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Judith M. Whipple, Ph.D.Department of Marketing and Supply Chain
ManagementMichigan State University
325 North Business [email protected]
517-432-6407
Collaboration: When, Why and HowCollaboration: When, Why and How
July 31, 2007 – Foundation For Strategic Sourcing
Whipple, 2007- 2 -
Spectrum of Customer-Supplier Relationships
Transactional Arm’s LengthRelationship
Acceptance ofMutual Goals
Relationship/Alliance
Traditional Role
ConfrontationSuspicionExplicit Knowledge
New Relationship
Cooperation/TrustCollaborative ValueTacit Knowledge
Whipple, 2007- 3 -
Why Collaborate?Why Collaborate?
• Strategic decisions are bigger and more complex– Globalization– Consolidation– Increase competition from old/new players– New forms of competition
• Time is the critical factor – first mover advantages• Environment is less certain• Preventable “glitches” are excessive and costly
No one individual or company has the information, time, credibility, and/or capability needed to make and implement this level of decision-making successfully
Whipple, 2007- 4 -
Current ResearchCurrent Research
• On-line survey sent to customers and suppliers• Asked to evaluate various constructs for both
collaborative and transactional relationships– Relationship management– Communication and information sharing– Satisfaction– Performance
• Objective: to compare how relationships are managed and to determine if collaboration is a worthwhile endeavor
Whipple, 2007- 5 -
Survey DefinitionsSurvey Definitions
• A collaborative relationship is a long-term relationship where participants generally cooperate, share information, and work together to plan and even modify their business practices to improve joint performance (may also be considered as an alliance, partnership or focus on a specific program such as VMI, JIT, CPFR).
• A transactional relationship is a buying-selling agreement where participants conduct business for a specific time period according to terms generally outlined in a standard contract (may also be considered as an “arm’s length” or “transactional” relationship).
This research was supported by the Innovation and Organizational Change (IOC) Program of the National Science Foundation, Grant Number 0122173
Whipple, 2007- 6 -
Who Participated in the Research?
• Customers– 544 completed surveys (13% response rate)
• F4SS – 38 of 71 completed (54% response rate)
– Majority worked for a manufacturer/distributor (73%)– 462 collaborative responses (85%)– 418 transactional responses (77%)
• Suppliers– 256 completed surveys (7% response rate)
• F4SS – 62 of 100 completed (62% response rate)
– 56% manufacturer/distributor and 30% 3PL/transportation provider
– 219 collaborative responses (86%)– 203 transactional responses (80%)
Whipple, 2007- 7 -
Do Respondents Manage Collaborative and Do Respondents Manage Collaborative and Transactional Relationships Differently?Transactional Relationships Differently?
• Relationship activities• Long-term commitment• Trust• Dedicated investments
Mean responses comparing collaborative and transactional relationships were statistically different from each other for both customers and suppliers.
Whipple, 2007- 8 -
Customer Responses: Relationship ManagementCustomer Responses: Relationship Management
Relationship Activities Collaborative Transactional
My firm and this supplier:
… interact on a real time basis. 5.98 4.38
…achieve goals collectively. 5.69 3.82
…develop a mutual understanding of responsibilities. 6.02 4.36
…informally work together. 5.98 4.32
…share ideas, information, and/or resources. 6.01 3.95
…have joint teams. 5.56 3.37
…conduct joint planning to anticipate and resolve operational problems. 5.73 3.65
…make joint decisions about ways to improve overall cost efficiency. 5.70 3.51
Long-Term Commitment
We expect this relationship to continue for a long time. 6.13 4.41
We are committed to this supplier. 6.01 4.11
We expect this relationship to strengthen over time. 6.04 4.17
Considerable effort and investment has been undertaken in building this relationship. 6.17 4.17
Scale: 1 = strongly disagree; 7 = strongly agree
Whipple, 2007- 9 -
Customer Responses: Relationship ManagementCustomer Responses: Relationship Management
Trust Collaborative Transactional
This supplier keeps the promises it makes. 5.83 4.66
We believe the information this supplier provides us. 5.96 4.76
This supplier is genuinely concerned that we succeed. 6.02 4.61
We trust this supplier keeps our best interests in mind. 5.64 4.11
This supplier considers our welfare as well as its own. 5.49 3.88
This supplier is trustworthy. 5.96 4.73
Dedicated Investments
We have invested substantially in personnel dedicated to this relationship. 5.03 3.43
We have provided proprietary expertise and/or technology to this relationship. 5.04 3.31
We have dedicated significant investments (e.g., equipment or support systems) to this relationship.
