Three Critical Elements Impact Global Supply Chain Partnerships

Guest Post by Stacey Little, Program Director, Transportation and Logistics Management at American Public University

The three building blocks most important to supply chain relationships are communication, trust, and mutually beneficial results. The goal is to increase the benefits to all parties involved and add value to the end consumer. I always explain to students that there is a purpose to every link in the supply chain—to add value. 

Miscommunication is a common problem in any business setting. It is the root cause of costly mistakes, delivery delays, and customer frustration. The severe consequence of miscommunication is the reason communication is a necessary skill for all supply chain managers. Effective communication among supply chain partners is essential to the flexibility and responsiveness of the supply chain.  Communication is the foundation for trust among supply chain partners.

Communication among several members possibly from different countries is a challenge in itself. Add in over 6,000 languages spoken around the world, and you have just added another level of complexity to the miscommunication dilemma. Then we also need to consider communications styles. A simple illustration is that in some cultures communication is indirect and you may have to construe meaning from vague comments, gestures, or facial expressions.

A lack of trust among supply chain partners can impact transparency and information- sharing, which are essential to process efficiencies and good decision-making. On the other hand, a high level of trust enhances cooperation and can reduce time that would otherwise be spent on discussion, negotiation, and investigation.

Since trust facilitates quicker processes, it can impact supply chain execution. As an example of trust problems in the supply chain a major Midwest university in the Midwest once suspended sales of a popular soft drink brand on three campuses due to human rights violations, environmental waste, and water usage in India. The vendor’s failure to meet the university’s code of conduct resulted in a disruption to the supply chain and loss of sales impacting both partners. 

Due to a lack of transparency, information-sharing, and trust, a third- party independent auditor was used to satisfy both parties and resolve the issues at hand. An issue like this one can clearly deteriorate positive supply chain relationships. 

Another example comes from a good friend of mine from Germany was looking to setup a supplier in China to produce stainless steel oven parts for a high-speed baking oven.  When he arrived at the meeting in China, he had brought a box of $150 chocolates to give to the President.  When he gave the President the box of chocolates, he simply pushed it over to his assistant.   My friend was in shock.  He could not believe that he did not accept his gift.  The problem was that he should have given the gift in private instead of at the business meeting in front of a group of people.  He had not established any type of relationship or trust with the President before giving the gift.  A trusting relationship is the first-step toward achieving mutually beneficial results in supply chain partnerships.  

Mutually beneficial results are positive results of trust and communication in supply chain relationships.  Positive, trusting relationships are the foundation needed for achievement of mutually beneficial results. Benefits realized in this supply chain may not be equal to all partners, but as a whole the chain should be strengthened as a result of each member’s role.

Are the approaches and tactics you use to deal with your boss, co-workers, and your subordinates the same or are they different for each relationship? Every relationship is different and deserves a unique approach. Your relationship with your global supply chain partners or team members is no different. Supply chain managers must be proactive in their approach to achieving successful relationships. A great deal of flexibility is required to show a level of concern and build trust with supply chain partners. 

About the Author

Dr. Stacey Little is Program Director for the Transportation & Logistics Management program. She has over 13 years of experience in teaching in Business and Logistics in both the online and traditional format.  She has a Professional Designation in Logistics and Supply Chain Management and a Certification in Transportation and Logistics from the American Society of Transportation and Logistics. Her research interests are in the area of cultural influences on supply chain relationships.

 

 

Logistics in the Limelight

The impact of global logistics is making headlines with the recent controversy in the US about Beck’s beer not being brewed in Germany.

Beck’s has been brewed in Germany and exported to the US up until recently. Feeling the pinch in market share a couple of years ago, the company quietly moved their brewing operations for the US market from Germany to the US.

One might wonder why any company would risk a global brand by making such a change. Beck’s has acknowledged a savings of $12 million in transportation costs. Unlike other operational savings, savings in logistics go straight to the bottom line. 

This becomes a huge coup for any company competing in the fierce beer marketplace, where market share can shift with popular tastes. Logistical savings can really impact an organization's profitability, which is something shareholders love to hear. Bottom-line savings of $9 million a year is probably worth the risk of a little controversy.

The Beck’s shift happened in 2012 and a recent class- action suit   is offering up to $50 compensation for misled consumers. This case of Beck’s moving their brewing operations to save transportation costs is an instructive example. Real transportation savings trump many organizational risks because the savings are direct and tangible.

We should expect more of these kinds of changes in the future. The only question now is, will Beck’s change their branding to become a domestic beer along the likes of Budweiser, Coors, and Pabst Blue Ribbon?