Can This Supply-Chain Collaboration Be Saved? - Global Trade Magazine
  November 23rd, 2015 | Written by

Can This Supply-Chain Collaboration Be Saved?

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Sharelines

  • Supply-chain collaboration is a relationship that’s financial, professional, operational, and frequently personal.
  • Focus on absolute rather than relative gains when assessing a supply-chain collaboration.
  • One partner may be bringing more to the table or have more to gain from a supply-chain collaboration.

Life isn’t the only thing that’s not always fair. According to many supply chain analysts, academics, and practitioners, supply-chain collaborations are prone to inequity. But that have to be a deal-breaker. Fabio Duque, APL Logistics global consumer vertical leader answers a few questions on this touchy subject.

Global Trade: Let’s start with a relatively easy question: Why in the world can’t some collaborative partners get along?

Fabio Duque: It’s often easy to get along and work well with individuals from other companies as long as the relationship is either clearly transactional or clearly professional. But by its very nature, supply-chain collaboration blurs all of those lines. It’s a relationship that’s financial, professional, operational, and frequently personal. As a result, the stakes become considerably higher. And so, on occasion, do the sensitivities.

Q: Several years ago, University of Tennessee Professor Matthew B. Myers said that, “while both partners’ share of the benefit pie will grow, each share will not necessarily grow at the same rate,” and that some, “benefits will not accrue in equal portions to the participants.” Do you agree?

A: I do. No two companies’ supply chains or competitive situations are exactly alike, so even if there’s been a contractually agreed-upon 50-50 split, there’s always a chance that the collaboration is more beneficial for one partner than the other simply because the gains for one came along at an especially good time or helped that organization deal with an especially vexing challenge that the other company had already solved.

Q: How should a company deal with that, especially if it feels like it’s the one getting the short end of the stick?

A: Professor Myers’ advises to focus on absolute rather than relative gains. Before a company decides to terminate a relationship, he advises companies to take a good hard look at the benefits they’ve realized as a result—and to be honest with themselves about whether or not they’d have been able to achieve those same benefits without the help of the collaboration. If the answer to the first question is yes and the answer to the second is no, that’s a good indication that they should probably stick with the game plan.

Q: In other words, don’t cut off your nose to spite your face?

A: Precisely. For all you know, times will change and within a few months your company may be the one reaping the greater portion of benefits—in which case you wouldn’t want your partner to pull the rug out from under you. There are many kinds of gains that you can’t always see on a scorecard or balance sheet but which are just as valuable. Companies engaged in collaborative relationships should always be focused on the big picture.

Q: Is there any way companies can avoid collaborative acrimony altogether?

A: Clear contractual language helps, because then there are no surprises about who’s responsible for what and how savings will be shared.

Absolute candor in the early stages of a relationship is also helpful, especially as it pertains to acknowledging that one partner may be bringing more to the table or have more to gain.

My company is a huge advocate of formal communications procedures, especially for things like discussing scorecard results and distribution of partnership-related data. It’s great for keeping participants on the same page and paves the way for the give-and-take that fosters healthy relationships.

There’s a lot to be said for tapping a reputable independent third party—be it a 3PL, an industry consultant or a jointly-hired professional—to be the relationship facilitator. By having that party coordinate everything from day-to-day operations to the financial ends of things—and to arbitrate if there are disagreements—every participant will know that have a greater level of confidence that everyone is indeed playing by the rules.

 

Lori Lockman is a freelance writer specializing in logistics.

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