Modeling Strategic Management in Supply Chain Collaboration:

A Channel Integrator Perspective

Abstract
Supply chain vs. supply chain calls for building competitiveness of the entire supply chain. As
competition shifts from an inter-firm to an inter-supply-chain level, the collaborative paradigm
in supply chain management regards strategic collaboration as a crucial source of competitive
advantage. Such philosophy requires a movement away from arms-length interactions and winlose relationships toward long-term, partnership-type arrangements to create highly competitive
collaborative supply chains.
Strategic collaboration involves Joint Decision-Making (JDM) that promotes cooperation
among the supply chain trading partners. It aims to prepare the network for supply chain vs.
supply chain competition. JDM goes beyond information sharing, involving "joint, concurrent,
intellectual, and cognitive decision-making" among partners. For implementing this high-level
collaboration process, a broad guiding framework or a structured approach is required for joint
planning (decision-making), governing the strategic collaboration; managing the execution of
joint strategy; and driving the strategic performance of supply chain collaboration. This article
attempts to develop a comprehensive strategic management process to address the above
strategic issues in implementing high-level supply chain integration in the channel integrator
(or self-sustained) collaborating model.

I.

SUPPLY CHAIN LEVEL COMPETITION

Todays CEOcant simply focus on his or her companys performance in a vacuum; there
is an emerging requirement to focus on the performance of the extended supply chain or network
in which the company is a partner.In the age of connected and global economy, a major trend
observed at present is:competition shifting from enterprise to supply chain level.Available

literature and expert views also substantiates this phenomenon. As the economy changes, as
competition becomes more global, its no longer company vs. company but supply chain vs.
supply chain (Harold Sirkin, 1994) .The best supply chain wins Mike Braatz, Vice-President of
business development at supply-chain vendor Optiant Inc., of Somerville. On the other hand,
competition is a real driver in a world where company vs. company competition has become
supply chain vs. supply chain1.For instance, an article mentions that classic model of company
vs. company is starting to give way to a new model: supply chain vs. supply chain 2. Another
article3views that for several years the market is evolving into one of supply chain vs. supply
chain. By optimizing internal efficiency, several manufacturers have cut costs, improved
agilityand maximized responsiveness.However, in the new global competitive scenario internal
efficiency alone is not sufficient to become competitive. Supply chain vs. supply chain calls for
building competitiveness of the supply chain. The supply chain-level competition has further
augmented the challenge of meeting customer requirements through reduced lead-times, speedy
delivery of defect-free products, quality products and services, reliability and cost effectiveness
across the value chain, ultimately to deliver unprecedented and differentiated customer value.
Driven by these observations/trends, organizations world-wide are currently confronted with the
following set of supply chain-wide goals/challenges at renewed levels:
1. Minimizing supply chain costs
2. Maximisingsupply chainresponsiveness
3. Improving supply chain agility
1Rob Spiegel (2002), What Extended Supply Chain? Less than 5 percent of the supply chain is broadly connected Distribution Electronic News, Electronic News, River One, 2002

2David A. Taylor (2003), Supply Chain vs. Supply Chain - The very nature of business competition is changing, and IT has a
big, challenging role, NOVEMBER 10, 2003, Computer World

3 Chris York (2003), Visibility in your supply chain minimizes surprises, Tompkins Associates, 2003

4. Maximising supply chain value

5. Increasing supply chain resilience
6. Maximisingsupply chain reliability/consistency

Above-mentioned supply chainchallenges at a higher level should be dealt through a holistic

approach, which means optimization of processes at every stage of the supply chain and the
supply chain as a whole.

It is critical, therefore, to focus management attention on the

performance of the supply chain as an integrated whole, rather than as a collection of separate
processes or companies. The entire supply chain network should be transformed into more
customer-focused, lean & agile supply chain offering unique or exceptional customer value that
is different and much superior to the competitors supply chains. Hence, the ultimate goal and
measure is customer satisfaction: the ability to fulfill customer orders for personalized products
and services faster and more efficiently than the competitors supply chain. Just offering the best
or superior products is no longer adequate. Along with product, the place and time of delivery at
a competitive price together determine the unparalleled customer value delivered.For delivering
such unparalleled value and, thereby outshine the business in todays connected, global and
vibrant economy, a holistic and innovative approach to improvisation and optimization of the
overall supply chain competence, is essential.

II.

COLLABORATIVE SUPPLY CHAIN FOR COMPETITIVENESS

Great firms will fight the war for dominance in the marketplace not against individual
competitors in their field but fortified by alliances with wholesalers, manufacturers, and
suppliers all along the supply chain. In essence, competitive dominance will be achieved by an
entire supply chain, with battles fought supply chain versus supply chain.
Roger Blackman, 1997.

