THE GLUE

1. THE GLUE THAT BINDS THE EXTENDED ENTERPRISE

2. Agenda • The two challenges and why is it important. • Trust is essential. • The role of contract and trust • Decomposing trust into its core dimensions • Supply chain development • E-commerce, supply chain and trust • Know the components of trust • Developing an atmosphere of trust

3. Challenges of trust and why it is important ? Importance of trust Trust is essential Contract and trust Decompose trust SC Development E-commerce and trust component of trust Develop trust • Challenges • Loss of confidence in business • The role of supply chain • Customers want on-time and seamlessly delivery. • Benefits of trust: (Dyer’s research) • Reduces transaction costs • Increases knowledge sharing • Encourages partners to dedicate assets on behalf of the others. • Outsourcing relationship which lead to higher profitability (HP and Solectron) • However, your trusted partner could turn to be severe competitor (Dell and HP)

4. Trust is essential Importance of trust Trust is essential Contract and trust Decompose trust SC Development E-commerce and trust component of trust Develop trust • Closeness can bring the “opportunism”, which can increase cost. • “organizational” problem is the largest barrier to success. • “People costs”, resulting from; • Old habits and cultural legacies that do not support the supply chain alliances. • Changes required • Developing the new climate that fosters trust • Open communications, builds commitments, and a win-win orientations. • Trust can be seen as “your word being your bond”. • Extended enterprise depend on trust for their lifeblood • Formal mechanisms cannot guarantee that rights and obligations will be met. • Legal documents breed compliance, not commitment. • Contract does not assure the outcome when conditions change.

5. Trust is essential (Continued) Importance of trust Trust is essential Contract and trust Decompose trust SC Development E-commerce and trust component of trust Develop trust • Difference between alliance-like thinking and contractual thinking

6. The role of contract and trust Importance of trust Trust is essential Contract and trust Decompose trust SC Development E-commerce and trust component of trust Develop trust • Understanding what is interplay between contract and trust. • Partners don’t need contracts to collaborate, trust your partners or get different partners” (Ryder) • Extended enterprise consists of three major; intertwined consideration. • Managing the business • Managing the relationship • Understanding the underlying spirit of relationship • Contracts do play a role when; • Protecting intellectual property. • Partners have little past experience with one another. • Adding the predictability to the outcome • The important thing is how best to leverage the two so that the supply chain accomplishes its objectives with minimal disruption and conflict.

7. Decomposing trust into its core dimensions. Importance of trust Trust is essential Contract and trust Decompose trust SC Development E-commerce and trust component of trust Develop trust • Following the contract means that there is little incentive to adapt, conflict arises and relationship just ends. • Trust is the belief that one’s alliance partner will act in a predictable manner. • Trust and its different dimensions.

8. Supply Chain Development Importance of trust Trust is essential Contract and trust Decompose trust SC Development E-commerce and trust component of trust Develop trust • Two goals sought: Strategic and Performance oriented • Supplier assessment: Direct Involvement/Competitive Pressure • Develop the approach that is not cost-driver but offer incentives. • Switching of suppliers often result from the price basis. • Keeping suppliers at arms’ length will damage long-term relationship. • The roadmap to success (Sun and Cisco) • One level – how all the parts create value for customers. • Second level – a commitment to the supply base and give suppliers voice • Third level – trust is build through the entire strategy-planning and implementation process.

9. E-Commerce, Supply Chains, and Trust Importance of trust Trust is essential Contract and trust Decompose trust SC Development E-commerce and trust component of trust Develop trust • Increasing growth for e-commerce business. • The challenge is placed on the “Credibility” of logistic systems. • In this point, trust is defined as “Reliability”. • The guarantee that transactions will be completed. • “Trust Broker” (Open Rating, GeoTrust) • Develop the objective scales and rating schemes to quantify the reputation of suppliers.

10. Importance of trust Trust is essential Contract and trust Decompose trust SC Development E-commerce and trust component of trust Develop trust Know the components of trust • Character-based trust is important because firms have choices. • Reputation serves to get a foot in the door. • State the importance of the partnership and mutual gains/benefits. • All partners are given voices and their strategic interests become parts of the plan for the network. • “Seasick Syndrome” • Resulted from inconsistencies between what the buyer says and does which will affect the tone and spirit of the relationship

11. Importance of trust Trust is essential Contract and trust Decompose trust SC Development E-commerce and trust component of trust Develop trust Developing an atmosphere of trust • Step 1: Begin with a plan • Benefit of having the collaborative relationship and setting goals. • Step 2: Ensure open lines of communication • more about the commitment in sharing the sensitive information. • Step 3: Establish an appropriate governance structure • Ensure the equitable treatment of all and shared commitment. • Step 4: Keep your eye on what matters • Member must be reminded to compete with other supply chains. • Step 5: Walk in your partner’s shoes • Understanding the partners’ perspectives and drives to make decisions • Step 6: Partner assessment and determining trustworhiness • Should consider mutuality of goals and shared vision. • Trustworthy partner will go extra mile for you.