Attempts for waste reductions beyond the organizational borders at supplier level have never practiced. Focus on supplier improvement approach misses out opportunities to improve utilizing joint capabilities. The inability by organizations to understand costs, processes and potential opportunities for operational improvement in relationships leads to sub optimal decisions, which have a negative impact on the effectiveness of their supply chains. What steps should be taken to improve effectiveness of relationship?
Management and supply chain must understand the importance of information sharing in supply chains for “development of long-standing deep alliances”, cost reduction by eliminating non value added activities from business processes, “improved resource coordination” and for “continuous improvement” in supply chains.
Information sharing is recognized as a crucial part of supply chain initiatives, such as transition from adversarial to collaborative relationships, shift from forecast to demand driven supply chains, supply chain process costs tracking, supply chain process integration, shift from managerial accounting to value based management, etc.
By constant interaction and information sharing, partners experience a closer bond and this serves to re-enforce trust that contributes to collaboration. Value of information exchange is derived from improved resource coordination. To reduce total supply chain costs, transparency and information sharing; among partners in supply chain, are the two key drivers.