Supply Chain Partnerships: Benefits for Channel Management Analysis

This essay critically assesses the benefits of supply chain partnerships in retail and channel management. It begins with an overview of supply chain functions and current trends, emphasizing the importance of partnerships. The core of the essay explores the advantages of trust-based relationships, collaborative innovation, cost efficiency, effective negotiations, and the implementation of omni-channel strategies. It highlights how these factors contribute to competitive advantages, operational efficiencies, and value creation for customers. The essay also addresses challenges such as power imbalances and conflicting interests, ultimately concluding that channel partnerships are crucial for gaining a competitive edge through various value generators. The essay references various sources to support the arguments and provides appendices with additional information and models.

Assessing the Benefits of Supply Chain
Partnerships for Channel Management
Janna Pearce
6531652
Words: 1499

Table of Contents
Introduction.................................................................................................................2
Supply Chain Overview and Trends.........................................................................2
Benefits of Supply Chain Partnerships...................................................................3
Trust-Based Relationships....................................................................................4
Collaborative innovation........................................................................................5
Cost Benefits...........................................................................................................5
Negotiations to Improve Partnerships..................................................................6
Omni-channels........................................................................................................6
Conclusion..................................................................................................................7
Bibliography................................................................................................................8
Appendix...................................................................................................................10
Appendix A – Supply Chain Trends and Retailer Payoffs.................................10
Appendix B – Traditional Buyer Supplier Interface............................................10
Appendix C – Model of Strong Partnerships.....................................................11
Appendix D – Buyer Firm Mediated Path from Trust Strategy to Firm..............11
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Introduction
This essay will assess the benefits of partnerships within supply chains by taking a
critical approach and considering solutions for effective channel management. The
essay focuses on concerns of retail and merchandising. First, an overview of
supply chain function and current trends will be examined, followed by an
introduction to the importance of partnerships in supply chain management. The
benefits of; relationships built on trust, collaborative innovation, cost efficiency,
negotiating, and omni-channels are the primary parts of the discussion.
Supply Chain Overview and Trends
Retail supply chains act as a network of facilities and distribution options that
serve to transform raw materials into finished products and distribute these
products to customers (Farooqui, 2021). Members of retail supply chains typically
include primary producers, manufacturers, intermediaries, wholesalers, retailers
and finally customers. The process of a supply chain aims to create value for the
end customers.
Formally, organisations concentrated on effective decision making independently
within the functions of the supply chain. A variety of functions exist in a supply
chain, for example, production, distribution, marketing and sales, in addition to
business processes such as customer relationships, customer service,
management and order fulfilment. To remain competitive in retail markets,
initiatives such as reducing costs and increasing efficiency drives the importance
of harmonising supply chain relationships and strategising effective management.
Supply chain management (SCM) is the organisation of material and information
flows between facilities (Thomas & Griffin, 1996). SCM aims to synchronise the
members of the supply network to form long term strategic cooperation
(Schnetzler, 2007). An article by Ganesan et al. (2009: 85) uncovered three current
trends transforming the retail market. These trends are influencing improvements
to “brand image, reputation, sales and profits, innovation, and relationships” (see
Appendix A). With a focus on relationship-based innovation, both suppliers and
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retailers are investigating ways to add superior value and benefit from
partnerships.
Benefits of Supply Chain Partnerships
A traditional relationship between supplier and retailer represents a “bow-tie”
shape where the single interaction between parties involve the sales and buying
teams, illustrated in Appendix B. A conventional channel exists with members
performing individual functions. This demonstrates a lack of collaboration and
integration between their functional departments.
A new emphasis on collaboration recognises strategic competitive advantages and
competencies achieved by partnerships among suppliers and retailers. Supply
chain partnerships involve a mitigated relationship between members consisting of
mutual benefits such as increased information flows, reduced uncertainty and
creating a more profitable supply chain (Maloni & Benton, 1997). Furthermore,
genuine partnerships commit to each other and change their behaviour to satisfy
the other partners’ needs (Ryu, et al., 2009).
Represented by a diamond shape interface, illustrated in Appendix C.
Collaboration and information flows seamlessly through an integrated system of
departments. To strengthen a supply chain and improve efficiency a value chain
analysis is implemented. The chain is first deconstructed and then restructured
depending on the evaluation of necessary partners essential to creating value.
This may include disintermediation, the removal of a channel member and
transferring the functions to another member to perform. This creates a vertical
marketing system. However modifying a channel involves costly and irreversible
investments, therefore extensive planning is necessary.
For example, Zara has a vertical marketing system. Customers respect the fast
fashion retailers’ speedy design processes and delivery to market, efficiently
addressing their needs, and giving Zara a competitive advantage in the fashion
market.
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Increased customer power is driving suppliers and retailers to exchange
information about customers' requirements and wants, ultimately delivering value,
which is influencing the new era of collaboration in retailing. This is due to an
increase in market diversity and choice, as well as increased competition.
Trust-Based Relationships
Competitive advantage can be achieved by developing trust-based inter-