In the age of competition at supply chain level, operational efficiency,

agility and performance across supply chain are not just requirements for
success, but are prerequisites for supply chain competitiveness. One way to
ensure supply chain competitiveness is to have the best or competent partners on both sides, i.e.,
supply and demand-sides. On the other hand, with the prevalence of business practices such as
global sourcing, outsourcing and collaborative commerce, the supply chain performance today
largely depends on the integrated performance of the partners. The partners in the supply
chain might have a significant adverse impact on the delivery of goods; no
matter how well optimized our own inventory/service levels are. The total
supply chain may be drastically inferior to that of a competing supply chain,
but the firm may be unable to observe that if it has only compared its local
node in the chain (e.g. our factory) with that of its competitor. This is often
described as "competition across supply chains" rather than individual
companies. For instance, in the diagram below (figure 1) both inventory and
service levels appear to be comparable between the competitor firms. But,
the same appears to be different when their respective supply chains are
compared.
Figure 1:Comparison of Inventory and Service levels between Competitor firms and their Supply chains

Source:Supply Chain Online

While improving operational efficiency of each supply chain partner is

crucial, the firm should also focus on enhancing partners competencies in all
relevant areas like product quality, inventory control, cost effectiveness,
service levels, agility, management practices, etc. This means building
competencies of the partners without restricting to internet links or periphery
integration with partners. Capabilities such as visibility, quality, efficiency,
resilience and agility should be developed across supply chain members.

As business success now depends on leveraging improved capabilities, process efficiency

and performance at every stage of the supply chain to transform the entire supply chain into
lean/agile, supply chain relations at strategy level is required which is beyond the win/lose
negotiations of traditional trading or the integrated supply chain relationships.The supply
chain management philosophy stresses that maximizing service to key
customers at the lowest total cost requires a strong commitment and close
relationships among trading partners (Stank, Keller, and Daugherty, 2001). In

order to achieve and maintain improved overall supply chain performance, the firms in the value
chain should go beyond traditional functional and business performance measures and develop
new metrics with enough detail and richness to handle supply chain performance rather than
individual business performance4. Such increased focus on suppliers and customers
require tremendous levels of coordination and collaboration with partners.
Robert E. Spekman, John W. KamauffJr, and NiklasMyhr(1998) 5stated that
only through close collaborative linkages through the entire supply chain,
can one fully achieve the benefits of cost reduction and revenue enhancing
behaviors. Thisphilosophy requires a movement away from arms-length interactions toward
long-term, partnership-type arrangements to create collaborative, highly competitive supply
chains (Stank, Keller and Daugherty, 2001).

When the success of one company depends on the success of others in the chain, it
becomes critical for the supply chain partners to engage in more strategic collaboration, a type
of collaboration that would make the chain behave as a single system, coordinated with each
element of the chain and aligned with a jointly established supply chain goal (Taylor,
2004).Historically, collaboration has been limited to coordinating operational efforts, but little
has been done in the strategic arena, specifically, joint planning.Thus far, collaborative efforts
have focused on integrating operational processes, without integrating the planning and design
activities, so, returns have been limited(Barratt, 2004).The study carried out by Ann Vereecke,

The Practice of Supply Chain Management: Where Theory and Application Converge, Springer Publications, 2004

5 Robert E. Spekman, John W. KamauffJr, NiklasMyhr (1998), An empirical investigation into supply chain management: A
perspective on partnerships, International Journal of Physical Distribution& Logistics Management, Vol. 28, Issue 8, pp. 630 650

Steve Muylle (2006)6in European countries has proven that higher levels of collaboration among
supply chain partners have shown higher performance improvement. Some of the most often
discussed benefits of collaboration include improved productivity, increased product quality,
increased product cycle times, decrease in overall costs, and overall competitive advantage
(Fawcett and Magnan, 2001; Ferdows et al., 2004; Fine, 2000; Lajara and Lillo, 2004; Lee and
Whang, 2001). Supply chain collaboration improves collaborative advantage(strategic benefits
gained over competitors)7 and indeed has a bottom-line influence on firm performance,
irrespective of the firm size8.Moreover, the structural collaboration was found to be improving
flexibility and procurement. In the long run, firms expect the supply chain collaboration to pay
off through more competitive products and quicker product development that will transform into
possible competitive advantage and increased profits (Stuart and McCutcheon, 1996) 9. As
competition shifts from an inter-firm to an inter-supply-chain level, the collaborative paradigm
in supply chain management regards strategic collaboration as a crucial source of competitive
advantage(Gold, S., Seuring, S. and Beske, P, 2010)10.

6Ann Vereecke, Steve Muylle(2006), Performance improvement through supply chain collaboration in Europe, International
Journal of Operations & Production Management, Vol. 26, Issue 11, pp. 1176 - 1198

7Collaborative advantage is defined as strategic benefits gained over competitors in the marketplace through supply chain
partnering and partner enabled knowledge creation, and it relates to the desired synergistic outcome of collaborative activity that
could not have been achieved by any firm acting alone.Supply chain collaborative advantage as the five dimensions: process
efficiency, offering flexibility, business synergy, quality, and innovation.

