Effective and collaborative supply chain management is increasingly becoming an important source of competitive advantage. Several researchers have examined the motivations for collective action via collaborative strategies and alliance structures among firms. Research publications on interorganizational cooperation and the influence of network resources on firm capabilities suggest that a narrow resource-based view of the firm misses the importance and value of resources that constitute part of a firm’s network. These research findings point towards integrating the traditional operational competence orientation typically encountered in operations strategy literature with the notion of collaboration competence. It can be argued that competitive advantage can be achieved if the individual members in the supply chain can move towards an efficient internal and external integration in the supply chain as well as a good relationship with other supply chain partners.
Several firms are involved in process improvement and product development endeavors however, in most instances these activities are undertaken in an individual enterprise, instead of its synergistic application across the value-chain. Original equipment manufacturers are slowly spreading process improvement through the supply chain by offering training to suppliers. Application of process improvement and product development practices in a supply chain requires that the improvement activities are strongly linked to strategy and the supply chain is viewed as a single entity. It is important to focus on the end customer and to integrate process improvement and product development actions across the entire supply chain. Effective performance measurement systems for the supply chain need to be developed and the improvement approach must incorporate variation reduction as a guiding principle. The standard process improvement approaches (such as Six Sigma) can be supplemented by appropriate time compression techniques and operations scorecard, such as the balanced scorecard, that link the performance on key measures back to strategic performance measures.
Few years ago I pondered on the issue of developing competitive advantage in collaborative supply chain environment and developed the following conceptual framework.
The framework emphasizes the need to combine internal orientation (operational competence) with an external orientation (collaboration competence). Operational competence relates to the preparedness, skill, or capability that enables organizations to develop product-market specific business strategy. It includes several aspects such as adaptive operations, cost efficiency of labor, delivery performance, logistics, economies of scale, process technology, quality performance, throughput and lead time and vertical integration.
It can be observed that an internal orientation is prevalent in almost all of these sets of competence measures and the aspect of collaboration is absent in the list. Many factors have converged over the past few years to provide a new emphasis on partnerships and alliances. While economic drivers (such as global competition and downsizing) are the principal forcing factors, advances in computing and communications suggest new and attractive opportunities. Within this general framework of increased reliance upon co-dependent relationships, there are several categories that present different challenges. Long-term relationships, such as strategic partnerships, marketing/distribution agreements, and joint ventures, generate a host of high-level management concerns.
Collaboration in business is no longer confined to conventional 2-company alliances, such as joint venture or marketing accords. Today groups of companies are linking together for a common purpose. Collaboration in operations could be argued to be one of the common purpose that could bind firms. Resources can be separated into contained resources (simple networks of resource factors that can be monetarily valued) and system resources (created by a complex network of firm resources factors). Research studies have suggested that access to information about potential partners constitutes a resource and that such resources are an important catalyst for new alliances, partly because alliances entail considerable hazards. Four potential sources of interorganizational competitive advantage can be gained from alliances: relation-specific assets, knowledge-sharing routines, complementary resources and capabilities, and effective governance. These resources acquired through extrafirm or intraorganizational contacts are critical to competitive success.