Several global studies have observed that though supply chain collaboration is most crucial; the way to accomplish it is not properly understood. Only about 35% of the collaboration initiatives were moderately successful. Although some firms claim that they have entered level three or higher, collaborating more effectively with supply/channel partners is still one of the major problems confronting supply chain professional. One of the basic reasons for supply chain collaboration (SCC) failures is behavioral and leadership issues faced at the nascent stages of SCC evolution. Several issues that crop up at nascent stages play a spoil sport in the formation of supply chain strategic alliance. Collaboration ends up in failure when the start is all wrong and when compromises cover irreconcilable differences. Several behavioral and leadership issues hinder SCC evolution process and restrain the formation of alliance for the strategic collaboration to become operational. Some of the observations are:
1. Collaboration efforts often fail in the evolution stage because not adequate care is taken in choosing the right partners, matching inter-organizational needs and capabilities.
2. Lack of effective leadership and coordination among partners make it difficult to manage or drive the partners to collaboration.
3. Without trust, neither partner will be willing to step out of traditional comfort zones to take on new roles and responsibilities.
4.Collaborating organizations rely on other partners for their success, which means joint decision making that is not always received by individual companies as they feel the threat of loss of independence.
5. Lack of agreed objectives among partners will lead the strategic alliance towards failure.
These observations collectively emphasize evolving effective leadership, choosing right partners and encouraging them to form strategic coalition through establishing trust, modesty, independence and mutual benefit, before strategic collaboration becomes functional or operational. It throws several new issues like – who should initiate and drive towards collaboration; what should be done to gain trust and establish as leader; how strategic partners should be chosen; what care should be taken to minimize reluctance; what is the incentive for joining alliance, how to encourage partners, what mechanism should be adopted to pull selected members into the alliance; and what strategy should be implemented to ensure successful transition from a state of coalition to full-fledged collaboration. In the ensuing discussion, a management framework for successful SCC evolution is proposed. This management framework spans along the five phases of supply chain evolution process (see Five Phase Supply Chain Collaboration Evolution Process).
Establish Supply Chain Leadership
Supply chains are predominantly characterized with asymmetric powers due to their relative positions. Asymmetric power in supply chains can be found in industries like aerospace, food processing, and automotive. Indeed, entity(s) relatively powerful becomes dominant partner in the strategic partnership and control other members. In industries like automotive, aerospace, etc., dominant partner is usually the original equipment manufacturer (OEM). Whereas in consumer goods, apparels, accessories, etc., big retailers like Wal-Mart, Metro, Tesco, etc., tend to influence upstream partners in their supply chains. Consumer Product Manufacturers (CPMs) have no or limited influence on their retailers, especially in multi-branded outlets. Thus due to relative positions, power relationships establish among members of supply chain. But due to such power relationships many collaborative initiatives have ended up in failure. Several researches revealed that one partner dominating the other as one of the major reasons for supply chain collaboration failures. Therefore leadership entirely based on positional power should not be the way to create and drive supply chain collaboration. Positional power only helps to open dialogue and initiate SCC process. Humility along with harmoniousness and mutuality should be prime character to gain trust and acceptance among other members (see figure below). Similar character should be built across the chain to avoid dominance due to position power through change leadership. James MacGregor Burns’s theory states, “a transformational leadership should focus on transforming others to help each other, to look out for each other, to be encouraging and harmonious, and to look out for the organization as a whole.” Therefore qualities like mutuality, equality, encouragement, harmoniousness and holistic thinking should be promoted among dominant members likely to become collaboration partners. This phase will take considerable time which is worth investing.
Identify Potential Partners
No doubt, partners in collaboration should yield potential benefits. Partners (supply or channel or 3PL) with higher collaborative value are identified for collaboration. But due to competitive pressures, several organizations enter into alliances without ample preparation or understanding of partners' needs and hence, these alliances fail. Collaboration efforts often fail because not adequate care is taken in choosing the right partners, matching inter-organizational needs and capabilities. Further, partners enter collaborative ventures with certain expectations and objectives. Thus partner selection process should broadly contemplate inter-organizational needs along with partner capabilities, expectations and objectives embracing a win-win mindset (see figure below). Most often, incompatibility of partners is cited as reasons for alliance failure. One of the company's guiding principles in selecting partners should be undertaking long courtship with potential partners to assess their motives and the quality of their management.
Motivate Selected Partners
After identifying potential partners for collaboration two questions should be addressed: what is the incentive for selected partners to collaborate and how should they be encouraged. External constraint(s) like logistics security, environmental regulations, etc., and business strategies like improving cost structures, customer value, etc., drive supply chain members towards collaboration. The purpose of supply chain collaboration (SCC) is to deal with such constraints or to improve performance or to support business strategy. For example sensing the need for improved performance, security, customer value, etc., Wal-Mart collaborated with its vendors and implemented several external integration initiatives like satellite based vendor-store links, item-level RFID tracking, vendor managed inventory (VMI), etc.
Partner at any stage of the supply chain is of course a commercial entity and hence behaves like any other business organization. According to Balanced Scorecard (BSC) theory every commercial entity works towards customer and/or financial goals in pursuit of their business. Therefore they are driven by short- or long-term business strategies like gaining repeat business, expansion/growth, improving cost structures and asset optimization. A stage in the supply chain would show interest in collaboration if integration is essential with others on supply or distribution side or both sides to deal with its external constraints or to improve strategic focus elements of its own business objective(s).
Besides above business drivers, the overall incentive alignment structure (i.e., sharing of costs, risks, and benefits) also motivate members to act in a manner consistent with their mutual strategic objectives. Therefore, a sense of urgency manifested in the customized one-to-one negotiation strategies formulated based on strategic values covering both individual and collaborative benefits will motivate identified partners to show willingness to collaborate (see figure above). However issues like lack of trust on other members and fear of loss of independence will hold them back to become formal member of strategic alliance which should be addressed in the next stage to evolve a formal partnership arrangement ready for collaboration.
Establish a Formal Alliance
Strategic alliances in supply chain often fail because they might not have formed at all, in the first place. Therefore a coalition like arrangement should be in place before the collaboration starts. However, without trust, neither partner will be willing to step out of traditional comfort zones to take on new roles and responsibilities. Collaborating means joint decision making which is not always acceptable to individual firms as they feel threat of loss of independence. These apprehensive behaviors hold them back to become formal member of strategic alliance though they show willingness to collaborate. So the role of transformational leader becomes more challenging at this point. Bringing all identified partners together (via informal meets) and motivating them to build dyadic inter-organizational relations amongst themselves beyond working relationships should be the strategy. An environment of trust and joint decision-making (JDM) should be developed across the would-be-alliance-partners (see figure above). A formal strategic alliance formed will comprise the chosen members of supply chain whose interests align and collaboration is felt from a holistic view with a character of trust, mutuality & humility.
Develop Shared Vision
After supply chain coalition is formed, collaborative planning effort should begin. Because collaboration requires objective sharing between partners and lack of agreed objectives among partners will lead the alliance towards failure. On the other hand, collaboration efforts often do not succeed because vital long-term details are ignored from the initial stages of planning effort. Therefore, success of collaboration depends on ensuring commonly agreed objectives and joint strategy with foresight. A joint planning process can ensure evolution of mutually agreed objectives or vision for the strategic alliance. The joint planning process (see Five Stage Strategic Supply Chain Goal Setting Process) should consider objectives and expectations of partners through consultations with an outlook for inclusive growth and supply chain performance.
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