When it comes to knowledge sharing between supply chain partners, the consensus is that you should do it. If you share knowledge, your supply chain will be more efficient, cost less, move faster. Your organization will be more effective, creating better quality products and improving on customer service.
However, there are two types of supply chain partners: those that buy and those that sell. And managers, depending on which group they're in, have different thoughts on the value of knowledge sharing. The benefits don't always accrue equally or simultaneously to all.
Some managers think that knowledge sharing has a dark side that can outweigh its benefits, worrying that divulged information regarding technologies, pricing schedules and processes can be copied or shared with competitors. Some also worry that relying on other organizations' knowledge flows can undermine a company's flexibility, leaving it vulnerable to changes in its partners' priorities.
So what types of information should suppliers and buyers share with each other? How does this information provide value to buyers and suppliers? And under what circumstances can it help both? How do cross cultural differences influence sharing information?
First, it's important to clarify the ways knowledge sharing helps suppliers and buyers and how the overall supply chain benefits from these activities. Knowledge sharing entails sharing information, much of which -- data on inventory levels, sales, production schedules and prices -- is easy to codify and transmit. But other types of knowledge are just as important to exchange and more difficult to codify: know-how, managerial and communication skills and organizational memory. There are three essential types of knowledge sharing within the supply chain, each offering distinct benefits.
The first is information sharing: companies exchanging data about sales, customer needs, market structures and demand levels.
The second is joint sense making: supply chain partners working together to solve operational problems, analyze and discuss strategic issues and facilitate communication about the relationship.
And the third is knowledge integration, which occurs when supply chain partners develop memories specific to their relationship, resulting in a common understanding of idiosyncratic routines and procedures that govern the relationship. Knowledge integration often results in collective problem solving.
In general, market volatility makes companies more open to sharing knowledge. Also, when it comes to knowledge sharing, cultural differences between buyers and sellers rarely matter. Why is this? In large part, because businesses are becoming increasingly diverse themselves, both in terms of their employees and the number of markets in which they operate.
However, buyers and sellers don't always have equal advantages from knowledge sharing: When it comes to information sharing and knowledge integration, suppliers receive greater benefit. It doesn't matter who shares the information: Both partners win, but suppliers win more.
Joint sense making, though, appears to have different effects. When suppliers develop teams to work with partners, increase face-to-face communication and evaluate routines and processes, both buyers and sellers benefit. However, when buyers promote the same activities, suppliers reap the most benefit. Why the disparity? It may be due to the time and resources needed to build intercompany teams. Buyers tend to see this as an investment with few benefits for them. Suppliers see the potential benefits as being worth the expense.
The question becomes, then, why suppliers generally benefit more than buyers. There are two factors: the predominance of demand-driven supply chains and the fact that suppliers have more room to improve than buyers, who already tend to be lean. Increased competition has forced supply chain managers to become more agile and to tie their global models more closely to real-time consumption than to capacity or speculative sales forecasts. As a result, the knowledge the buyers share with suppliers is more valuable.
There are several important lessons here. First, while suppliers may benefit more from knowledge sharing, buyers also come out ahead. Frequently, supply chain partners focus too much on their own share of the benefits pie, forgetting that unless knowledge is shared, no one benefits.
Second, it may sound appealing to divide benefits equally between suppliers and buyers, but it may not be possible in reality. One partner will always have more to learn than the other and thereby have a bigger upside. In most industries, suppliers have the advantage as supply chains move toward more demand-driven models, giving buyers the upper hand. However, buyers have already seized many efficiencies. And suppliers, who are furthest removed from the final point of sale -- and thus have the most room for improvement -- have the next opportunity.
Third, companies need to participate in the sharing process, even if they feel that sharing certain information or knowledge resources could be a liability. They must recognize there is a quid pro quo: A partner's participation in the sharing process will probably depend on the original company's willingness to do its part.
For more information on this topic is available at http://sloanreview.mit.edu/smr/issue/2008/summer/01/