8 Mei Cao, Qingyu Zhang (2011), Supply chain collaboration: Impact on collaborative advantage and firm Performance,
Journal of Operations Management, Volume 29, Issue 3, March 2011, Pages 163-180

9Mei Cao, Qingyu Zhang (2011), Supply chain collaboration: Impact on collaborative advantage and firm Performance,
Journal of Operations Management, Volume 29, Issue 3, March 2011, Pages 163-180

10Gold, S., Seuring, S. and Beske, P. (2010), Sustainable supply chain management and inter-organizational resources: a
literature review. Corp. Soc. Responsib. Environ. Mgmt, 17: 230245. doi: 10.1002/csr.207

Prabir K. Bagchi, Byoung-Chun Ha and TageSkjoett-Larsen (2006)11 have proven that

collaboration in supply chain design and operations with key suppliers and length of relationship
with key supply chain partners were found out to be important factors in supply chain integration
that positively affect performance improvement.Daugherty et al. (2005) found that formalized
collaboration could provide superior long-term performance. Corsten and Felde (2005) found
that supplier collaboration increased financial performance12.Chief Executive Officers (CEOs) in
the CPG industry recognized collaboration with partners as their highest strategic priority and
more than 80 % of the firms surveyed through the Annual Customer and Channel Management
(CCM) Survey, conducted by McKinsey & Company, Nielsen, and the Grocery Manufacturers
Association in 2010said they were involved in at least one collaboration initiative, and some
were involved in as many as 10 such arrangements13.

III.

STRATEGIC COLLABORATION IN SUPPLY CHAINS

Supply chain collaboration is neither the same as joint ventures or strategic alliances,
which normally entail some degree of shared ownership across the parties (Lambert et al., 1996).
Nor is it the same as vertical integration, whereby there is common ownership of many supply
chain members (Cooper et al., 1997b). In addition to Lambert (1996), we view partnerships as a
special case of supply chain collaboration while other partnerships may involve extended
11Prabir K. Bagchi, Byoung-Chun Ha and TageSkjoett-Larsen (2006), Supply Chain Integration in Europe: A Status Report,
School of Business, The George Washington University in its series Working Papers with number 0003.

12Richey, R. G., Roath, A. S., Whipple, J. M. and Fawcett, S. E. (2010), Exploring A Governance Theory Of Supply Chain
Management: Barriers And Facilitators To Integration, Journal Of Business Logistics, 31: 237256. doi: 10.1002/j.21581592.2010.tb00137.x

13Luis Benavides, Verda De Eskinazis and Daniel Swan (2012), Six steps to successful supply
chain collaboration, Supply Chain Quarterly, Quarter 2 2012.

financial linkages that are not necessary in supply chain collaboration.It is a synergistic
relationship with upstream and/or downstream partners that add value above and beyond what is
achievablethrough simple long-term contracts,14involving shared commitment/resourcesthat deal
with strategic issues. A simple example is the relationship between Procter & Gamble (P&G) and
Wal-Mart, which have worked together to establish long-term EDI satellite linkages, shared
forecasts, and pricing agreements. Such collaboration enabled speedy replenishments, reduced
inventory and lowered order-processing costs that it can afford to give Wal-Mart "every day, low
prices."

Figure 2: Approaches to Strategic Collaboration in Supply Chains (modified from Cooper et al., 1996)

There are many ways to be engaged in supply chain collaboration. Cooper et al.
(1997b)elaborate on these different approaches of collaborating in the supply chain (see Figure
3). The firstis the dyadic approach, which may exist at numerous levels in the chain. Many
organizations willfocus in their early attempts on the channel members with whom they have
immediate contact. Thesecond approach uses a channel integrator. This channel leader plays
the key role in setting theoverall strategy for the channel and in getting the channel members
involved in and committed tothe strategy. The third approach uses a fourth party logistics (4PL)
14 Stanley E. Fawcett, Gregory M. Magnan, Matthew W. McCarter (2005), Supply Chain Alliances: Rhetoric And
Reality,Stanley E. Fawcett, Gregory M. Magnan, (2002) "The rhetoric and reality of supply chain integration", International
Journal of Physical Distribution & Logistics Management, Vol. 32 Iss: 5, pp.339 - 361

entity as a centralizedoptimization tool to coordinate and control the channel. As suggested the
fourth approach, verticalintegration, adopts ownership of other channel members and therefore is
not considered ascollaboration.
Figure 3: Multiple Ways of Supply Chain Collaboration (Modified From Cooper Et Al., 1997b)

The Channel Integrator

Collaboration is to create value.Often, creating value requires transformational or

significant change. No successful transformational change occurs without proper leadership. Or
they must have beenvery lucky, Kotter (1996) explains. According to the theory of five bases
of powerdeveloped by social psychologists John R.P. French and Bertram Raven (1959),one of
the bases of power is positional power, i.e., power due to the relative position.The relative
positions of the partners determine the power relationships.Indeed, the entity(s) with more power
becomes the dominant partner in the strategic partnership and controls other members.
Dominant Partner is generally present in a supply chain collaboration characterized with
asymmetric powers. Examples of asymmetric power in supply chain collaboration are found in
aerospace industry (Leslie and Young, 2005), the food industry (Van Dijk et al., 2003), and the
automotive industry (Dyer and Nobeoka, 2000; Maloni and Benton, 2000).