4.56 3.13
Scale: 1 = strongly disagree; 7 = strongly agree
Whipple, 2007- 10 -
Supplier Responses: Relationship ManagementSupplier Responses: Relationship Management
Relationship Activities Collaborative Transactional
My firm and this customer:
… interact on a real time basis. 5.86 4.50
…achieve goals collectively. 5.35 3.54
…develop a mutual understanding of responsibilities. 5.74 4.18
…informally work together. 5.84 4.02
…share ideas, information, and/or resources. 5.77 3.81
…have joint teams. 5.58 3.34
…conduct joint planning to anticipate and resolve operational problems. 5.60 3.53
…make joint decisions about ways to improve overall cost efficiency. 5.33 3.26
Long-Term Commitment
We expect this relationship to continue for a long time. 6.26 4.62
We are committed to this customer. 6.43 5.12
We expect this relationship to strengthen over time. 6.27 4.76
Considerable effort and investment has been undertaken in building this relationship. 6.38 4.90
Scale: 1 = strongly disagree; 7 = strongly agree
Whipple, 2007- 11 -
Supplier Responses: Relationship ManagementSupplier Responses: Relationship Management
Trust Collaborative Transactional
This customer keeps the promises it makes. 5.52 3.97
We believe the information this customer provides us. 5.79 4.40
This customer is genuinely concerned that we succeed. 5.40 3.56
We trust this customer keeps our best interests in mind. 4.78 3.20
This customer considers our welfare as well as its own. 4.85 3.08
This customer is trustworthy. 5.59 4.07
Dedicated Investments
We have invested substantially in personnel dedicated to this relationship. 5.77 4.02
We have provided proprietary expertise and/or technology to this relationship. 5.57 3.95
We have dedicated significant investments (e.g., equipment or support systems) to this relationship.
5.78 3.91
Scale: 1 = strongly disagree; 7 = strongly agree
Whipple, 2007- 12 -
Do Respondents Communicate Differently in Do Respondents Communicate Differently in Collaborative and Transactional Relationships?Collaborative and Transactional Relationships?
• Communication• Information sharing
Mean responses comparing collaborative and transactional relationships were statistically different from each other for both customers and suppliers.
Whipple, 2007- 13 -
Customer Responses: CommunicationCustomer Responses: Communication
Communication Collaborative Transactional
This supplier keeps us informed of new developments (e.g., R&D, new products/services).
5.77 4.08
This supplier’s sales personnel frequently visit our place of business.
5.51 3.81
This supplier devotes a lot of time in getting to know our staff.
5.84 3.73
This supplier gives us opportunities to participate in goal setting to enhance performance.
5.20 3.29
Information Sharing
We inform this supplier in advance of changing needs. 5.98 4.71
In this relationship, it is expected that any information which might help the other party will be provided.
6.17 4.57
The parties are expected to keep each other informed about events or changes that may affect the other party.
6.34 4.97
The information shared in this relationship is more detailed than what is shared in other relationships
6.09 4.97
Scale: 1 = strongly disagree; 7 = strongly agree
Whipple, 2007- 14 -
Supplier Responses: CommunicationSupplier Responses: Communication
Scale: 1 = strongly disagree; 7 = strongly agree
Communication Collaborative Transactional
This customer keeps us informed of new developments (e.g., R&D, new products/services).
5.39 3.59
The customer’s personnel frequently visit our place of business.
4.94 3.11
This customer devotes a lot of time in getting to know our staff.
5.16 3.21
This customer gives us opportunities to participate in goal setting to enhance performance.
5.09 3.01
Information Sharing
We inform this customer in advance of changing needs. 5.87 4.66
In this relationship, it is expected that any information which might help the other party will be provided.
5.87 4.20
The parties are expected to keep each other informed about events or changes that may affect the other party.
6.00 4.49
The information shared in this relationship is more detailed than what is shared in other relationships
5.83 3.49
Whipple, 2007- 15 -
Do Respondents Evaluate Collaborative and Do Respondents Evaluate Collaborative and Transactional Relationships Differently?Transactional Relationships Differently?
• Performance• Satisfaction
Mean responses comparing collaborative and transactional relationships were statistically different from each other for both customers and suppliers.
