The aim of the essay is to ascertain why companies struggle to develop relationship. There have been numerous ideas, views and opinions expressed by many authors and practitioners but due to the enormous nature of the subject matter, the scope of the essay will be limited to ........ In this context, collaboration will be explained, followed by reviews pertaining to advantages and disadvantages of collaborative relationship between customers and suppliers. The essay is concluded having critically
The thrust behind collaboration is due to continues relationship existing between or among companies. develops to become the thrust of collaboration. Though the fundermental effectiveness and efficiency of the entire supply chain management is dependent on these relationships (Emmett and Crocker, 2006), then why do companies struggle to develop it? Many authors and writers have attempted to, and have defined the term in various ways.
Wilding (2006) defined collaboration as “working together to bring resources into a required relationship to achieve effective operations in harmony with the strategies and objectives of the parties involved thus resulting in mutual benefits”. Hence collaboration involves the contribution of either two or more organisations performing a task to accomplish a result.
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Similarly authors such as Goodman and Abel (1987) viewed collaboration as the benefits derived from an activity of parties working cohesively through the exchange of information that will affect the work of the parties in achieving its objectives. For example an organisation seeking for ideas and instructions from other people to manufacture an aeroplane by itself is not collaborating. On the other hand, negotiating with the people to design or manufacture parts so that all the components from the parties is assembled into a complete product, then there is a collaboration.
According to Kippenberger (1996) collaboration is partnership involving a customer and supplier pulling their resources to work together so as to attain higher commercial advantage and to benefit both sides as a whole. Thus the partnership allows the parties to agree on certain terms as to how goals will be achieved and sharing the benefits through their commitment and support.
Todeva and Knode (2005) clearly gave the practical effect of the type of relationship in organisations working together as cartels, alliances, partnership, research and development consortia, suncontractor networks, joint ventures, outsourcing agreements, contractual relationships, service agreements, equity investments, cooperative agreements, franchises, market relations, etc.
Why Need For Collaboration
Emmett and Crocker (2006) pointed out that in order to secure their products into a reliable market, suppliers engage in collaborative relationship with the customers who also focus on the total cost of the items delivered. This because the price of the items to be sold will determine the revenue to be generated by the customer and its profit margin. In addition whereas the supplier the the sales
One of the reasons for collaboration among companies is to add value by way of diffrenciating the goods or services offered to the market within the shortest possible time. Thus for companies to be successful, collaboration is seen ‘as key weapon' to help them achieve their objectives (Kippenberger, 1996). This helps companies to apply quality and ensure continuous improvement in the provision of better good and services to their customers. In this case the companies engage in efficient and effective usage of resources at the optimum cost (Mehra and Rangathan, 2008).
Pawar and Sharifi (2002) indicated that companies collaborate purposely to reengineer products due to the global market competitions. Thus keen market competition causes suppliers and customers to come together to adopt production strategies (example; sharing ideas to create joint business plan for introduction of new product) that will enable them to gain competitive advantage over their competitors. Moreover this is in the quest to respond to the enormous demand from customers (Crouse, 1991). This allows them to become customer focus which is a key factor for organisational growth. According to the Frohlich and Westbrook (2001) suppliers and customers working together through integrated planning of activities in response to customers expectations results in attainment of higher performance.
According to Hines and Johns (2001) the activities of supply chain provides a platform that promotes momentous relationship between the customers and suppliers in the sense that customers offer initiatives that guides the suppliers in developing customer satisfactory products in a cost effective way that brings about potential share benefits and build teamwork (cited in Rao and Halt, 2005). The idea is eliminating waste to improve upon the delivery schedule.
Why Companies Struggle To Develop These Relationship
Always on Time
Marked to Standard
in spite of the anticipated benefit of establishing collaborative relationship, Barringer and Harrison, (2000) argued that managing the activities (including coordinating and organising the resources together) that fosters the collaborative relationship is difficult and expensive.
In contrast, Wilding (2006) indicated that companies fail to achieve win-win relationship with customers because of beraucratic commercial practices and attitudes among organisations that brings about increase in costs, causing delays and reduce trust as well.
Internal culture problems/corporate culture differences (top mgt diff/partner org lacks top support)
Changes in market
Lack of total quality commitment by supplier
Lack of trust
Poor upfront planning/forecasting or lack of benefit/risk sharing
Lack of strategic direction
Supplier base too large or distance barriers
Argument And Debate
From the above definitions of collaboration, the various authors identified common attributes that collaboration possesses which is working together, corporation among parties through information sharing and achieving objectives thus both supplier and customer become productive and profitable. However the openness of modern supply chain has led to keen competition resulting into “survival of the fittest” among the players of the supply chain. This brings the debate to game theory, bullwhip effect and Power.
Giannakis and Croom (2004) suggested that suppliers and customers will benefit through improved performance when there is close long-term relationship. Find case studies Hence trust is developed when suppliers and customers engage in collaborative business relationship within the long-term period. (trust)
Unforeseen disruptive events such as fuel shortages and 09/11 terrorist attack on the US affected the supply chain especially to those who relied on one supplier. The vulnerability of the modern supply chain evidence that fact of establishing a collaborative relationship is risky (Uta et al., 2003). Hence companies in order to satisfy their customers think of getting pool of suppliers and customers to deal with in order to gain competitive advantage in the market.
Fearne et al argue that
Emmett and Crocker (2006) re-emphasized that the thrust of building strong collaborative relationships among suppliers and customers is basically to exchange of resources including information that leads to shared goals. However
Network And Not Chains
Wildings (2006) re-emphasize that for companies to establish collaborative relationship; first of all, they should have a common focus which can only achieved through information sharing (Information Technology) system. This also calls for flexibility, agileness and responsiveness in their operations as well as adopting strategies to measure the successes of their relationship.
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Pawar, K.S and Sharifi, S. (2002) Managing the product design process: exchanging knowledge and experience. Integrated Manufacturing Systems, Vol. 13, No. 2, pp. 91-96
Rao, P. and Halt, D. (2005) Do green supply chains lead to competitiveness and economic performance? Internal Journal of Operations and Production Management, Vol. 25, No. 9, pp. 898-916
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Todeva, E. and Knode, D. (2005) Strategic alliances and models of collaboration. Management Decisions, Vol. 43, No. 1, pp. 128-148
Uta, J., Helen, P. And Martin, C. (2003) Supply Chain Risk Management: Outlining an Agenda for Future Reasearch. International Journal of Logistics: Research and Applications, Vol. 6, No. 4, pp. 197-210
Wilding, R. and Humphries, A. (2006) Understanding collaborative supply chain relationships through the application of the Williamson Organisational Failure Framework. International Journal of Physical Distribution and Logistics Management, Vol. 36. No. 4, pp. 309-329
Wilding, R.D. (2006) Understanding Collaboration: generating the multiplication effect. (introduction), “playing the tune of success” Financial Times – Understanding Collaboration supplement & FT.com Friday 10th Nov. pp. 2-3