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Session 7: Building Supply Chain Partnerships

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Approach to Sustainable Supply Chain Management (SSCM): Overarching Framework

Framing the Issues Preparing for Implementation Assessing Impact

Session 1: From Sustainable Development

to Sustainable Supply Chains

Session 2: Governance of Supply Chains: From

Compliance to Voluntary Standards

Session 4: Sustainable Supply Chains as a Lever of Competitive Advantage

Session 5: Integrating Sustainability into the

Supply Chain

Session 6: Managing Stakeholder Relations

Session 7: Building Supply Chain Partnerships

Session 8: Measuring and Communicating on

Sustainable Supply Chain Performance

Session 3: Governance of Supply Chains: Introducing

International Labour Standards

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Session Objectives

Examine the value of partnerships in sustainable supply chains

Learn about the types of partnerships

Raise awareness on the centrality of trust in the initiation and maintenance of SC partnerships.

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Session Outline

Unit 7.1: Introduction Unit 7.2: Case Study Discussion Unit 7.3: Developing and Managing SC

Partnerships. Unit 7.4: Managing Risk Spots. Unit 7.5: Conclusion

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Unit 7.1: Introduction

Partnering is…“an attempt to build close, long-term links between organizations in a supply chain that remain distinct, but which choose to work closely together” (Boddy et al, 2000, p.1004).

It is important in both goods and service SCs

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Sample SC for Leather goods (Source: GTZ ValueLinks Manual, 2007, cited by Mayoux and Mackie (2008))

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Finger Pointing – “It’s the cows…”

Retailers and consumers: quality bad, price too high!

Manufacturers: “No es nuestra culpa!” (“not our fault!”)

Tanneries: it’s the mataderos (slaughterhouses)!

Slaughterhouses: the ranchers don’t care!

Ranchers: it’s the stupid cows!

Source: Herr & Muzira (2009), quoted from Fairbanks and Lindsay (1997)”

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Notebook Computer SC (Graves and Willems, 2005)

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SC for Tourism Servicestier2 supplierstier1 supplierstour operatorstravel

agentscustomers/tourists

(Rusko et al, 2009)

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Information and Service Flows in Tourism SCs (Zhang et al, 2009)

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Brainstorming and Class Discussion

In what ways does the tourism supply chain differ

from the typical supply chain for goods?

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Unit 7.2 – Discussion: Posada Amazonas Case

1) What prompted Holle to enter into a partnership when developing the business?

2) What competitive value does the partnership offer?

3) What problems did the partnership encounter?

4) As external consultant hired to advise Holle on the SC problems, what would you advice?

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Unit 7.3: Developing and Managing SC Partnerships

Why develop a partnership? Anticipation of mutual gains for partners (win/win):

• reduced financial risk, improved service quality, increased productivity, and reduced total costs

Positive outcomes for business:• Financial• Social

- Community goodwill- Fulfillment of business social responsibilities- Potential to contribute to achieve MDGs

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Which Millennium Development Goals did the Posada Amazonas Case promote?

Goal 1: Eradicate extreme poverty and hunger Goal 2: Achieve universal primary education Goal 3: Promote gender equality and empower

women Goal 4: Reduce child mortality rates Goal 5: Improve maternal health Goal 6: Combat HIV/AIDS, malaria, and other

diseases Goal 7: Ensure environmental sustainability Goal 8: Develop a global partnership for development

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Stages in the development of partnerships

Seek and choose a partner. Evaluate strategic fit. Implementation of operating procedures. Managing the relationship and evaluating

outcomes.(Austin, 2000)

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Key facilitating factor in partnership development

key factor TRUST“a shared belief that you can

depend on each other to achieve a common purpose” (Lewis, 1999)

Two levels of trust:– Interpersonal level

– Social level

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Trust in different Cultures (“Social Capital: Trust, networks and involvement in associations in 13

countries”, Fundación BBVA, 2006)

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Other facilitating factors in partnership development

Mutual needs of partners to be. Interpersonal connection. Ability to work together joint leadership. Disposition to share information. Willingness to invest resources in

collaboration. Belief that collaboration is an asset for both

and is sustainable in time.

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Types of Relationships in the Supply Chain(Emmett & Crocker, 2006)

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Comparison between Arm’s Length and Collaborative Relationships

These differ in the following dimensions Contracts with suppliersPrice/riskNegotiations Interpersonal relationshipsControl mechanisms

(Adapted from Emmett & Crocker, 2006)

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Advantages of Partnership over Arm’s Length Relationship

Common goals Power balance Risk sharing Shared gains/losses Joint expertise Greater chance of sustainability in some

industries(Emmett & Crocker, 2006)

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Choosing a Long-term partner

Technically sound and competent. Managerially competent. Adequately resourced and financially stable Reliable

(Adapted from Emmett & Crocker, 2006)

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Critical Factors for maintaining partnerships

Match in organizational and strategic objectives. Match in values or philosophies regarding the

management of the relationship. Availability of expected technical resources in the

partners. Willingness to share planning and performance

information. Continued belief on the mutual benefit of maintaining the

collaboration. Establishment of a measurement system to assess

partnership benefits.

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Unit 7.4: Managing Risk Spots

Partner selection deficits in due diligence• Choosing the wrong partner • Rejecting a potentially good partner

Design of the alliance• Power equilibrium• Conflict management

Manage the alliance• Poor communication/lack of transparency• Slackening of shared goals• Loss of trust

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Threats to collaboration

Opportunistic behaviorDeficits in communicationsLack of transparencyUnkept commitmentsFeelings of unfair playUnbalances in reciprocity

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Perceptions of Contractors/Suppliers

Factors contributing to failed collaborations Contractors’ response (rank)

Suppliers’ response (rank)

Poor communication 1 1Lack of top management support 2 10Lack of trust 3 4Lack of total quality commitment by supplier 4 18Poor upfront planning 5 5Lack of distinctive value-added quality/benefit 6 13Lack of strategic direction 7 3Lack of shared goals 8 2Ineffective mechanism for conflict resolution 9 7Lack of benefit/risk sharing 10 6Agreement does not support a partnership philosophy 11 9Partner organization lacks top support 12 8Changes in the market 13 16Supplier base too large 14 15Corporate culture differences 15 17Top management differences 16 14Lack of central pruchasing 17 12Low status of purchasing 18 11Distance barriers 19 19

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Unit 7.5: Conclusion

Partnerships should be an asset.Positive outcomes: financial and social. Partnerships need to be adequately

managed.There are facilitating factors as well as

barriers to developing and managing partnerships.

Trust is key in the emergence and growth of collaborative relationships.