Sharing Global Supply Chain Knowledge

Knowledge sharing between partners has more upsides than downsides, provided that the right kind of knowledge goes back and forth.

There are two categories of supply chain partners: those that buy and those that sell. Depending on which group they identify with, managers have different perspectives on the value of sharing critical knowledge resources with their supply chain partners. Both groups agree that sharing knowledge makes for more efficient supply chains (with lower costs and quicker speeds) and more effective organizations (with higher quality outputs and enhanced customer service). But the benefits of knowledge sharing don’t always accrue equally or simultaneously to all participants.

In addition, some managers think that knowledge sharing between buyers and suppliers has an underappreciated “dark side” that can outweigh the benefits.1 A common worry is that divulged information regarding technologies, pricing schedules, client bases and processes can be copied or shared with competitors. Another worry is that relying on knowledge flows from other organizations can undermine a company’s flexibility and leave it vulnerable to changes in its partners’ priorities. Despite these concerns, knowledge sharing between supply chain partners offers more positives than negatives, provided that the right kind of knowledge goes back and forth.

What type of information or knowledge should suppliers and buyers share with each other? How does knowledge sharing provide value to buyers and suppliers, and under what circumstances can it help both? How do cross-cultural differences between global buyers and suppliers influence the value of sharing information? To answer these questions, we studied more than 100 cross-national supply chain partnerships in the industrial chemicals, consumer durables, industrial packaging, toy and apparel industries in 19 country locations.(See “About the Research.”) We examined how different types of knowledge sharing can benefit buyers or sellers individually. But more importantly, we studied how knowledge sharing can enhance the performance of partnerships and build stronger supply chains in the global marketplace. We sought to understand not only which companies benefit from cross-border knowledge sharing but also the conditions that lead to knowledge sharing in global supply chains. Many people see knowledge sharing as the result of customer or supplier needs when in fact it is more likely to be influenced by market structures or organizational similarities and dissimilarities between buyers and suppliers.

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References

1. E. Anderson and S.D. Jap, “The Dark Side of Close Relationships,” MIT Sloan Management Review 46, no. 3 (spring 2005): 75–82.

2. H.L. Lee, “The Triple-A Supply Chain,” Harvard Business Review (October 2004): 102–112.

3. B. Swanton and D. Hofman, “DDSN: Who Says Reducing Forecast Error Requires Predicting Further Into the Future?” (Boston: AMR Research, 2004). An increase in demand visibility was also found to increase on-time delivery performance by 27.5% and yield an average margin improvement of 3.7%, according to AMR; see C. Saran, “Supply Chain Optimisation Can Deliver ROI Within Four Months, Finds AMR Research,” Computer Weekly, April 25, 2006.

4. K. Giriprakash, “Toyota’s Small Car Likely to Be Ready by 2010–11,” Hindu Business Line, Feb. 15, 2007.

5. I. Young, “Industry Eyes Big Savings From Supply Chain Collaboration,” Chemical Week, Nov. 2, 2005; S. Monahan and R. Nardone, “How Unilever Aligned Its Supply Chain and Business Strategies,” Supply Chain Management Review 11, no. 8 (November 2007): 44–50.

6. Many industries besides the chemical industry can benefit from increased supply chain collaboration and knowledge sharing. According to AMR Research, increased knowledge flows and more visible supply chains (meaning more information on customer demand for all supply chain members) lead to a significant reduction in supply chain problems. The combined annual returns for companies in AMR Research’s 2007 top 25 supply chains, an annual ranking that identifies large manufacturers and retailers that display superior supply chain performance, capabilities and leadership, was 17.89%, significantly higher than the Dow Jones or S&P 500 returns for the same period. The top companies include Nokia, Apple, Procter & Gamble and IBM. See K. O’Marah, “The Top 25 Supply Chains 2007,” Supply Chain Management Review 11, no. 6 (September 2007): 16–22.

7. “Best-In-Class Firms 2.7 Times More Likely to Use Global Supply Chain Visibility Platforms to Improve Global Trade Management,” Asia Pulse News, June 15, 2007.

8. Author’s interview with U.S. freight company executive, Aug. 26–27, 2007.

9. F. Selnes and J. Sallis, “Promoting Relationship Learning,” Journal of Marketing 67, no. 3 (July 2003): 80–95.

10. For more detailed descriptions regarding how knowledge sharing works and who benefits, see D. Apostolou, N. Sakkas and G. Mentzas, “Knowledge Networking in Supply Chains: A Case Study in the Wood/Furniture Sector,” Information Knowledge Systems Management 1, no. 3–4 (1999): 267–281; for excellent reviews of the dangerous repercussions, see Anderson and Jap, “The Dark Side.”

11. “Chinese Toys: No Fun and Games,” Economist, Jan. 12, 2008.

12. R. Kisiel, “Automaker, Supplier Win Supply-Chain Honor,” Automotive News, Dec. 12, 2005.

13. J. Ott, “Chain Reaction: The Supplier Excellence Alliance Is Spreading the Gospel of Lean Manufacturing and the Mechanics of Survival,” Aviation Week, Sept. 19, 2005, 51; for more on the Supplier Excellence Alliance, see www.seaonline.org.

14. “Chain Reaction.”