organisational relationships. An article based on the commitment-trust theory by
Wu et al. (2012) suggests that trust is an important factor in developing better
interactions, increasing the interest of both entities, improving communication and
reducing uncertainties. Value advantages can be realised, the risk of a partner
departing can be reduced, and supply chain cooperation efficiency can be
improved.
Critically, academia focuses research on relational strategies predominantly on
resource-rich organisations. Supply chain collaboration relies on significant
resources to implement therefore the power and resource imbalance compared to
smaller organisations means the cost of wide-scale collaboration would outweigh
the value achieved (Barratt, 2004).
Conversely, Jones et al. (2014) investigate the ability of medium and small
organisations to also leverage supply chain relationships. Findings suggest that
performance benefits and competitive advantage can be achieved when
organisations pursue trust-based collaboration and demonstrate trustworthiness
strategically. Trustworthiness is achieved by meeting demands such as
performance capability and relationship commitment. The length of the relationship
mediates trustworthiness routines. Enhanced trustworthiness affects the
performance of operational activities and finally the firm performance (see
Appendix D).
However, disruptions in supply chains can cause adverse effects to trust-based
relationships such as prompting over-reactive behaviours through the functions.
As a result, negatively affects the ability of organisations to meet fluctuating
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demand (Doroudi, et al., 2020). To avoid negative consequences, it is critical to
have trust in supply chain connections. As a result, trust is a critical aspect in
ensuring partnership advantages.
Collaborative innovation
Highly interdependent supply chains can benefit from the capability to form
innovative products, processes, services and business models through the shared
work of partners. Such innovations can benefit the end customers with new market
offerings. The findings of research by Skippari et al. (2017), establish that
collaborative innovation protects members in a supply chain from technological
shocks threatening the organisations offerings, the reason being, information
sharing enriches exposure of new ideas and opportunities which reduce the risk of
the impact of volatile changes. Recently applicable to the disruption faced by
supply chains as a result of the Covid-19 pandemic 12% of retailers globally were
heavily disrupted and a further 56% were moderately disrupted (Statista, 2021).
Underlining the importance of collaborative innovation in adapting to current
unpredictable environments.
However, successfully innovating is challenging within a heterogeneous
environment of conflicting interests and motives. Engaging all actors in
collaborative innovation as well as supporting inter-organisational relationships
and consolidating confliction interests are preventative factors (Skippari, et al.,
2017).
Cost Benefits
Ultimately, improving efficiencies and creating competitive pricing benefits for
customers, relies on costs. “Although value can be created in many ways, one of
the primary and most practical objectives is to lower total cost in the value chain”
(Cannon & Homburg, 2001, p. 29). Partnerships can benefit their financial and
operational performances due to decreasing the total costs and reducing
inventories. When buyers and suppliers collaborate closely, total costs can be
reduced, including direct product costs as well as the customer's acquisition and
operational costs (Mieghem, 1995). Furthermore, cost-saving benefits can be
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achieved from economies of scale as well as decreased administration, switching
costs, process integration and reducing inventories (Maloni & Benton, 1997).
Negotiations to Improve Partnerships
Win-win negotiations are an important basis for long-term partnerships with fewer
disputes, leading to efficient contract implementation and improved reliability and
service. Both parties can be mutually rewarded by strong cooperation and
willingness to mutually compromise (Thomas, et al., 2018). Benefitting from closer
relationships that themselves encourage further opportunities for greater
improvement (Barratt, 2004).
However unsuccessful, win-lose negotiations have adverse effects on the
collaboration in supply chains and therefore decrease the exchange of information
and operation knowledge.
Trust encompasses an important role in negotiation outcomes, a meta-analysis by
Kong et al (2014) states, trust increases integrated behaviours that are
cooperative and seek to create value for everyone by encouraging mutually
benefiting negotiations. However a dark side of trust may be exploited during
negotiations, detrimental to partnerships.
Omni-channels
An omni-channel strategy of supply chain management offers customers a
seamless evolution of a multi-channel. The customers’ journey is fluid and
channels are managed together, therefore the interaction is perceived as with the
band rather than the channel (Piotrowicz & Cuthbertson, 2014). Disney stores for
example benefit customers from seamless experiences, improving customer
experiences, which benefits the organisation by increasing customer satisfaction
and increasing sales. There is unified cooperation for profit developed by common
objectives. Adopting an omni-channel might lead to market advantage with regard
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to acquiring and retaining customers and ensuring sustainability (Gerea, et al.,
2009).
Conclusion
In summary, this essay has explored the current trends of supply chains and the
benefits of collaborations between supply chain members. Challenges to
establishing partnerships with heterogeneous members, conflicting interests and
power dynamics have been considered. This essay, however, emphasises the
significance and advantages of partnerships. Economies of scale can be used to
generate operational and economic efficiencies. Collaborative innovations can
provide value to customers and protect members from unpredictable changes.
Additionally, the importance of trust-based relationships reduces the risk of partners
leaving, costing the organisation time to establish new partners. Furthermore, win-
win negotiations have advantageous outcomes such as increased trust and
willingness to compromise. Finally omni-channel retailing provides customers with
integrated experiences, allowing them to take advantage form product availability,
ease and satisfaction. Therefore channel partnerships can gain a competitive
advantage through important value generators.
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Appendix
Appendix A – Supply Chain Trends and Retailer Payoffs
(Ganesan, et al., 2009, p. 85)
Appendix B – Traditional Buyer Supplier Interface
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(Cooper, et al., 1997, p.75)
Appendix C – Model of Strong Partnerships
(Cooper, et al., 1997, p.75)
Appendix D – Buyer Firm Mediated Path from Trust Strategy to Firm Performance
(Jones, et al., 2014, p. 5461)
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