Strategic Supply Chain Management Masterclass: Managing relationships central to success

Strategic Supply Chain Management Masterclass: Managing relationships central to success

Professor David Bamford is an experienced industrial academic who has published over 250 articles, book chapters and reports. His multiple publications include two co-authored books, ‘Essential Guide to Operations Management’ and ‘Managing Quality’. As a senior lecturer in operations management at Alliance Manchester Business School, he teaches Strategic Supply Chain Management as an elective for the Manchester Global Part-time MBA and delivered a masterclass on the subject in Dubai, where he was also leading an MBA student workshop.

Through his interactive masterclass, Professor Bamford shared insights into the ‘art of the possible’ when it comes to leveraging supply chain management, as a taster of his three-day elective workshop on strategic supply chain management.

“We know that profitability in most organisations or enterprises is actually fairly small. You're talking maybe one, two to three percent. The majority of the cost and the operational spend is on the ‘stuff’. It's on the resources - people, skills – and the ability to align these with some sort of grand future state. Most organisations will have spent the past several years or a number of decades perfecting their internal operations.

“As a professor of operations management, I know this is what organisations focus on. The opportunity, therefore, exists to look both upstream and downstream across that distributed supply chain to try and make more profit, to make it more efficient. From work that we did at the University of Manchester back in the late noughties, we know from surveying the Chartered Institute for Procurement and Supply (CIPS) that a 1% improvement in that distributed supply chain can potentially impact the bottom line by 10%. That's not a 10% increase in turnover. That's a 10% increase potentially in profitability. And that's not just from some hypothesis. It's actually having surveyed over 1,500 members of the CIPS. So, we know some of the things we teach actually do make a difference but require strategic alignment and understanding.”

“The module that I'm teaching this week is called Strategic Supply Chain Management. Any company's annual report will feature these words because that's what stakeholders expect to see. And they also expect to see how you're going to leverage this relationship. It's how you achieve that 1% improvement across a distributed supply chain.

“But it needs to be done consciously, not unconsciously. What we want to give you is a toolkit. We call this the ‘Manchester Method’ (learning by doing), we're going to give you a series of frameworks, tools, mechanisms that are evidence based, and allow you to apply them in certain circumstances.

“One of these frameworks is the ability to look at relationships from a supply chain perspective, which may be deceptively simple. A relationship between a buyer and the seller. In the academic press, they talk about a ‘dyad’. A dyadic relationship is simply a relationship between two entities. What we suggest is the ability to step back and analyse it, unpick what a relationship is but also to understand the difference between inter-organisational relations and intra-organisational relations because they are co-linked.

“We're suggesting that relationships are not a ‘thing’. You need to be able to objectify this and you need to be able to define it ideally as a process.”

As Professor Bamford went on to explain, there are three main theories regarding relationship management. The social exchange theory, which looks at aspects of justice, power, and dependency. The second is socialisation - formal and informal mechanisms within organisations. The third model uses elements of game theory in relation to supply collaboration. For example, this could apply to two firms which compete but don’t collaborate; if one of them collaborates, then there's a clear differentiation - one of them ‘wins’ more than the other. The opportunity is to facilitate collaboration to get a win-win. This is where, potentially, aspects of negotiation and strategic alignment against objectives begin to work. But it requires facilitation and this tends to be around communication and involves appropriate transparency.

“Some organisations are really good at facilitating this. Emirates Airlines excels at doing this, bringing people together with purpose and with intent. They've been doing it for decades now, which is where the approach really begins to pay off. Companies like Unilever, Procter & Gamble do the same thing. Some of the large consultancies also facilitate this – and it's done purposefully.

“If you can predict events going forward, you can facilitate the operational, supply chain domain in order to achieve your objectives. Because the ability to predict provides the ability to control. We teach you the models that allow you to do this. Including the one developed in conjunction with the CIPS which has a large membership across England, Europe and other parts of the world. To explore aspects of game theory, the survey asked questions around how organisations interacted both upstream with suppliers and downstream with their customer base. Survey responses indicated that there were over 1,500 strategic relationships that were reported on and we had 500 firms involved so the data is actually quite significant. It was a relevant and quite a timely study. 25 major corporations were also interviewed after the survey took place.
“Most organisations and most individuals enter into what we call an adversarial relationship at the beginning of any supply chain exchange. You put a number out, pick the cheapest supplier and you negotiate back and forth. When time progresses if that relationship continues you can turn the adversarial relationship into something more of a collaboration but still over a relatively short time. Then what happens, you get a reduction in the numbers but you can get a strategic collaboration over a much longer time period and it's done with intent and aligned with something purposeful.

“The perhaps shocking learning from the data and from the survey was that for about 23% of organisations that made it to the strategic collaboration phase, a number of them then adopted opportunistic behaviours to reduce price and upset that balance. They did it because they almost couldn't help themselves. It's rather like human nature. Some organisations will always be opportunistic in their behaviour. They seek to make profit in a complex and challenging marketplace. We're suggesting that this happens.

“So, just as we know from a marketing lifecycle perspective, we get an introduction phase, a growth phase, a maturity phase, a decline phase and that is entirely predictable over different time frames. Since 2008, this has been reinforced, it's been proven, it's been demonstrated again and again which is why to-date, I haven't replaced this model in my teaching because it's the best one I've found that actually works in the real world.”