Dominant partner or the Channel Integrator in supply chains varies from industry to
industry. In sectors like automotive, aerospace, etc. the dominant partner is the FG manufacturer.
Whereas in consumer goods, apparels, accessories, etc., big retailers like Wal-Mart, Metro,
Tesco, etc., tend to influence upstream partners in their supply chains. Consumer Product
Manufacturers (CPMs) have no or limited influence on their retailers, especially in multibranded outlets. In service supply chains like Healthcare, Banking, Insurance, Hotel, Tourism,
etc., the dynamics of supply chain differ from the functional supply chains. Cost-effective
infrastructure plays a critical role for service quality in these sectors along with people
infrastructure, and therefore, service organizations usually exert control on supply partners.

The dominant partner in the supply chain acts as a channel integrator. It usually sets the
overall strategy and vision thats based on its internal and external capabilities.But due to such
power relationships many collaborative initiatives have ended up in failure (R. Kampstra, J.
Ashayeri, & J. Gattorna, 2006). Several researches have revealed that one partner dominating the
other, as one of the major reasons for supply chain collaboration failures. Therefore leadership
entirely based on positional power should not be the way to create and drive supply chain
collaboration. Positional power should help to open dialogue and initiate supply chain
transformation process.

Transformational Change
A transformational change is usually driven by new constraint(s) or the need to achieve
next level of performance. John Kotter (1990) in his book A force for change: How Leadership

Differs from Management advocates eight phase model for successful change. 1. Establish a
sense of urgency, 2. Create a coalition, 3. Develop a clear vision, 4. Share the vision, 5.
Empower to clear obstacles, 6. Secure Short term wins, 7. Consolidate and Keep moving, and 8.
Anchor the Change. Kotters analysis concentrates on organizational change showing similarity
to supplychain transformation through collaboration.First three stages of Kotter (1996) model
describe how a change initiative begins at the top and with three discrete actions by the leaders :
(1) create the guiding coalition; (2) establish a sense of urgency; and (3) develop a clear
vision.The dominant partner (or) channel integrator drives formation of strategic coalition and
develops the joint vision/goal/strategy. The strategic coalition for collaboration depends on how
the dominant partner(s) perceives internal and external environments of the supply chain
members.Organizations often eliminate suppliers or customers that are clearly unsuitable,
whether, because they do not have the capabilities to serve the organization are not well aligned
with the company15. Therefore, partners those with higher collaborative value aligned with the
long-term interests of dominant partner (or) channel integrator will be chosen for the strategic
partnership. Partners (upstream or downstream) with higher collaborative value are identified for
collaboration. But due to competitive pressures, several organizations enter into alliance without
ample preparation or understanding of partners' needs and hence, these alliances fail (Dacin, M.
Tina; Hitt, Michael A.; &Levitas, Edward, 1997). Daugherty et al (2005) found that collaboration
efforts often fail because not adequate care is taken in choosing the right partners, matching
inter-organizational needs and capabilities. Further, partners enter collaborative ventures with
certain expectations and objectives (Dacin, M. Tina; Hitt, Michael A.; &Levitas, Edward, 1997).

15Rob Handfield (2002), Managing Relationships in the Supply Chain, Supply Chain Resource Consortium(SCRC), Feb, 01,
2002

Thus partner selection process should strive to contemplate inter-organizational needs along with
partner capabilities, expectations and objectives embracing a win-win mindset.

From the perspective of corporate vision/goals of dominant partner(s), each partners

strengths, limitations, opportunities, threats and challenges are evaluated to qualify as strategic
partners. For instance, if the dominant partners vision is to emerge as the global leader in its
industry, then it is more likely to influence its supply chain to evolve as a highly competitive
global network. In such case, supplier(s) and/orchannel partner(s) which can easily and quickly
expand their capacities in any market where the dominant partner has plans to operate in future
will have greater chances of being part of the strategic collaboration. However, partner firms who
see benefit (or) business value with dominant partner will join the strategic coalition.
Driving Coalition
According to James McGregor Burns theory of transformational leadership, a
transformational leader focuses on "transforming" others to help each other, to look out for each
other, to be encouraging and harmonious, and to look out for the organization as a whole.
Therefore, in an environment of win-win/lose-win relationships,the channel Integrator in supply
chain acts as the transformation leader. Channel integrator involves the associated partners and
lead the supply chain change initiative. It aims to transform selected group of strategic partners
in the chain and motivates them to help each other, behave harmoniously and consider the
partner firms in the collaborative partnership as one organizational entity. Nextthey establish a
sense of urgency and develop a vision and a strategy (Kotter). A sense of urgency manifested in
the customized one-to-one negotiation strategies formulated based on strategic values covering
both individual and collaborative benefits will motivate identified partners to show willingness to

collaborate.The interactions between supply chain members and their associated power equations
will ultimately evolve theshared vision for the strategic collaboration. Formulating the shared
vision will be more or less not a collaborative effort. But the true collaborative effort begins
after the shared vision is set.

