Supply Chain Collaboration: From Coordination to Partnership


When two or more firms across value chain are aligned and if they are willing as well as find it feasible to collaborate, then different levels of collaboration is possible depending upon business drivers and perceived collaborative value (i.e., potential overall incentive structure that can be realized from collaboration) of each member. Basic level of collaboration can be simple information exchange & coordination. The next level of collaboration focuses on synchronization and improvement of intra- and inter-organizational processes. The third level is intensive collaboration, in which strategically aligned partners enter into a higher-level partnership to improve strategic performance and innovation of their supply chain. The fourth level is partnerships involving extended financial relationships such as sharing investments, risks and profits.

While the lower level collaboration types are widely practiced across industries, higher levels are gaining prominence and are expected to diffuse slowly in select sectors. The practical need and feasibility of implementing for such collaborations are subjective and varies from product to product, company to company and industry to industry. Implementation problems span from: mutual trust to cultural compatibility, behavioral issues to leadership issues, process alignment to strategic alignment, etc. Power relationships and extent of inter-dependencies shared by partners are some major determining factors, for the type/level of collaboration that can arise in a given relationship and business context.

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