature,
Barratt (2004) has presented the directions in which collaborative relationship can be formed
i.e. either vertical or horizontal collaboration. In this he has identified “The four different
potential relationship partners, suppliers and customers on the vertical axis and
complementors or competitors on the horizontal plain”. In addition, a new form of
collaboration has also been identified called lateral collaboration, which is a form of
combined relationship linking the benefits of vertical and horizontal collaboration (Mason et
al., 2007).
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(iv) Virtual collaboration:
It refers to a temporary tightly coupled collaborative effort between independent entities i.e.
suppliers, customers, competitors linked by telecommunication technology Byrne (1993). It
helps in accessing the global market, cost sharing and skills.
Matopoulos et al., (2007) in his study has presented the conceptual framework for supply
chain collaboration and has observed that it is about organizations and enterprises working
together and the relationships can be considered as beyond normal commercial relationships.
In the words of Bowersox, 1990; Mentzer et al., 2000; Muchstadt et al., 2001; it can be
understood as a notion which implies that the chain members (two or more than two) get
involved and work together actively for coordinating activities spanning the boundaries of
their organizations for fulfilling and satisfying customers‟ needs.
Matopoulos et al., 2007; have suggested a general research framework for supply chain
collaboration. In his framework, he has identified two pillars and distinguished them i.e. the
one dealing with design and governing of supply chain activities and the other dealing with
the establishment and maintenance of supply chain relationships.
(a) Designing and governing of supply chain activities:
The first step in this involves taking the decision regarding the selection of partner.
This is so because companies interact with large number of suppliers and customers in
the real world but not all of them can be involved into collaboration, as it is based on
the perceived benefits and drawbacks, expectations and the “ Business Fit” of
companies.
The selection of activities on which collaboration would be established constitute the
second step and the activities are defined as “Width” of collaboration. Elaborating on
this Sahay (2003) says that companies should determine specific activities on which
collaboration can be performed as all the activities do not require the same kind of
involvement and close relationships.
The third step is the decision regarding the strategic, tactical and operational level and
constitutes the “Depth” of collaboration (Chopra and Meindl, 2001; Fawcett and
Magnan, 2002). The combination of above three elements mentioned above comprises
the intensity of collaboration. As mentioned by Matopoulus et al., 2007 “The more the
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depth (from operational level to tactical and strategic), the width (from simple supply
chain activities to more complex such as new product development) and the number
of entities, upstream/ downstream) the more intense the collaboration is”.
The last step involves the decision regarding the selection of appropriate technique
and technology for facilitating information sharing. This is considered as very
complicated decision because all the members may not be able to meet the
requirements in terms of technology and techniques.
(b) Establishment and maintenance of Supply chain relationships:
The second pillar identified by Matopoulus et al., (2007) is the establishment and
maintenance of supply chain relation. Some of the critical elements in this cited by the
authors like Barratt and Oliveira, 2001; Stank et al., 1999; are mutuality of benefits
and sharing of risks and rewards. The other identified elements, in the literature like
trust, power, and dependence also play an influential role in the company‟s decision
to collaborate.
Thus to summarize the above discussion, it can be said that collaboration in supply chain
means different companies involve themselves in the flow of products and information from
the raw materials to final consumer in order to fulfill the customer needs. The areas in which
they collaborate, as identified by Anderson and Lee, 1999, 2001; Ellaram, 1995; Horvath,
2001; are supply chain design (procurement, transportation and distribution); manufacturing
(planning, inventory management, product design and development) and for order fulfillment
(including order processing, sales, customer service and demand management).
In the SCM literature, traditional supply chains are considered as a weakly connected activity
both within and outside the organization due to which there exists a lack of cohesion that
destroys value in the supply chain. As such according to Anderson and Lee, 1999; Bauknight,
2000, collaboration in supply chain have been recognized as a significant process which
holds the value creation opportunity and drive effective supply chain management.