Joint Decision-Making (JDM)

In a collaborative relationship, only a coordinated and joint effort can deliver expected
results. The attributes such as Collaborative/joint efforts, Collaborative continuous improvement,
Shared vision and objectives, etc., were all described as fundamental elements of
outstandingalliance relationships16.In doing so, the companies within the coalition should
consider sharing resources with each other. Companies not only have to contemplate sharing
operational information (e.g., point-of-sale data, production schedules) but should also consider
jointly developing tactical and strategic plans (e.g., inventory and production plans, strategic
plans) (Xu and Beamon, 2006).Joint decision-making (JDM) and strategic planning can increase
competitiveness (Ajmera, Abhinav; Cook, Jack, 2009). Joint decision-making (JDM) goes
beyond information sharing, involving "joint, concurrent, intellectual, and cognitive decision
making" among partners (Ayers, 2006). It can be defined as "joint authority and structure to carry
out a common mission [in which] the parties engage in comprehensive planning and operate well
defined communication channels. They pool resources jointly, and share the resulting benefits"
(Scheff and Kotler, 1996). JDM promotes cooperation over competition among the supply chain
trading partners. It aims to prepare the network for supply chain vs. supply chain competition.
Figure 3: The elements of supply chain collaboration

16Stanley E. Fawcett, Gregory M. Magnan, Matthew W. McCarter (2005), Supply Chain

Alliances: Rhetoric And Reality,

Source: Supply Chain Management: An International Journal, Vol.0 number 1, 2004, pg. 30-42

Ajmera, Abhinav; Cook, Jack (2009)17 proposes an implementation framework to initiate

the transition from a simple information sharing agreement to a fully functional JDM
collaboration. In the process, they suggested two alternative ways for transition to joint decisionmaking (JDM) viz., Self-sustained initiative and Third-party managed initiative. Self-sustained
initiative requires establishing a permanent steering committee responsible for both operational
and strategic aspects of the network. Whereas in third-party managed initiative, companies could
outsource the overall supply chain management function to a designated third party, which in the
supply chain arena is called fourth-party logistics (4PL).

There are certain joint decision-making (JDM) and control issues like -- what are the
broad strategic considerations and framework for joint planning (decision-making) by supply
chain collaboration partners? What should be the mechanism to govern &control the supply
chain strategic collaboration? How can supply chain partners manage the execution of joint

17 Ajmera, Abhinav; Cook, Jack (2009), A multi-phase framework for supply chain integration, SAM Advanced Management Journal |
January 1, 2009

strategy? In what way partners can jointly manage/drive the strategic performance of the supply
chain collaboration?

Ensuing discussion attempts to model the strategic management process to address the
above mentioned strategic issues in implementing high-level supply chain integration in the
channel integrator (or self-sustained) collaborating model. It aims at determining various
strategic considerations and provides a suitable framework for joint strategic planning in supply
chain collaborations. Next, it provides a collaborative mechanism for governing the supply chain
collaboration process. Further, it guides supply chain partnerships in managing the execution and
control of joint strategies. Finally, it creates a mechanism for managing strategic performance of
the collaboration.

Strategic Management in Supply Chain Collaboration

While the companies are establishing programs to enhance supply-chainrelationships,

they are not building the vital alliance management capability that will help themcreate truly
synergistic supply chain teams18. Vast majority of companies do not yet have thealliance skills
needed to build a cohesive supply chain team.Strategic planning and management in supply
chains requires, investigation into and analysis of elements like supply chain functions,
productivity, profitability, economics, risks, product performance and quality, etc. across supply
chain.

In addition, analysis of the supply chain will provide for understanding current

performances, achievements, industry benchmarks and effort level required in achieving supply
chain goals. As the competition in the global markets has moved from the enterprise level to
18Stanley E. Fawcett, Gregory M. Magnan, Matthew W. McCarter (2005), Supply Chain
Alliances: Rhetoric And Reality,

supply chain, the competitor analysis between competing supply chain networks within the
industry can provide an insight for better way of competing. For example, a better way in
identifying high cost areas and inter-relationship when costs are applied to various elements.

The financial perspective views organizations as creating long-term shareholder value,

and therefore builds from a productivity strategy of cost structure and asset utilization and a
growth strategy of expanding opportunities and enhancing customer value. Each partner in the
supply chain alliance, therefore views their partnership aligned with their business strategy to
maximize their own share-holdersor customer value. Hence, each partner in the supply chain
alliance will prefer to pursue either productivity strategy (optimizing cost structure & asset
utilization) or growth strategy (enhancing opportunities and customer value) or both to remain
aligned with their shared vision or business objectives of the channel integrator.

Organized collaborative strategic functions each encompassing relevant processes offer

the mechanism required to set and achieve strategic goals of the supply chain network. Four
different functions form the core of such strategic management which can be referred to as
collaborative strategic planning and management, viz., collaborative strategic planning,
collaborative policy-making, collaborative strategy execution & management and collaborative
performance management.

