Tuesday, June 29, 2004

Trust Factors in SCM

Trust is a critical factor fostering commitment among SC partners. The presence of trust improves measurably the chance of successful SC performance. A lack of trust among SC partners often results in inefficient and ineffective performance as the transaction costs (verification, inspections and certifications of their trading partners) mount.
In an article in the Journal of SCM (Spring 2004) Ik-Wang G. Kwon and Taewon Suh report results of their empirical testing of such relationships.
- A firm's trust in its SC partner is highly associated with both sides' specific asset investments (positively) and behavioral uncertainty (negatively).
- Information sharing reduces the level of behavioral uncertainty, which, in turn, improves the level of trust.
- A partner's reputation in the market has a strong positive impact on the trust-building process, whereas a partner's perceived conflict creates a strong negative impact on trust.
- The level of commitment is strongly related to the level of trust.
It is interesting that Kwon and Suh recommend that curricula in business schools need to be changed from traditional functional disciplines toward an integrated and strategic-oriented curriculum to satisfy the needs of a new breed of decision makers. That makes sense to me.


Blogger DINH Bao Anh said...

Trust factor in SCM, anyhow, is still a very important factor in developing SC, particular in orient countries. We can find some interesting ideas from "Strategic Supply Chain Management - McGraw-Hill,2005 -p.159" of Shoshanah Cohen & Joseph Roussel: "Trust your partners, but protect your interests".

Trust factor and its risk in SCM is an interesting topic once we think about integrated systems of suppliers and customers. It's glad to receive more comments about this topic.

6:51 PM  
Anonymous Anonymous said...

Dear Dinh Bao Anh,

I completely share your concern as to how positively implement integrated systems between partners in "low trust" or "hit & run" types environment.
While greater awareness of mutual benefits partnership is to be demonstrated so it gains credibility from operators, we have currently to involve more time in Partner selection and communication. While not strictely oriental, cross-investment or shares exchanges, is certainly an interesting way to promote trust between partners at one point.

This being said Vietnam has the potential and opportunity to step in directly within new global networks and frameworks with less extensive process re-engineering associated costs & pains of more "advanced" economies. That could, if it opportunitly saise current momentum to look ahead and widen up horizons to neighboring Asean partners, balance China's regional omnipotence somewhat.

9:48 AM  

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