In the words of Lambert and Cooper (2000, p.76) a process “is a structure of activities
designed for action with a focus on end customers and on the dynamic management of
flows involving products, information, cash, knowledge and ideas”. According to
Ellinger et al., (2000) collaboration has been widely mentioned as a process aimed at
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creating competitive advantage through trust, mutual respect, joint decisions,
information sharing and collective responsibility of outcomes between buyers and
sellers. One of the pre- requisites for the supply chain process to be successful is that
it should be flexible as far as possible to respond to the different customer
requirements at minimum costs.
Eight key supply chain processes has been proposed by Croxton et al., (2001) which
includes customer relationship management, supplier relationship management,
demand management, order fulfillment, manufacturing flow management, new
product development, commercialization and returns management. It has been
observed that a company having a partnership with its suppliers and /or customers is
forced to bring change in its relationships, expectations and job descriptions.
Therefore, Hoyt and Huq (2000) have stated that for collaborative supply chain
management to be successful, drastic actions are required for changing or redesigning
the organizational structures and business processes. According to Poirier, 1999; it
can be achieved in four levels i.e. “Sourcing and logistics” and “Internal excellence”
as the first two levels focused internally and the two levels as “Network constructs”
and “industry leadership”. However, companies face difficulties while “Aligning”
their internal processes with suppliers and customers, (Kampstra et al., 2006). This is
so because tactical and operational issues are not well understood. But an aspect
which motivates the businesses to integrate their processes is the potential benefits
associated with it. For example, Corbett et al., (1999) has empirically shown that
process improvement in inventory management and order fulfillment led to better
results when the chain members got involved in aligning joint optimization rules with
logistics and commercial benefits.
Further, Bowersox et al., (1999) and Lambert (2006) have opined business process
integration as the main source of competitive advantage within a firm and across
firms. The three collaborative enablers that drive the shared supply chain processes
leading to better supply chain performances are information sharing, incentive
alignment and decision synchronization. For example, information sharing provides
visibility and help in better decision making. With the help of information technology
as a tool of collaboration, it leads to sharing of process between manufacturers. Like
“CPFR” is a business process where in trading partners use technology and a standard
set of business processes for collaboration on forecasts and plans for replenishing
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product. Similarly, electronic data interchange (EDI) as a tool facilitate co-ordination
and promote relationship building in supply chain (Hill and Scudder, 2002; Kim et al.,
2006).
For collaborative supply chain management to work effectively and efficiently an
appropriate amount of planning is necessary. Planning involves two critical steps or
stages. At the first stage comes front –end agreement and joint business plan. The next
stage includes forecast oriented steps i.e. sales forecast collaboration and order
forecast collaboration. While developing front end agreement requirements of all
partners and objectives are clarified. This aligns all parties around common objectives
and guarantees adequate commitment to collaboration by all supply chain partners.
The second step enables partners in exchanging information regarding product or item
and involves joint business planning. According to Simatupang et al., (2002) for
facilitating the coordination of planning and executing decisions between the
participating members decision synchronization has been considered as a means.
Fisher (1997) and Lee et al., (1997) have observed that decisions involving
independent parties lead to sub-optimal performance where as joint decision making
leads to the benefits of chain members. Decision synchronization also relates to the
trade – off between centralization and decentralization. According to Sabath et al.,
(2001) centralization is required for firm level integration and coordination as it
provides focus and long- term planning at the supply chain level whereas
decentralization in selected areas like purchasing, logistics, inventory management
leads to flexibility, improved operational efficiency and enhanced responsiveness.
It has been stated by Anderson and Lee (1999) that in order to achieve a
“Synchronized Supply Chain”, industry participants “Collaborate on planning and
execution”. However, according to Hoover et al., (2001) the benefits of planning in
collaboration are significant only when collaboration is possible on a larger scale and
it cannot be considered just as a solution between close partners but needs to be
implemented with a larger number of different business partners.
In the context of supply chain, information sharing can be defined as the extent to
which crucial information are available to the chain members. The shared information
can be tactical i.e. related to purchasing, operation scheduling and logistics or
strategic i.e. related to long- term corporate objectives, marketing and information of
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the customer. In other words, it refers to the act of capturing and disseminating
relevant and timely information to the decision makers for planning and controlling
the supply chain operations. Simatupang and Sridharan (2002) have defined it as “The
access to private data in all partners systems enabling the monitoring of the progress
of products as they pass through each process in the supply chain”. It covers data
acquisition, processing, representation, storage and dissemination of demand
conditions, end –to- end inventory status and locations, order status, cost –related data
and performance status.
