THE GLUE THAT BINDS THE EXTENDED ENTERPRISE

The two challenges and why is it important.Trust is essential. The role of contract and trustDecomposing trust into its core dimensionsSupply chain development E-commerce, supply chain and trustKnow the components of trust Developing an atmosphere of trust

Agenda

Challenges of trust and why it is important ?Challenges

Loss of confidence in businessThe role of supply chain

Customers want on-time and seamlessly delivery.Benefits of trust: (Dyer’s research)

Reduces transaction costs Increases knowledge sharingEncourages partners to dedicate assets on behalf of the others.Outsourcing relationship which lead to higher profitability (HP and

Solectron)

However, your trusted partner could turn to be severe competitor (Dell and HP)

Importance of trust

Trust is essentia

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Contract and trust

Decompose trust

SC Developme

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E-commerce and trust

component of trust

Developtrust

Trust is essential Closeness can bring the “opportunism”, which can increase cost.“organizational” problem is the largest barrier to success.

“People costs”, resulting from; Old habits and cultural legacies that do not support the supply chain alliances.

Changes required Developing the new climate that fosters trust Open communications, builds commitments, and a win-win orientations.

Trust can be seen as “your word being your bond”.Extended enterprise depend on trust for their lifeblood

Formal mechanisms cannot guarantee that rights and obligations will be met.Legal documents breed compliance, not commitment. Contract does not assure the outcome when conditions change.

Importance of trust

Trust is essentia

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Contract and trust

Decompose trust

SC Developme

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E-commerce and trust

component of trust

Developtrust

Trust is essential (Continued) Difference between alliance-like thinking and contractual thinking

Importance of trust

Trust is essentia

l

Contract and trust

Decompose trust

SC Developme

nt

E-commerce and trust

component of trust

Developtrust

The role of contract and trust Understanding what is interplay between contract and trust.

Partners don’t need contracts to collaborate, trust your partners or get different partners” (Ryder)

Extended enterprise consists of three major; intertwined consideration.Managing the businessManaging the relationshipUnderstanding the underlying spirit of relationship

Contracts do play a role when; Protecting intellectual property.Partners have little past experience with one another.

Adding the predictability to the outcome

The important thing is how best to leverage the two so that the supply chain accomplishes its objectives with minimal disruption and conflict.

Importance of trust

Trust is essentia

l

Contract and trust

Decompose trust

SC Developme

nt

E-commerce and trust

component of trust

Developtrust

Decomposing trust into its core dimensions.Following the contract means that there is little incentive to adapt,

conflict arises and relationship just ends. Trust is the belief that one’s alliance partner will act in a predictable

manner. Trust and its different dimensions.

Importance of trust

Trust is essentia

l

Contract and trust

Decompose trust

SC Developme

nt

E-commerce and trust

component of trust

Developtrust

Two goals sought: Strategic and Performance oriented

Supplier assessment: Direct Involvement/Competitive PressureDevelop the approach that is not cost-driver but offer incentives. Switching of suppliers often result from the price basis. Keeping suppliers at arms’ length will damage long-term relationship.

The roadmap to success (Sun and Cisco) One level – how all the parts create value for customers.

Second level – a commitment to the supply base and give suppliers voice

Third level – trust is build through the entire strategy-planning and implementation process.

Supply Chain Development

Importance of trust

Trust is essentia

l

Contract and trust

Decompose trust

SC Developme

nt

E-commerce and trust

component of trust

Developtrust

E-Commerce, Supply Chains, and Trust Increasing growth for e-commerce business.

The challenge is placed on the “Credibility” of logistic systems.

In this point, trust is defined as “Reliability”. The guarantee that transactions will be completed.

“Trust Broker” (Open Rating, GeoTrust) Develop the objective scales and rating schemes to quantify the reputation

of suppliers.

Importance of trust

Trust is essentia

l

Contract and trust

Decompose trust

SC Developme

nt

E-commerce and trust

component of trust

Developtrust

Know the components of trust

Character-based trust is important because firms have choices.

Reputation serves to get a foot in the door.

State the importance of the partnership and mutual gains/benefits.

All partners are given voices and their strategic interests become parts of the plan for the network.

“Seasick Syndrome” Resulted from inconsistencies between what the buyer says and does

which will affect the tone and spirit of the relationship

Importance of trust

Trust is essentia

l

Contract and trust

Decompose trust

SC Developme

nt

E-commerce and trust

component of trust

Developtrust

Developing an atmosphere of trust

Step 1: Begin with a plan Benefit of having the collaborative relationship and setting goals.

Step 2: Ensure open lines of communication more about the commitment in sharing the sensitive information.

Step 3: Establish an appropriate governance structure Ensure the equitable treatment of all and shared commitment.

Step 4: Keep your eye on what matters Member must be reminded to compete with other supply chains.

Step 5: Walk in your partner’s shoes Understanding the partners’ perspectives and drives to make decisions

Step 6: Partner assessment and determining trustworhiness Should consider mutuality of goals and shared vision. Trustworthy partner will go extra mile for you.

Importance of trust

Trust is essentia

l

Contract and trust

Decompose trust

SC Developme

nt

E-commerce and trust

component of trust

Developtrust