Collaborative process competence mediates the relationship between absorptive capacity

and collaborative engagement, and positively influences both operational and relational
outcomes19.
1.4.1 Collaborative Strategic Planning (CSP)

Devising a feasible joint strategy for the supply chain alliance is a complex challenge as
each strategic global partner operates in a different economic, political, technical and regulatory
climate.According to Simplified Strategic Planning (Bradford and Duncan, 1999), the external
environment is broken into 7 key areas: Markets (customers), Competition, Technology, Supplier
markets, Labor markets, Economy, and Regulatory environment. For instance, if the partner(s)
operate in an instable economic conditions with high cost of credit, it limits those partners
ability to contribute for overall supply chain cost containment or capital expenditure for capacity
expansion. Similarly, if stringent labor laws prevail then partner(s) cannot contribute to assets
utilization. Quality may not be the strategic plan if the partners have limited access to skilled
labor and/or technology resources. Service cannot be the game plan if infrastructure is poor.
Hence, to craft an appropriate supply chain strategy it requires channel integrator to analyze the
macro environments of each strategic partnerto develop and gain support for the joint strategy.
Examining the feasibility, the shared vision may be reviewed and alteredat this stage.In such
case, the partners may revisit previous stage to revive the shared vision and keep in the loop
until a feasible vision/strategy is framed.
Figure 4: Elements of Collaborative Strategic Planning (CSP)

Joint Strategy
Collaborativ

19 eZach
G. Zacharia, Nancy W. Nix, Robert F. Lusch (2011) Capabilities that enhance outcomes of an episodic supply chain
Strategic
collaboration, Journal of Operations Management, Volume 29, Issue 6, September 2011, Pages 591603

Planning
(CSP)

In the next stage, joint strategy (key components) is decomposed into many
transformational change objectives or goals with timelines. For example, if improving supply
chain efficiency is one of the components of supply chain strategy then it is usually achieved
through improving inventory management and asset utilization, etc. In such case one of the
transformational change objectives would be to improve forecast accuracy. Another
transformational objective for the same component can be optimizing distribution efficiency.
Likewise, several transformational objectives can be identified for each strategic component. So
for every component of the joint strategy, the corresponding transformational objective(s) should
be identified through due diligence with the strategic partners. However, these transformational
objectives should be always viewed in relation with the competitors supply chains. For instance,
let us say, the delivery performance of competitors supply chain is relatively better. In such
case,the corresponding competitive transformational objective should be to enhance delivery
performance of the supply chain that is far superior to the competitors performance. Like this all
the transformational objectives for each component in joint strategy should be stated / defined by
benchmarking either with the immediate competitor supply chain or with the industry leader,
whichever way that aligns well with shared vision. This calls for the competitor analysis.
However, to set realistic transformational supply chain goals the supply chain members should
also assess the level of opportunities and threats/challenges prevailing in their micro environment
before they fine-tune the transformational change goals. For instance, the goal to improve
logistics performance cannot be set as high in a highly unreliable or insecure transport
environment where the control is limited. On the other hand, there may be opportunities for

alternative modes for transportation, but relatively at higher prices increasing the supply chain
costs. Final call should be taken through a balanced approach. Hence, a careful analysis of the
competitors supply chain performance, opportunities and threats/challenges of the entire supply
chain is essential to determine competitive and realistic transformational supply chain goals.
Hersey and Blanchard characterized leadership style in terms of the amount of Task Behavior
and Relationship Behavior that the leader provides to their followers. According to the selling
leadership style, while the leader is still providing the direction, he or she is now using two-way
communication and providing the socio-emotional support that will allow the individual or group
being influenced to buy into the process. Likewise, the transformational leader (dominant
partner)uses two-way communication with other supply chain entities so that they are convinced
tosupport the transformational changes. Next step involve development of the appropriate change
strategies based on the transformational objectives by the collaboration leaders and strategic
partners. Where to change and ultimately what to change to, for achieving each transformational
change objective will be focus of developing change strategies. However, identification of what
to change and where to change depends on determination of the strengths and limitations of each
partner in the supply chain.

Though the partner(s) in the supply chain possesses advantages/strengths, it may not have
been leveraged or may be under dormant. So the strengths/competencies of dominant partner(s),
strategic partners and other partners in the supply chain should be identified and assessed. All
strengths of partners should be mapped to the appropriate transformation objective(s). As in any
system, the supply chain partneris haunted by certain limitations that may be affecting the supply
chain performance, which we refer to as supply chain constraints. Supply chain constraints can

be broadly classified into internal and external to each partner. Internal constraints are those
related to the internal limiting factors of each supply chain partner thats affecting their
performance such as capacity, creditworthiness, limited working capital, purchase policy, process
quality, etc. External limiting factors of each partner refers to those affecting their performance,
but related to their immediate external environment in the supply chain like the rigid interfaces,
poor service levels, high cost of goods and unpredictable behavior of partner(s).