Some of the criterion which is `used to judge the contributions of information sharing
leading to collaboration in supply chain are relevancy, accuracy, timeliness and
reliability. In supply chain collaboration, information sharing has been considered as a
starting point as it aims at capturing and disseminating timely and relevant
information to the decision makers which enables them in planning and controlling
the supply chain activities. Several studies like Bowersox et al., (2000), Cannon and
Perreault (1999) have associated the success of buyer- supplier relationship with high
levels of information sharing. Thus sharing of information has been recognized as the
main requirement for inter- organizational collaborative relationships. One of the
important factors responsible for information sharing becoming the main feature of
supply chain collaboration is the advances in the information technology (IT). For
example, internet, decision support systems, enterprise resource planning etc are used
to convey latest data regarding product movement, workflow, cost and performance to
facilitate information sharing with customers and partners. Some of the specific
customer oriented IT applications include informational facility like online
information about custom and standard products, frequently asked questions section,
contact person, return policy etc and transactional facilities like online order, order
modification, notification and tracking of orders, online payment security and
technical assistance. Similarly, for supply chain partners IT application includes
information regarding customer demand (like customer profiles, products, prices,
locations, quantity and demand patterns); resource planning (like forecasting,
shipping schedules, inventory, capacity, location, lead times and products) and
contract status such as price, automatic ordering, order- status- tracking, invoicing,
auction and electronic payments etc.
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However, the success of coordinating the collection, processing and dissemination of
information among the chain members depends upon the readiness of using the shared
information while executing logistics tasks leading to the operational and financial
performance. According to Patnayakuni et al., (2006); Zhou and Benton (2007),
information sharing leads to three major advantages to the supply chain members.
One, information is distributed throughout the supply chain, secondly closeness
increases between the receivers and the senders and finally the members become able
to act on new information in a timely manner. In the words of Truman (2000)
information sharing helps in improving relationships through the integration of
partner‟s information system, decision systems and business processes leading to
improved performance. Some of the researchers highlighting the importance of formal
and informal information sharing between the trading partners indicate that it leads to
increase in visibility and reduction in uncertainty (Brennan and Turnbull, 1999;
Handfield and Bcchtel, 2002). The extent of information shared helps in creating
collaborative opportunities and removing of inefficiencies in the supply chain and
significantly impact the buyer/ supplier relationship.
Several examples from the real world testify the above mentioned benefits of
information sharing in supply chain collaboration. For instance, Wal- mart uses
supplier information for setting the optimal inventory levels. Dell delivers finished
product only when it has real demand from an end customer (Schonfeld, 1998).
Similarly, orders and sales information are received by Benetton electronically from
hundreds of companies agents located across the world (Camuffo et al., 2001;
Dapiran, 1992). Another fashion firm Levis Strauss, while capitalizing on information
sharing charges premium price for personally fitted jeans (Schonfeld, 1998). Also, in
one of the survey study, conducted by Simatupang and Sridharan (2004) in 76 retail
companies in New Zealand have found out that sharing of information significantly
affected on time delivery, accuracy, fill rate and inventory performance, while it had
moderate impact on lead time and flexibility.
The supply chain literature on collaboration has identified several areas/ activities
were collaboration can take place like supply chain designing which includes
(procurement, transportation and distribution), collaborative manufacturing which
includes (inventory management, product design and development, manufacturing
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planning etc) and integrated fulfillment like (order processing, sales, customer service
and demand management). Anderson and Lee, 1999, 2001; Ellram, 1995; Hovrath,
2001.
