How does cooperation and trust improve performance in a supply chain partnership?

Question

What will be an ideal response?

Answer 1

Answer: Cooperation and trust within the supply chain help improve performance for the following reasons:
1. A more natural aligning of incentives and objectives is achieved. When stages trust each other, they are more likely to take the other party's objective into consideration when making decisions.
2. Action-oriented managerial levers to achieve coordination become easier to implement. Sharing of information is natural between parties that trust each other. Similarly, operational improvements are easier to implement and appropriate pricing schemes are easier to design if both parties are aiming for the common good.
3. An increase in supply chain productivity results, either by elimination of duplicated effort or by allocating effort to the appropriate stage. For example, a manufacturer receives material from a supplier without inspecting it as long as the supplier shares process control charts.
4. A greater sharing of detailed sales and production information results. This sharing allows the supply chain to coordinate production and distribution decisions. As a result, the supply chain is better able to match supply and demand, resulting in better coordination.