Relationships are important, especially in supply chains.

SCM pointing

 

In implementing an integrated value system, organizations are continually faced with the challenge of managing the “people” part of the equation. Relationship management affects all areas of the supply chain and has a dramatic impact on performance.

In many cases, the information systems and technology required for the supply chain management effort are readily available and can be implemented within a relatively short time period, barring major technical mishaps. Inventory and transportation management systems are also quite well understood and can be implemented readily. A number of supply chain initiatives fail, however, due to poor communication of expectations and the resulting behaviors.

Managers often assume that the personal relationships within and between organizations in a supply chain will fall into place once the technical systems are established. However, managing relationships among the various personalities in the organizations is often the most difficult part of the Supply Chain Management (SCM) initiative.

Moreover, the single most important ingredient for successful supply chain management may well be trusting relationships among partners in the supply chain, where each party in the chain has confidence in the other members’ capabilities and actions. Without positive interpersonal relationships, the other systems cannot function effectively.

Supply chain management is most importantly the management of people. People are the weak link in the supply chain:  people blaming other people for their problems based on some incident that may or may not have occurred sometime in the past. Once you get people together into the same room, you begin to realize the number of false perceptions that exist.

The weakest supply chain link is the human link

The weakest supply chain link is the human link

People are still very reluctant to let someone else make decisions within their area. It becomes especially tricky when you show people how “sub-optimizing” their functional area can “optimize” the entire supply chain.

In deploying the integrated supply chain; developing trust on both sides of the partnership is critical to success. In discussing the importance of relationships in supply chain management, trust building is emphasized as an ongoing process that must be continually managed. In short, trust takes time to develop but can disappear very quickly, if abused.

Tactical and operational plans should be continuously shared and coordinated. Instead of encouraging companies to hold their information close, trust-building processes promote the sharing of all forms of information possible that will allow supply chain members to make better, aligned decisions.

Whereas traditional accounting, measurement, and reward systems tend to focus on individual organizations, a unified set of supply chain performance metrics should be utilized as well.

Finally, instead of “pushing products” into the supply channel, thereby creating excess inventories and inefficient use of resources, consultative sales processes and “pull” systems should be utilized. When organizations in a supply chain seek these goals, they may discover the need to re-design the entire structure of their supply chains.

 

People are the most important consideration in the design of a supply chain.