Integral Logistics Management — Operations Management and Supply Chain Management Within and Across Companies

2.3.1 Target Area Strategies for Intensive Cooperation

Intended learning outcomes: Produce an overview on the social competency of a company. Present target area strategies for an intensive cooperation in the partnership relationship, describe tasks and investment areas, and disclose possible supply chain risks entailed.

In any case, a partnership relationship must be designed as long term. In contrast to relationships that are buyer-domi­nated or supplier-dominated, in a balancedpartnership relation­ship, the intensity of the cooperation can be significantly greater. For successful partnerships, an enabler objective within the target area of flexibility stands in the foreground. We propose calling this the social competency of a company. This could make sense because of the definition of a company as a socio­technical system (see the introduction to Chapter 19).

The social competency of a company comprises the flexibility to enter as a partner in supply chains and to link others in a supply chain.

This demands a high degree of social competency, particularly of the leading partner in the supply chain. For many companies, acquiring social competency requires some changes in behavior. Similar to the way that individuals develop social competency for a balanced partner­ship, a company must develop, first, the ability to play a part in cooperation with others, and, second, the ability to engage others as partners in a trustworthy way, that is, without using coercion.

Related to the entrepreneurial objectives, strategies arise between the producer as buyer and the producer’s suppliers as shown in Figure They are complementary to the strategies shown in Figure

Fig.        Target area strategies for an intensive cooperation in the partnership relation­ship.

In buyer’s markets, the demand for short product innovation times (time to market) has come to the fore. Cross-company product and process develop­ment with partners can be advantageous. When product development becomes more costly, entrepreneurial risk may in this way be more widely distributed. Reducing the time for R&D and production demands more in­tensive cooperation with partners — and this at all levels of the supply chain (see [Fish97]). This means that partners have insight into the participating companies. One absolute prerequisite is the long-term formation of trust.

Figure groups the tasks in which both supplier and buyer invest in different areas, namely, supply chain structure, supply chain organization, and the required information technology.

Fig.        Tasks and investment areas for intensive cooperation in the partnership relationship.

To support the requirements, specific SCM software has been developed. See also Section 9.2.4. Good communication paths are necessary, both technical (phone, fax, ISDN, EDI, transponders [e.g., an RFID sensor]) and personal (regular meetings at all hierarchical levels).

Intensive cooperation in the partnership relationship tends to entail the following supply chain risks — in addition to those of the customer-supplier partnership (see Section 2.2.2), which must be in total smaller than the advantages mentioned.

  • Abuse of the knowledge gained from cooperation with partners to enter into business relationships with their competitors.
  • Investment by partners that — due to too brief cooperation periods — is not profitable.
  • Dependence on a system or modular supplier, because of the very close link, can prove to be excessively strong, but dual sourcing cannot be considered.
  • Local sourcing can result in higher prices, suboptimal product quality, and a lack of quantitative capacity flexibility.

Course section 2.3: Subsections and their intended learning outcomes

  • 2.3.7 The Virtual Enterprise and Other Forms of Coordination among Companies

    Intended learning outcomes: Produce an overview on the virtual enterprise and underlying long-term network of potential partners. Present target area strategies for a virtual enterprise and disclose possible supply chain risks entailed. Describe some other forms of cooperation in relation to the virtual enterprise.