The determination of organizations competitiveness and the percentage of market
share depend upon the type of the product. Further, it also helps in capturing suppliers
and customer‟s information leading to the measurement of their involvement in
product development activities. Olsen and Ellram (1997) have acknowledged item
(Product) critically as a key in buyer- supplier relationship and says that more critical
items has more expectancy of developing relationships. Some of the characteristics
which operationalises the items criticality are value addition in the product line,
percentage of raw material in total cost and their profitability impact, supply scarcity,
pace of technology/ material substitution, entry barriers, logistics cost or complexity
etc.
Further, Bensaou, 1999 and Holweg et al., (2005) have also identified some of the
characteristics of item criticality like technical complexity, novelty of technology,
frequency of design changes, the level of customization required and short shelf life
and high- item value.
Collaboration on forecasts between companies helps in increasing efficiency and
decrease in costs as valuable resources are spent by the companies on responding to
unexpected conditions (Andarski, 1998; Stank and House, 2001). Similarly, Ireland
and Bruce ( 2000) considers forecasts to be a pivotal business function, which when
not strategically, systematically coordinated between firms can contribute to
disruption of activities at the point between trading partners where product is planned,
ordered and replenished. As such collaborative forecasting provides a substantial
opportunity for improved supply chain performance and should be viewed by the
firms as priority (Helms et al., 2000).
The existing literature on collaborative forecasting falls into two categories. First, the
intra firm collaborative forecasting efforts among functional business units within a
firm (Diehn, 2000, 2001; Lapide, 1999; Reese, 2000, 2001; Wilson, 2001). Second,
the inter firm collaborative forecasting among trading partners (Ackerman, 2000;
Andarski, 1999; Barratt and Oliveira, 2001; Ireland and Bruce, 2000; Vics, 1999).
According to Burgin et al., (2000) inter firm collaborative forecasting extends the
process beyond the four walls of an enterprise and include the trading partners either
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face to face or electronically while forecasting. Some of the essentials of collaborative
forecasting are trust and reliance on supply chain partners in providing accurate,
detailed and timely demand information.
Coyle et al., (2003) has defined transportation as “The physical link connecting the fix
points in a logistics supply chain” (Coyle et al, 2003). It has been considered by
Christopher and Towill ( 2000), and Ellram (1991) as the key integral process for
planning and control of material flow, for delivering superior value to the end
customer and contributing to the overall goal of successful supply chain management.
According to Daganzo (1998) and Fleischmann (1998) distribution system can be
efficient in the collaborative arrangement only if the transportation network is
efficient. This is because of the interaction between the distribution structures and
transportation structures, where the cost of transport and performance are considered
to be an important factor in deciding about the distribution structure.
Inventory has been considered as a critical supply chain resource. For most of the
managers, it is an asset, time buffer and insurance against any wrong doings.
According to Zipkin (2000), inventory performance has been considered as a vital
measure of supply chain effectiveness as well as one of the most sought after goals of
supply chain collaboration initiatives. It touches every value added activity of a firm
from new product development to logistics, sourcing, operation and sales (Fawcett
and Fawcett, 1995; Mentzer et al., 2008). Some of its requirement is clear and
frequent communication, close coordination of efforts; open sharing of sensitive
strategic plans and excellent tracking systems.
Frankel et al, (2002) observes that few companies have adopted the significant change
in philosophy and practices required to manage inventory collaboratively. On the
other hand Angulo et al.,2004; Boddy et al.,1998; Ellinger et al., 2006; Fawcett et
al.,2007; Moberg et al., 2003; Yao and Dresner, 2008; believe that despite exemplary
success achieved by some companies, many firms have failed to achieve desired
performance improvement through their collaborative inventory management
practices. The companies have also struggled in achieving coordinated inventory
flows due to lack of investment in technological and organizational structures
(Fawcett et al., 2006; Stank et al., 1999). However companies like Toyota, Dell and
Wal -mart have illustrated the value of collaborative inventory management and have
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achieved difficult to replicate strategic advantage and better than financial returns
(Dyer, 1996; Fawcett et al., 2009 b; Frohlich and Westbrook, 2001; Liker and Choi,
2004; and Stank et al., 1990).
