Sharing Your Global Supply Chain Knowledge -- The Right Way

Oct. 10, 2008
Knowledge sharing between supply chain partners has more upsides than downsides, provided that the right kind of knowledge goes back and forth.

In global supply chains, managers consistently have struggled with sharing valuable knowledge with buyers and suppliers across borders. Both buyers and suppliers agree that sharing knowledge among supply chain partners will create more efficient supply chains and more effective organizations, leading to higher quality outputs and enhanced customer satisfaction. However, some managers think that knowledge sharing with supply chain partners has a "dark side" that can outweigh the benefits. Individual companies tend to be wary of getting too close to one another for fear of losing control, compromising trade secrets, proprietary information, and even losing revenue and competitive edge. It may even lock firms into unproductive relationships or preclude partnering with other viable firms. In this way, a firm's collaborative relationships with its supply chain partners can become a source of both opportunities and constraints.

Increasingly, talk of the "dark side" of collaborative relationships has left managers wondering who benefits most from knowledge-sharing activities: their companies or their partners. Furthermore, in today's competitive global marketplace, how do cross-cultural differences between buyers and sellers impact the value of knowledge sharing? In order to find the answers to these questions, we conducted an in-depth study of more than 100 cross-national supply chain partnerships in the industrial chemicals, consumer durables, industrial packaging, toy and apparel industries in multiple locations in 19 countries across Asia, Australia, Africa, Europe, North American, and South America.

Knowledge sharing in global supply chains goes beyond basic information sharing. Much of the information that companies share -- data on inventory levels, sales, production schedules and prices -- is easy to codify and transmit. Other types of knowledge are more difficult to codify but proven to be more valuable: know-how, managerial and communication skills and organizational memory. Inter-firm knowledge sharing is a joint activity between supply-chain partners in which every party strives to create more value together than they would be able to create individually. It involves the parties sharing knowledge and then jointly interpreting and integrating it into a relationship-domain-specific memory that influences relationship-specific behavior. We found three different dimensions of knowledge-sharing activities within the supply chain, each offering distinct benefits to buyers and suppliers:

  • information sharing takes place when companies exchange important data about sales, customer needs, market structures, and demand level
  • joint sense making occurs when supply chain partners work closely to solve operational problems, analyze and discuss strategic issues, and facilitate communication about the relationship.
  • knowledge integration occurs when both sides develop relationship-specific memories, providing each party with a common understanding of idiosyncratic, routines and procedures governing the partnership.

The overall results of our research show that both buyers and suppliers will benefit from these knowledge-sharing activities, but suppliers generally benefit more than buyers. Why is this so? Because the predominance of demand-driven supply chains in today's global marketplace, and the fact that suppliers are further away in the supply chain node from the final point of sale. Increased global competition also has forced supply chain managers to strengthen their agility and adaptability and to tie their planning and operations as closely as possible to real-time customer needs. As a result, the knowledge that buyers share with suppliers becomes more valuable. When the benefit pie turns out to be unequal size between buyers and suppliers, problems can emerge. If managers see relative gains as more important than absolute gains, it can undermine long-term cooperation within supply chains. There is a saying that, in the global marketplace, companies don't compete -- supply chains do. A company may not benefit as much from knowledge-sharing activities as its partners. But in absolute terms, its performance will be enhanced significantly. Without participation from both sides, knowledge sharing would not take place, and the entire supply chain suffers.

Suppliers need to be willing to address the problem proactively when tension arises due to the real or perceived disproportional benefits on their part. They could demonstrate goodwill to the buyers who are more collaborative in knowledge sharing. For example, suppliers could offer support for customers' R&D programs, grant discounts or preferred customer status, or be more generous in the division of profits with their customers. Through this revised "pie-sharing," both buyers and suppliers would ultimately benefit through the strengthening of the knowledge sharing efforts from both sides.

One of the more interesting findings in our research is that cross-national cultural differences between buyers and suppliers rarely matter when it comes to knowledge sharing. This is against traditional wisdom in which we had assumed that national culture and all of its nuances would impact the propensity to share knowledge and other valuable resources between cross-border business partners. Interviews with managers revealed the reasons of the new findings. In business-to-business settings, we are seeing a decrease in the influence of culture as it traditionally is perceived and an increase in 'cultural overlaps' as human resource elements within the firm become more diverse, and the firms themselves operate in more markets in the global setting. Recent research also has found that one of the major effects of globalization is the creation of a new identifiable class of managers who belong to an emergent global culture, especially in business markets.

As membership in this new global culture rises, many critics find a distinct threat to national cultures, resulting quite possibly in their eventual obsolescence. In the management of MNCs (multi-national companies), it is common to find an increasing number of managers who describe themselves as bi-cultural or multi-cultural. More and more, MNCs are managed by multi-cultural expatriates. This group of managers is adept at cross-cultural code switching and modification of their behavior to accommodate different cultural norms for appropriate behavior in cross-cultural scenarios. This shows a trend that implies a 'cross-vergence' of cultures where the influence of societal values and economic ideology combine to produce a value system significantly disparate from traditional national cultures. Thus, globalization leads to significant cultural cross-pollination, and global managers tend to have values that are more in common with other global managers than with those of their own countries of origin. This seems to explain that managers' decisions about whether to share knowledge -- and how to do it -- are driven less by cultural norms and more by objective business decision making and market demands.

In the competitive landscape of global supply chains, knowledge sharing between buyers and suppliers has become increasingly critical. As concluded by a top executive in our interviews, "Even though it is often hard to quantify the actual size of the pie gained by each individual party, both sides have to look at the ultimate picture and be more in sync.... Businesses are constantly looking for best practice and best thinking. We have to put our cultural differences aside." Companies need to approach knowledge sharing with their global supply chain partners constructively in order to make their supply chains more competitive.

Matthew B. Myers, Ph.D. is Associate Professor and Interim Head, Department of Marketing and Logistics, Nestle USA Professor of Marketing, and Director, Global Business Institute, the University of Tennessee. Mee-Shew Cheung, Ph.D. is Assistant Professor, Department of Marketing, O'Conor Research Fellow, Williams College of Business, Xavier University.

For over 50 years, University of Tennessee (UT) faculty have played a major role in the supply chain/logistics arena -- conducting innovative research, publishing leading-edge findings, writing industry-standard textbooks, and creating benchmarks for successful corporate supply chain management. U.S. News and World Report ranked the University of Tennessee College of Business Administration a Top-25 school among top-tier public universities, up 12 positions from last year. The college's supply chain management/logistics program now ranks #5 among top-tier public universities. Certification is available.

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