The purpose of supply chain collaboration (SCC) is to deal with these supply chain
constraints and bring the supply chain performance to a higher level. The Theory of Constraints
(TOC)concepts

(Goldratt,

1990)

were

originally

adapted

to

manufacturing

environment;however they apply to the supply chain very well.Rahman (2002) discusses the use
of the Theory of Constraints (TOC) thinking process in a supply chain environment. TOC
concepts are usefulto identify where to change, what is the benefit and ultimately what to change
to.With the help of current reality trees the supply chain cause-and-effect relationships are
structured, whichmakes the identification of core problems easier. TOC introduceda five-step
approach to deal with the systems constraints. Identifying the core problems is one step of
thecontinuous improvement suggested by TOC. In total five steps are provided to deal with
thesystems constraints: 1) identify the constraint; 2) exploit the constraint; 3) subordinate
everythingelse to the above decision; 4) elevate the constraint; and 5) repeat these steps.If some
strong positive pulse does not break thisvirtuous cycle, the collaboration initiative could come to
a quick end. This observation is supportedby the recent survey conducted by SCMR and CSC
(2004).

Whether internal or external constraint, all should be grouped and each limitation should
be mapped to the transformational objectives. Those limitations/constraints if elevated can
contribute to the transformational objective(s) should be considered as part of the change
strategy of that objective(s). These change strategies should be mapped to the partners and be
delegated for implementation to the respective partners in the supply chain.

4.4.2 Collaborative Policy-making (CPM)

Steering the strategic partnerships in the supply chain to successfully implement the joint
strategy requires governance of certain contractual relationships thatis part ofstrategic
collaboration. Confidentiality agreements andInformation sharing facilitates trust-based
relationships and is the third most frequently cited key to alliance success. To bind all the
partners together and guide them in the strategic process, a set of clear policies should be framed
so that desired behaviors are exhibited in strategic collaboration. Need to establish a mechanism
for jointly sharing risks and rewards was the second most frequently cited key to alliance
success20. Incentive alignment, and risk and gain sharing, are argued to be key factors for the
successful implementation of Supply Chain Management (SCM)21. Successful alliances have an
established and agreed-to approach to evaluate and resolve any problems that arise and Exit
criteria should be spelled out at the very beginning of the relationship22.
Figure 5: Elements of collaborative policy-making (CPM)

Partnership Policies
20 Stanley E. Fawcett, Gregory M. Magnan, Matthew W. McCarter (2005), Supply Chain Alliances: Rhetoric And Reality,
Collaborative

21Norrman,
Andreas (2008), Supply chain risk-sharing contracts from a buyers' perspective: content and experiences
Policy-Making
International Journal of Procurement Management, Volume 1, Number 4, 21 May 2008

(CPM)

22Stanley E. Fawcett, Gregory M. Magnan, Matthew W. McCarter (2005), Supply Chain

Alliances: Rhetoric And Reality,

A firm can design incentive structures (Williamson1983) that reward the necessary
behaviors and/or penalizenon-compliance in the ongoing relationship.

Which means the

dominant partner(s) and strategic partners should together agree on certain policies in areas that
will govern their strategic relationships. In strategic alliances, the relationship factors that should
be governed effectively are: resources and risks. Resource sharing JDM promotes cooperation
over competition among the supply chain trading partners and aims to prepare the network for
supply chain vs. supply chain competition. In doing so, the companies within the alliance should
consider sharing resources with each other23.Partners in the alliance should, therefore determine
and agree upon what and how they will pool the resources from each other for executing their
strategic plans. Similarly, the collaborative initiatives shall not only derive benefits but may also
results in certain financial risks. So, the partners should together determine the type of risks
involved, how they will address those risks, and if unavoidable, in what way they will share
those risks.

In strategic partnerships, disputes between partners are common and sometimes

inevitable too. So, there should be a mechanism that guides the partners to resolve their conflicts.
Strategic partners of the supply chain collaboration should priorly determine what disputes are
likely and agree on how they would settle those disputes. Similarly for any reason(s) or no
reason(s), if any partner(s) wishes to disassociate from the partnership, it affects the strategic

23 Jack Cook, Abhinav Ajmera (2009), A Multi-Phase Framework for Supply Chain Integration SAM Advanced Management
Journal, January2009

collaboration process. The point at which the respective member(s) want to disassociate
themselves determines how it will influence the strategic collaboration. It may also influence the
leaving partner(s) either positively or negatively. So, a detailed exit policy should be prepared
before the strategic collaboration is started in order to avoid any disputes later.

Collaborative performance of the partnership or a team should be governed and

controlled from time-to-time, to prevent under performance of the partners or to know whether
all partners are performing as per the pre-determined expectations. But the question of how will
the collaborative performance measured, how each partners contribution will be known and what
guides the partners to control their own performance, what mechanisms should the partners
employ to control their performance and how frequently they should meet to review their own
performance, etc., should be answered and understood by all the partners prior to the
commencement of the strategic collaborative exercise. So, a broad review policy should be
developed by all the strategic partners together. Besides, broad guidelines should be stipulated
for the strategy execution from instituting the implementation organization to defining the
execution authority and mechanism for execution control.