Many Writers such as Christopher, 1998; Gattorna and Walters, 1996; Gunasekaran et al.,
2001; Hines, 1994; Lamming, 1993 and Lewis, 1990; have recognized collaboration as a
means of establishing closer and long term working relationship with suppliers and customers
at various levels in the chain. Goffin et al., (2006) highlights the need for identifying potential
partners before entering into collaboration. Elaborating on this Vereecke and Muylle (2006)
gives importance to the accuracy in making choices about working closely as supply chain
collaboration with anybody and everybody does not always lead to improvement.
Collaboration as a new source of competitive advantage has emerged for the companies due
to globalization (Dyer and Singh, 1998). According to Horvath (2001) and Spekman et al.,
(1998) supply chain collaboration has been regarded as the new strategy for creating
competitive advantage by the companies. In recent years, manufacturing firms have led
emphasis on collaboration in supply chain as a means of achieving competitive goals.
Collaborative manufacturing practices have been found to maximize the effectiveness of
value chain leading to profits and addressing the ever changing market demands. Fischer
(1997) observes that by working closely supply chain members can create and capture mutual
benefits, which according to Walker et al., (2000) can translate into very positive return on
investment and more efficient inventory management.
In the production process fast development of new products have increased the difficulties of
manufacturing companies, as such they are required to restructure their functions and
positions in the industry. Thus, according to Bowersox (1990) and Lee et al., (1997) a closer
relationship can be seen as a solution as it may help the participating companies in achieving
reduction in cost, revenue enhancement and flexibility in dealing with supply and demand
uncertainties. For instance, Hewlett-Packard (HP), while collaborating with one of its major
resellers achieved improvement in fill rate, increase in inventory turnover and sales (Callioni
and Ballington, 2001). Similarly, Wal-Mart attained mutual benefits of collaborative
planning, forecasting and replenishment by collaborating with Warner-Lambert (Parks,
2001). As mentioned by Kotler (1997) the basic reason of firms entering into collaboration
was that they cannot compete individually. Elaborating on this Anderson and Narus (1990)
have said that most of the firms coordinated along the cross firm activities, in order to
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achieve superior performance. More specifically, Lambert et al., (1998) mentioned that
companies obtain for inter firm collaborative arrangement for sharing risks and rewards and
for securing higher performance which they could not achieve individually.
According to Akintoye el al., (2000) the key factor informing supply chain collaboration is
the trust between all parties that is suppliers, manufacturers and customers. Further, trust
leads to other factors such as mutual help, openness, common development of interest and
resource synchronization. Defining trust in the context of SCM, Doney and Cannon (1997)
and Ganesan, (1994) refer it as “the extent to which supply chain partners perceive each
other as credible and benevolent” (Doney and Cannon, 1997; Ganesan, 1994). In the words
of Spekman et al., (1998 p.635) trust is not only a desired characteristic but a necessity for
collaborative arrangement. Due to trust coordination improves, process become reliable and
quality of information is improved as a result of which purchasing cost decreases (Zaheer et
al., 1998). In addition to trust, according to Moorman et al., (1992, p.316) commitment is an
“enduring desire to maintain a valued relationship” (Moorman et al, 1992, p.316). As stated
by Grifix et al., (2004) shared goals, open communication and a commitment of sharing
information, joint problem solving and rapid response to failures to meet expectation were the
main drivers for successful collaboration in supply chain.
In the SCM literature both commitment and trust has been identified as key variables for
collaboration (Morgan and Hunt, 1994). Trust has a positive influence on commitment. For
instance Narayandas and Rangan (2004) have found that inter personal trust in a buyer
supplier relationship facilitated the development of inter organizational commitment in a
mature industrial market. Similarly, Zineldin and Jonsson (2000) has identified that
commitment from every member in the supply chain was a strategic factor leading to the
improvement in the effectiveness of the supplier customer relationship. On the other hand,
Morgan and Hunt (1994) had found out that negative influence of commitment in a
relationship reduces collaboration and success.
Thus, it can be contented that both commitment and trust leads to increasing collaboration but
trust is crucial factor for the development of commitment.