Whipple, 2007- 16 -
Customer Reponses: EvaluationCustomer Reponses: Evaluation
Performance Collaborative Transactional
This relationship has:
… reduced our order cycle times. 5.36 4.21
… reduced our inventory. 5.22 4.12
… achieved cost reductions. 5.67 4.46
… provided us more specialized expertise. 5.83 4.14
… improved our order processing accuracy. 5.06 4.15
… improved our on-time delivery. 5.47 4.44
… improved our fill rate. 5.22 4.20
… increased our profitability. 5.46 4.26
… increased our forecast accuracy. 4.46 3.71
Scale: 1 = strongly disagree; 7 = strongly agree
Whipple, 2007- 17 -
Customer Responses: EvaluationCustomer Responses: Evaluation
Satisfaction With Relationship Collaborative Transactional
My firm is satisfied with this relationship in terms of:
…coordination of activities. 5.64 4.45
…participation in decision making. 5.62 4.20
…level of commitment. 5.87 4.39
…level of information sharing. 5.64 4.10
…management of activities. 5.61 4.30
Satisfaction With Results
My firm is satisfied with this relationship in terms of:
…profitability. 5.23 4.23
…market share. 5.29 4.21
…sales growth. 5.32 4.17
Scale: 1 = strongly disagree; 7 = strongly agree
Whipple, 2007- 18 -
Supplier Responses: EvaluationSupplier Responses: Evaluation
Performance Collaborative Transactional
This relationship has:
… reduced our order cycle times. 4.76 3.67
… reduced our inventory. 4.25 3.40
… achieved cost reductions. 4.72 3.59
… provided us with more specialized expertise. 5.23 3.54
… improved our order processing accuracy. 4.60 3.63
… improved our on-time delivery. 4.98 3.88
… improved our fill rate. 4.85 3.77
… increased our profitability. 4.90 3.70
… increased our forecast accuracy. 4.75 3.45
Scale: 1 = strongly disagree; 7 = strongly agree
Whipple, 2007- 19 -
Supplier Responses: EvaluationSupplier Responses: Evaluation
Scale: 1 = strongly disagree; 7 = strongly agree
Satisfaction With Relationship Collaborative Transactional
My firm is satisfied with this relationship in terms of:
…coordination of activities. 5.48 4.05
…participation in decision making. 5.40 3.70
…level of commitment. 5.63 3.72
…level of information sharing. 5.43 3.54
…management of activities. 5.36 3.93
Satisfaction With Results
My firm is satisfied with this relationship in terms of:
…profitability. 5.10 3.93
…market share. 5.13 3.83
…sales growth. 5.21 3.69
Whipple, 2007- 20 -
F4SS Responses – Comparing Customers and F4SS Responses – Comparing Customers and SuppliersSuppliers
Construct Collaboration Customer
Collaboration Supplier
Transactional Customer
Transactional Supplier
Relationship Activities 5.68 5.77 3.53 3.67
Commitment 6.03* 6.50* 3.54* 4.79*
Trust 5.72 5.46 4.47* 3.70*
Dedicated Investment 5.13* 5.08* 2.65* 3.67*
Communication 5.21 5.45 3.13 3.09
Information Sharing 5.93 5.89 4.06 4.22
Performance 5.01 4.68 3.77 3.40
Satisfaction with Relationship
5.58 4.68 3.77 3.40
Satisfaction with Results 5.17 5.07 3.86 3.72
* Indicated statistically significant difference in mean response
Whipple, 2007- 21 -
Which Factors Contribute Most to Performance?Which Factors Contribute Most to Performance?
Predictors of Performance - Customers
Trust
Communication
Performance
Collaborative Relationships Transactional Relationships
Trust
Communication
Long-term Commitment
Relationship Activities
DedicatedInvestments
DedicatedInvestments (negative)
Relationship Activities
Information(negative)
Whipple, 2007- 22 -
Which Factors Contribute Most to Performance?Which Factors Contribute Most to Performance?
Predictors of Performance - Suppliers
Trust
Commitment(negative)
Performance
Collaborative Relationships Transactional Relationships
TrustRelationship Activities
DedicatedInvestments
DedicatedInvestments
Relationship Activities
Whipple, 2007- 23 -
Which Factors Contribute Most to Satisfaction?Which Factors Contribute Most to Satisfaction?
Predictors of Satisfaction with Relationship - Customers
Trust
Performance
Satisfaction with Relationship
Collaborative Relationships Transactional Relationships
Trust
PerformanceRelationship Activities
CommitmentDedicated
Investments (negative)
Relationship Activities
Whipple, 2007- 24 -
Which Factors Contribute Most to Satisfaction?Which Factors Contribute Most to Satisfaction?
Predictors of Satisfaction with Relationship - Suppliers
Trust
Performance
Satisfaction with Relationship
Collaborative Relationships Transactional Relationships
Trust
Relationship Activities
Commitment
Relationship Activities
Performance
Whipple, 2007- 25 -
Which Factors Contribute Most to Satisfaction?Which Factors Contribute Most to Satisfaction?
Predictors of Satisfaction with Results - Customers
Trust
Commitment
Satisfaction with Results
Collaborative Relationships Transactional Relationships
Trust
Performance
Performance
Whipple, 2007- 26 -
Which Factors Contribute Most to Satisfaction?Which Factors Contribute Most to Satisfaction?
Predictors of Satisfaction with Results - Suppliers
Trust
Satisfaction with Results
Collaborative Relationships Transactional Relationships
Trust
Performance
Performance
Relationship Activities
Information Sharing
(negative)
Commitment
Whipple, 2007- 27 -
Which Factors Contribute Most to Performance for Which Factors Contribute Most to Performance for F4SS Only?F4SS Only?
