Supply chain management intends to make a significant and sustainable value contribution to the success of business activities and thus to generate a decisive competitive advantage. It aims to make full use of available potential in supply chain departments while simultaneously providing reliable and uninterrupted end-to-end supply chains.
Customer is considered as a king in any business and in order to fulfill your king’s demand, constant efforts have to be made. Demand is achieved after the formation of efficient and effect supply chain. Customer happiness is highly dynamic and the prerequisite of success is the collaboration of supply chain partners. Significant performance and long-term relationships between supply chain partners is considered to improve different levels of supply chain (Benavides et al, 2012). Success of supply chain department in any firm is due to the management of buyer-supplier relationships. This can be further elaborated as the strategic management of relationship between buyer and critical supplier (Chen et al, 2004). The four dimensions of the value contribution are:
· Productivity/ material cost reduction
· Quality
· Availability of product and decisive power or authority
· Innovation in product as well as in organization.
Researchers have proved that the success of an organization does not merely depend on implementation of high-tech softwares but high-value strategic relationship of human plays an important role (Morgan and Hunt, 1994). Supplier’s only concern is not making profit or business but also building trustworthy long term relationships to keep them away from fear of lose of business. Contractual governance or heavy investment in such relationships is secondary and their major focus is to gain value to be considered as a success (Narayandas and Rangan. 2004). Through studies, it has been found that suppliers have concern with cost theory and social exchange theory as well (Kwon and Suh, 2004; Kingshott, 2006; Hakins et al, 2008; Zhao et al, 2008, Liu et al, 2009).
In supply chain, relationship of buyer-supplier and their individual priorities make an impact on complete cycle. Progress has made in managing inventories, transportation, business activities, goods and services but a lot is there to be discussed in behavioral issues, especially in decision making with normative or optimal policy (Bazerman, 2002; Stanovich and West, 1998). However, behavioral activities are built and incorporated in supply chain policies to predict the accuracy and usefulness of it. Coordination and collaboration of representatives from suppliers, intermediaries, third party service providers and customers have equal importance in supply chain management (CSCMP).
There are 8 key levers which can guarantee value contribution if human behavior adopts them:
· Early involvement of supply chain department and supplier as well.
· Cost & value engineering
· Organizational efficiency
· People excellence
· Identification of core/non- core activities
· Supplier innovation & development
· Digitalization
Lets take an example from IAR framework applied to logistics activities of network design to optimize the trade off between transportation costs, inventory costs and warehousing costs. Intension-related behavioral assumptions of warehouse decision are that manager has to minimize all the costs. Available information has an impact on decision-making of manager. Decision has to be made while assessing all the risks in rational manner. Force majeure has more importance than daily dispute among labors while considering the risks. Replenishment of inventory to be managed by manager is another factor. But there are still many risks that cannot be planned or decision makers can control them. However, intuition and experiences can minimize them.
In practical circumstances, Bonner (1999) research in judgment and decision making and highlighted two basic issues:
· The quality of decision that people made during various tasks.
· Their positive or negative determinants
Bonner classified his research into three variables to examine the performance i.e. person, task and environment.
Environment variable means the circumstances in which decision maker perform tasks.
Listed below are few examples with their solutions than can minimize the risks and can improve the relationship:
· Companies usually opt for new business and for that proposals are sent to customers to win the project. Procurement department must be involved from the beginning and procurement department should involve their suppliers to minimize cost and build trust. But if the company does not win the project then supplier must be informed.
· Forecasting of product is important. This helps both, supplier and company to be more efficient. Departments have their forecasted value but they are reluctant to share this value with supplier. Such information helps the supplier to be prepared before time.
· Agreements can be signed between buyer and supplier. Through such agreements, company information is shared and suppliers are bound not to reveal it. This builds long term relationships.
· Every functional department’s lead time must be defined. These lead times must be included in their policies to avoid any conflict. This can highlight the loopholes of every department.
· Procurement department is directly dealing with suppliers, therefore, they must send technically sound RFQs to suppliers and inform them If they failed to meet targeted prices. In order to make it more transparent, eBidding/ eAuction can be implemented.
Conclusively, an organization feeds upon the strategic relationships between individuals. A strong customer-supplier relation can do wonders for the business, given the fact that this relationship evolves as rules of business mature.