Supply chain relationships involve a higher degree of interdependency between competitors
(La Londe, 2002). It is defined as the resource dependencies among partners for the
achievement of mutual benefits (Mohr and Spekman, 1994). According to Heikkila (2002) it
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refers to the need of maintaining a relationship with the partner for achieving its goals. It
exists when one party do not have entire control in the supply chain operations.
Organizational compatibility refers to “Complementarities in goals and objectives as well as
similarity in operating philosophies and corporate cultures” (Buklin and Sengupta, 1993,
p.35). According to Niederkofler (1991) if the partners do not match each other‟s operating
requirements, culture and structure then it becomes very difficult to achieve cooperation. It
has also been found that after the relationship becomes operational, large manufacturers tend
to create obstacles for their smaller suppliers. Therefore, large firms in the supply chain
context need to fill the gap enthusiastically in order to create operational compatibility. For
example, Nokia mobile phone (NMP) collaborates closely with its upstream supply partners
to develop and manufacture its new product line while it interacts with its downstream
partners to obtain customer input and seize new market opportunities. It has put forward
several IT initiatives and intensive information exchange between its upstream and
downstream partners leading to the creation of a flexible and efficient supply chain network.
As a result of these initiatives it is having the second best supply chain network, after Dell
computers (O‟ Marah, 2004).
Highlighting the importance of quality of leadership, Kidd et al., (2003) observes that within
the supply chain firms leadership acts as an important driver, as it helps in shaping the culture
of the firm and also management perception in the alliances. In the words of Kotler (1996)
“Collaboration leaders is the most important strategic partner together with collaboration
coordinator and no successful transformational changes can occur without proper
leadership” (Kotler, 1996). Providing incentives to suppliers and customers for their
commitment and performance also help in developing good relationship among OEMs,
suppliers and customers. On similar lines Peterson et al., (2000) is of the view that sharing of
rewards and penalties within the chain act as a mechanism for driving efficiency and unity.
Jassawala and Sashittal (1998) have found out that more equitable distribution of power
among the chain members leads to a more collaborative firm.
Apart from the above mentioned factors infrastructure/ technologies such as database,
information system and the internet also plays an important role in making CSCM a success.
For instance, linking of the supply chain partners through information sharing mechanism
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leading to transparency have been considered as one of the most critical drivers for successful
supply chains (Min and Zhou, 2002).
Some of the drivers identified in the SCM literature leading to supply chain collaboration are
presented in table 2 as under:
Authors Driving Forces
Lewis, 1990 Increase in market share, asset
utilization, Enhancement in customer
service, improvement in quality of
product, skill enhancement and
economies of scale in production.
Paster , 2000 Decrease in the risk of failure of
product development.
Holton, 2001; Parker, 2000 Reduced inventory (In the face of
technological complexity and rapid
rate of product development and
obsolescence).
McCarthy and Golicic, 2002; Parker, 2000. Gaining rapid access to market.
Horvath, 2001; Lewis, 1990; Mclaren et al.,
2000; Parker, 2000.
Sharing and reduction in the cost of
product development.
Lewis, 1990; McCarthy and Golicic, 2002;
Mclaren et al., 2000; Parker, 2000.
Reduced time in product
development.
Conclusion:
This paper covers a literature review of eighty studies pertaining to supply chain
collaboration undertaken in the period of 19 years that is from 1990-2009. It is noted that
supply chain collaboration can be in various areas such as process, planning, information
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sharing, forecasting, transportation/distribution, inventory management and strategic
planning. Further, various factors which motivates a manufacturer into supply chain
collaboration and have a significant bearing on its working are identified as
trust/commitment, interdependence, organizational compatibility, leadership, and
infrastructure/technology members. Interdependence implies resource dependence, where by
each partner supplements the deficiency of the other: as a result collaboration is mutually
beneficial. Organizational compatibility is achieved by matching each other‟s operating
requirements, culture and structure. Leadership helps in molding the culture of the
organization and also enables better management perception in the alliance. Lastly,
infrastructure and technology links the supply chain partners and brings about transparency in
the entire supply chain..
Trust leads to commitment among collaborating members and commitment further leads to
improvement in effectiveness of relationship among the collaborating
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