4.4.3. Collaborative Strategy Execution (CSE)

Every partner in the collaboration is bound to execute the delegated part of the joint
strategy. However, a coordination team drawn from the dominant and strategic partners will
develop the implementation plan and coordinate the resources and program. Further, the
coordination team will exclusively monitor and control the strategy implementation across the

supply chain firms. For executing different parts of the strategy, inter-organizational teams
comprising specialists/experts in the respective areas will be drawn from the associated supply
chain members or sometimes hire consultants from outside. An extension on the training motif is
the increased use of process development teams to help supply partners dramatically improve
their own capabilities24. When a problem is discovered, a problem-solving team comprised of
buyer and supplier personnel comes together to identify the root cause, brainstorm a resolution,
and take action. Joint problem solving also can mitigate the impact of an unexpected disaster. For
example, when one of Toyotas suppliers suffered a catastrophic fire that burned a key facility to
the ground, a joint problem solving team was quickly mobilized to get a critical valve back in
production. A desire to shrink concept-to-market cycle times has led to the use of multifunctional product-development teams, consisting of managers from marketing, research and
development, manufacturing, purchasing, and logistics as well as representatives from key
suppliers.Leadingmanufacturers are aggressively pursuing collaborative product development
opportunities.
Figure 6: Elements of collaborative strategic execution (CSE)

Collaborative
Strategy
Execution (CSE)

Inter-Organizational Teams

Each cross-organizational team will be responsible for transforming a specific area as stipulated
in the joint strategy. As per the joint-strategy and transformational objectives, these teams may
focus on improving processes, instituting systems for enhancing quality, developing competitive
24Stanley E. Fawcett, Gregory M. Magnan, Matthew W. McCarter (2005), Supply Chain
Alliances: Rhetoric And Reality,

products quickly and cost-effectively, or establishing the technology, logistics and production
infrastructure. Usually the combination of any of the following inter-organizational teams is set
up aligned with the joint strategy:
a. Process Team
b. Quality Team
c. Product Team
d. Infrastructure Team
e. Coordination Team
Each constituted team is provided with the set of transformational objectives and the appropriate
change strategy to pursue. Their performance will be monitored and controlled in the ways as
stipulated in the execution policy.

4.4.4 Collaborative Strategic Performance Control (CSPC)

Majority of supply chain metrics are in fact measures of internal logistics performance
(Lambert and Pohlen, 2001), and can be considered inappropriate for the supply chain as a whole
(Simatupang and Sridharan, 2002). By sharing performance metrics with customers and
suppliers, bottlenecks in the supply chain (in the form of inventory stockpiles and process gaps)
can be identified and overall performance improved (Lummus and Vokurka, 1999; Stank et al.,
1999b; Ireland and Bruce, 2000). The major barriers to developing such supply chain measures
are the complexity of overlapping supply chains and the sharing of information between
organizations (Lambert and Pohlen, 2001). Unless real supply chain metrics can be developed,
then the various constituent parts of the supply chain will continue to operate in different
directions and will not be aligned.

Figure 4.7:Elements of collaborative strategic performance and control (CSPC)

Key Performance Areas (KPAs)

Collaborative
Strategic
Performance
control
(CSPC)

Periodically the strategic performance of the alliance is reviewed by the dominant and strategic
partners. The predetermined review policy will guide how the members will measure their own
performance and the collaborative performance. The performance of the entire supply chain in
various areas as focused by their joint strategy will be known to assess the effectiveness of their
joint strategy. Focused areas such as cost, quality, service and revenue aligned with their shared
vision are usually assessed and compared with the performance expected at that stage. Any
drastic deviation from the expected performance will require the members to review and

ative Strategic
Planning
and
Management
reformulate
their strategy
or policies,
as indicated by(CSPM)
the core problem(s) areas. Otherwise, on

Active
ply Chain Partner

successful progress of the strategic partnership, further action-plans will be devised.On achieving
the strategic mission, the collaborative team will move on to next agreed common mission if
required. Again the entire strategic collaboration process will restart and follow the same steps as
defined in figure 1.8.
Figure 4.8:Collaborative Strategic Planning and Management (CSPM)

Collaborative
Functions
/Processes
Collaborati

ve
Strategic
Planning
(CSP)

Collaborativ
e PolicyMaking
(CPM)
Partnership Policies
Inter-Organizational Teams
Collaborativ
e Strategy
Execution
(CSE)
Collaborati
ve
Strategic
Performanc
e Control
(CSPC)

Key Performance Areas (KPAs)

On combining all the collaboration strategic management processes {viz., collaborative strategic
planning (CSP), collaborative policy-making (CPM), collaborative strategic execution (CSE),
and collaborative strategic performance control (CSPC)}; an integrated strategic management
modelis resulted as shown in figure 1.8,

Conclusion
The strategic model referred to as Collaborative Strategic Planning and Management (CSPM)
presented in this paper offers a structured approach to effectively address the strategic issues/ challenges
of the networked global supply chain firms. The CSPM model developed in this paper, at large, offers
opportunities to optimize effectiveness of supply chain integration towards supply chain excellence. It
offers a solid mechanism to implement strategic management in channel integrator driven collaborative
supply chains. This model helps partners of the strategic alliances (within supply chains) to strategically
operate the entire supply chain network as one legal entity, which ultimately results in building supply

chain competitiveness. Hence, the CSPM model can help global giant firms to further optimize their
supply chain competitiveness to sustain in the era of network competition.

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