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.

Responsible SCM

In the Harvard BR of June 2004, there is an interesting article by Elliot Schrage about coffeemaker Starbucks. Not only did Starbucks react to antiglobalization activists singling out Starbucks for having exploited third-world farmers: to protect its brand the company also began to actively cultivate and reward environmentally and socially responsible suppliers ("sustainable sourcing"). This is a preferred supplier program to attract and reward farmers committed to socially and environmentally responsible farming.