One study showed that strategic suppliers partnership has a positive and significant effect on the integration of supply chain and supply chain performance. Supply chain partnership also helps increase the cooperation and communication between functions and firms, such as balancing production, synchronizing logistics, and shortening the time to market new products remarkably. Strengthening flexibility and agility in the fierce market is also advantageous in partnership as it improves mode of modularisation, simplification, and standardisation oriented to high customisation.
The problem is, maintaining partnership and relationship with respectable 3rd party companies is not easy. Generally, the main reason is all firms are always concerned with their own benefits. For example, Ericsson Corp. lost its competitive advantage in the mobile phone market and showed a growth decline from March 2000. The decline began due to a fire in a microchip plant owned by Philips Co., a supplier of Ericsson, which then resulted in a downtime in Ericsson for the lack of key components.
See also: Culture Integration and Adaptation in Supply Chain
Learning from Ericsson, it can be said that the depth and scope of relationship is usually limited, even for the strategic partners. When the internal or external environments change, the firms might suffer great disasters because of their partners’ mistakes or abandonment.
Choosing the right strategic partner in supply chain
In order to seamlessly cooperate and avoid problematic relationships, the partners chosen should have consistent cultures, uniform strategic insights and inter-supported operational philosophy. These criteria help ensure their core competencies are complementary to each other.
Here are other criteria, according to Ruth Banomyong, to include in your strategic partnership building:
- Trust – degree to which supply chain partners have the intention and ability to work for the good of chain.
- Commitment – an implicit or explicit pledge of relational continuity between exchange partners.
- Decision synchronisation – joint decision making in planning and operational contexts.
- Incentive alignment – the degree to which supply chain members share costs, risks, and benefits.
- Information sharing – the willingness to make strategic and tactical data available to other members of the supply chain.
Maintaining the relationship
Maintaining relationships with top-notch business partners requires three aspects, including common strategy and operational vision, bi-directorial performance evaluation metrics, and formal and informal feedback mechanism.
- Common strategy and operational vision – vision is important in every aspect of businesses. Without a vision, businesses will be difficult to scale up. Therefore, to maintain a good relationship with supply chain partners, leaders should define their strategy and operational goals all together. Then, trace, evaluate, and update the goals often to achieve long-term improvements.
- Bi-directional performance evaluation metrics – the focal firm and partners should decide the metrics and measure frequency together.
- Feedback – annual assessment is the most popular formal method and is usually done by top managers aiming at checking and updating strategy goals. Quarterly and monthly checks are considered as informal feedback focusing more on tracing and evaluating the operational performance. The informal feedback is usually excluding its top managers. Although there is formal and informal feedback, both are good for establishing close relationships between coordinators.
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