When information is shared in confidence, then supply chain members can make better and more informed decisions that will benefit the customer.
Strategic alliances happen in a variety of markets with different combinations of suppliers and customers; however, the most typical supplier-consumer alliance involves just a one supplier and one customer. To get a better idea, take a look at the relationship between Wal-Mart and Proctor & Gamble, "which have worked together to establish long-term EDI linkages, shared forecasts, and pricing agreements"
. There are alliances that can come about between two horizontal suppliers in an industry, like the relationship between Dell and Microsoft -- "organizations that collaborate to ensure that the technology road map for Dell computers (in terms of memory, speed, etc.) will be aligned with Microsoft's software requirements"
. Last of all, a vertical supplier-supplier alliance may include various party members, like trucking companies that have to work with railroads ocean freighters in order to make sure that proper time of delivers for multi-modal shipments is maintained
The concept of strategic alliances makes perfect sense, but the big question remains: how does one form or initiate a strategic alliance? When and how should they occur? There are some supply chains that don't need to put forth effort or commitment when it comes to managing an alliance, which seems unfair, but there isn't some magical equation to know if, how, when, where and why one should form a strategic alliance. Unfortunately, many strategic alliances occur after a company is already very successful and it forges or makes a strategic alliance with a successful company as well -- such as the case with Wal-Mart and Proctor & Gamble.
Strategic alliances can improve many different aspects of a supply chain's functioning. For example, management of supply-channel conflict; on-time product delivery; quick response to problems and complaints; a much better consistency in parts, supplies and other products; detailed agreement when it comes to handling the products' problems as well as any complaints about a specific product; better supply chain productivity; specific product volume commitments; contacts that are committed to your business's account; increased supplier loyalty; quick responses to requests for quotes and/or pricing issues; privacy when it comes to shared business strategies.
Strategic alliances can be very beneficial for supply chains, but even if a company doesn't have a strategic alliance, there are still some very important steps a company can take in order to strengthen their supply chain. Collaborative relationships cannot be over-emphasized. Collaborative relationships make it possible for companies to strengthen their competitive positions by focusing joint efforts on improving areas that are of mutual concern -- like quality, productivity, delivery and customer satisfaction
. These four areas are crucial and the better the relationships between these entities, the better it will be overall for the company as customers will be satisfied.
Trust and commitment are a direct result of the behavior of all person's involved. The level of trust and commitment between a customer and a supplier in a partnership can be compromised when one of the two is places in an uneconomical position. "For example, a seller may delay deliveries when it can sell its products on the spot market in excess of the stipulated contract price, or a buyer may rely on the spot market to obtain lower prices than those specified in an agreement"
. This means that any collaborative relationship naturally possesses the possibility of certain performance issues, which can be very problematic if they affect mutual expectations reinforcing the commitments of the partners
Any changes in environment can impact the expectations or perceptions of performance. The environment, it should be noted, is generally made up of these factors: external elements such as economic, climatic, social, technological, government, competition; demand base; supply base; buying organization; selling organization; and, the partnership itself
Some of the external factors may include a recession, recovery from a recession, inflation or deflation, interest rates, tax rates, surpluses and deficits. Climatic factors involve weather changes, natural disasters, environment issues, etc. Social factors may include personal values as well as shifts in viewpoints; new product or process advancements in technology is another factor to consider. Government changes like a change in wage and price controls, equal employment opportunities and disability legislation is another environment. Competitive environments like new competition is another factor that must be brought up for considerations as well
To improve supply chain management one has to know that there is really no way of changing the competitive landscape, but there are ways of improving and changing -- for the better -- internal efficiency. Paying attention to customer services, offering a uniform quality of service, supporting customer accounting, supporting customer purchasing and budgeting, being a valuable partner in the supply chain, and participating in markets as they evolve are all excellent targets to strive to achieve within a company
. These targets would improve areas in business operations: for example, demand forecasting; inventory management; order management; and, delivery scheduling
. The majority of these targets' goals, as can be seen, is to improve custom service; improving demand flexibility is also another main goal.
The most important thing for any business to remember is that the customer is the most vital element of the whole operation. The goal is for your customer to be satisfied so that he or she will stay loyal to your product. When implementing change in a supply chain in order to improve overall customer satisfaction, communication is the most vital element. People need to be involved when change is occurring inside any business as it has been said that communication and change are synonymous "as people are fearful and are uncertain and therefore need to be communicated with clearly"
To improve a supply chain in a company, management, collaboration, trust, and customer satisfaction are some key elements to consider. Management needs to embrace change via communication with everyone involved in the company. Change does not come easy, but it comes easier with communication. Collaboration is also vital when it comes to running a successful supply chain. Collaboration should be implemented with an overall feeling of trust, safety and loyalty in order to ensure all lines of communication between different supply chain areas are open.
Ackerman, K.B. & Van Bodegraven, A. "Relationships for supply chain success."
CSCMP's Supply Chain Quarterly. Quarter 4, 2007.
Ackerman, K.B. Fundamentals of Supply Chain Management: An Essential Guide for
21st Century Managers. MA: DC Velocity Books, 2007.
Davis, T. "Effective supply chain management." Sloan Management Review, 1993. pp.
Emmet, S. & Crocker, B. The Relationship-Driven Supply Chain: Creating a Culture of Collaboration Throughout the Chain. England: Gower Technical Press; illustrated edition, 2006.
Handfield, R. "Managing supply chain relationships." NC State University, 2003.
Hugos, M.H. Essentials of Supply Chain Management. New York: Wiley; 2nd edition,