Predictors of Performance - Customers
Trust Performance
Collaborative Relationships Transactional Relationships
Trust
Long-term Commitment
Whipple, 2007- 28 -
Which Factors Contribute Most to Performance for Which Factors Contribute Most to Performance for F4SS Only?F4SS Only?
Predictors of Performance - Suppliers
Trust
Performance
Collaborative Relationships Transactional Relationships
TrustRelationship Activities
DedicatedInvestments
Whipple, 2007- 29 -
Which Factors Contribute Most to Satisfaction for Which Factors Contribute Most to Satisfaction for F4SS Only?F4SS Only?
Predictors of Satisfaction with Relationship - Customers
Trust
Satisfaction with Relationship
Collaborative Relationships Transactional Relationships
Performance
Relationship Activities
Whipple, 2007- 30 -
Which Factors Contribute Most to Satisfaction for Which Factors Contribute Most to Satisfaction for F4SS Only?F4SS Only?
Predictors of Satisfaction with Relationship - Suppliers
Trust
Satisfaction with Relationship
Collaborative Relationships Transactional Relationships
TrustRelationship Activities
DedicatedInvestments (negative)
Whipple, 2007- 31 -
Which Factors Contribute Most to Satisfaction for Which Factors Contribute Most to Satisfaction for F4SS Only?F4SS Only?
Predictors of Satisfaction with Results - Customers
Trust
Commitment
Satisfaction with Results
Collaborative Relationships Transactional Relationships
Performance
DedicatedInvestments (negative)
DedicatedInvestments (negative)
Commitment
Whipple, 2007- 32 -
Which Factors Contribute Most to Satisfaction?Which Factors Contribute Most to Satisfaction?
Predictors of Satisfaction with Results - Suppliers
Collaborative Relationships Transactional Relationships
Performance
Relationship Activities
Satisfaction with Results
Trust
Performance
Communication (negative)
Whipple, 2007- 33 -
Initial Research ConclusionsInitial Research Conclusions
• Collaborative relationship offer more value than transactional relationships
• Collaborative relationships provide higher levels of performance and satisfaction than transactional relationships
Whipple, 2007- 34 -
Customer Conclusions: F4SSCustomer Conclusions: F4SS
• Customers who want to improve performance– Collaborative Relationships
• Focus on improving trust
– Transactional Relationships• Focus on long-term commitment and trust
• Customers who want to improve satisfaction– Collaborative Relationships
• Focus on improving trust, relationship activities, and commitment
– Transactional Relationships• Focus on performance and commitment
Whipple, 2007- 35 -
Supplier Conclusions: F4SSSupplier Conclusions: F4SS
• Suppliers who want to improve performance– Collaborative Relationships
• Focus on improving relationship activities and trust
– Transactional Relationships• Focus on trust and dedicated investments
• Suppliers who want to improve satisfaction– Collaborative Relationships
• Focus on improving trust, relationship activities, and performance
– Transactional Relationships• Focus on improving trust, relationship activities, and
performance
Whipple, 2007- 36 -
F4SS Additional ConsiderationsF4SS Additional Considerations
– Dedicated investments• Customers perceive the dedicated investments they make to
have a negative impact on satisfaction with results for both collaborative and transactional relationships
• Suppliers perceive the dedicated investments they make to have a negative impact on satisfaction with the relationship for collaborative relationships
– Communication • Suppliers perceive the relatively weak level of
communication in transactional relationships to negatively impact satisfaction with results
Whipple, 2007- 37 -
ConclusionsConclusions
• Collaboration offers the potential for creating a sustainable value chain
• It’s not always going to be easy, but it pays to be a collaborator
• Step ZERO – internal buy-in is often overlooked and underestimated
• Early and consistent wins provide momentum for larger, more important wins
• TRUST
Whipple, 2007- 38 -
Dimensions of TrustDimensions of Trust
Competence-Based Trust: Examines specific operational behavior and performance
• Specific competence in knowledge/skills• Interpersonal competence• Competence in business sense• Judgment
Gabarro (1978, 1987)
Whipple, 2007- 39 -
Dimensions of Trust (continued)Dimensions of Trust (continued)
Character-Based Trust: Examines the qualities or characteristics inherent in philosophies/culture
• Integrity• Identification of motives• Consistency of behavior• Openness• Discreteness
Gabarro (1978, 1987)
Whipple, 2007- 40 -
Trust – How it LooksTrust – How it Looks
Elements of Trust
Lev
els
of T
rust
Character-Based Competence-Based
Inte
rper
sona
l
Inte
rorg
aniz
atio
nal
InterorganizationalCharacter-Based Trust
InterpersonalCharacter-Based Trust
InterorganizationalCompetence-Based Trust
InterpersonalCompetence-Based Trust