Comparing Competitive and Collaborative Approaches in Supply Chain Management in the Industrial Sector

Introduction

Supply chain management refers to how the flow of both goods and services are effectively managed in the industries. It also involves the amicable storage of raw materials, of work-in-process inventory, and that of the finished products from one place to another. It is for this purpose as to why SCM plays an integral role in both small and big organizations. Thus, it is essential to own up that the SCM often present a new paradigm in both the strategic and operational management of businesses in the modern society. It provides both the collaborative and integrated model of the value-creation process via a cross-organizational perspective in the contemporary world. The most significant influence on the concept of supply chain management was introduced by M. Porter. It was mainly a resource-based approach and also the idea of core competencies. It is for this purpose as to why the SCM has been adopted by various practitioners, consultants, and researchers. The paper comprehensively analyzes the collaborative and competitive approaches that firms apply in the supply chain management in contemporary society.

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The competitive strategy or independent strategy is generally used by the organizations when they have a lot of alternatives to choose from either the buyers or the suppliers in the market. It is usually applied in perfect competition. This means that it is used by firms when the product is highly standardized or when it is not the core product in the market. The application of competitive strategy often presumes that counterparties do not fall in the protracted linkages and that the ex-ante transactions that are undertaken are low enough to enable the parties involved to seek new suppliers on the next stage (Christopher 2016, 13). For instance, a housekeeper who buys household goods is a perfect example of competitive relationships on the b2c market. This is because in-depth analysis has found out that in most cases, the housekeeper cannot remember the brand of the household waste bags that was used in the past. Consequently, he begins to start evaluating every brand and keeping the stock unit on the shelf of the supermarket as for the first time. This is mainly because the transactions costs of doing this are relatively lower as compared to the transaction costs of remembering the information about the brands. It suggests why the price is very significant in this segment and also why there are not many premium brands involved.

The application of the competitive strategy implies that firms in the industry would cooperate in how they conduct their business dealings to augment the net revenues that they obtain. An example is that of adopting a classic supply chain. Under this mechanism, the firms cooperate as a means of decreasing the amount of waste in the market. The cooperation is normally directly linked with the positive transaction cost so as to form specific investments in the economy. It is important to acknowledge that if organizations invest in specific information systems in the market, then they would not be in a position to use it elsewhere. However, the partners in the supply chain are able to save money that they make form their business dealings by decreasing the number of stocks and also planning effective ways of undertaking their operations (Christopher 2016, 25). It implies that a cooperative strategy usually requires investments to be undertaken but also at the same time gives an opportunity for businesses to increase their net profits. It is for this reason as to why companies fall in the protracted linkages, and the ex-ante transaction costs are high. This is what makes such relationships to be more constant and to last for a relatively long time. It also requires a positive atmosphere, commitment, and trust among the firms involved. An example form the b2b market is when organizations cooperate and share vital information about their sales, stocks online, and production capacity among others. A well-known example is that of the practice between Wal-Mart and Proctor-and-Gamble.

Competitive strategy implies that the firms in the industry get to compete because of their desire to make more profits. They produce a turnover in the market out of the exchange of competing with their rival firms in the industry. It is for this purpose as to why the object of conflict between counterparties is typically founded on the amount of profit made. Under this mechanism, the supplier always has its lowest price and cannot sell below this price. Also, the suppliers are still willing to sell its products or services at the highest possible price in the market to increase his or her net profits. However, the client also has its highest price which means that he cannot buy the product or services above this price. The customer always wants to buy at the lowest possible price as a way of increasing his net profits (Christopher 2016, 34). Thus, the cost of the contract couldn't be less than the lowest price for the supplier and higher than the value of goods or services for the client, that is the highest possible price is value both in the short-run and in the long-run. The price is always closer to the weaker side which means that the amount needs to be higher for the weaker buyer as compared to the stronger buyer. The same scenario applies to the supplier. For instance, if the buyer has the chance to choose out of several suppliers, it means that he dominates in the relationships thus can shift the price down ceteris paribus. Alternatively, if the share of the particular consumer is relatively small in supplier's turnover, then it means that the supplier would dominate and can push the price up, ceteris paribus.

Both cooperative and competitive approaches are valid. This is because the profits are efficiently distributed between the two parties. However, if the gain is not efficiently allocated, then it means that one of the companies is applying the command strategy. Two main motives could lead to inefficiency. One is the political decisions made by the shareholders in the firm. For example, there could be situations where one person owns two companies (client and supplier) and then decides to accumulate profit in one of the companies, either by decreasing tax or through any other means (Tachizawa, Gimenez & Sierra 2015, 1547). This situation could lead to an inefficient relationship. Two, inefficiency could also be caused by the opportunistic behaviors among the managers in a company. For instance, when sales manager from one firm and the purchasing manager form another organization work for relatively long duration together and develop some form of friendship, then it is possible that one of them would act opportunistically by pressing the other side to accept favorable prices. This is because if you are in a friendship, it would be hard to reject. It is such inefficiencies that lead to the existence of the command strategy in the market.

There are various similarities and differences between the use of the cooperative approach and competitive approach in the supply chain management. The integration of significant business-processes within the suppliers and other partners is advocated for under the competitive approach while the cooperative strategy does not encourage it. The collaborative policy ensures that there is no integrated process of strategic development (Tachizawa 2015, 1553). It does not also advocate for the integration of the information system. The cooperative approach encourages the need to have joint orientation on the ultimate clients. The approach equally ensures that the relationship is mutually beneficial to the parties involved and that there are no longitudinal relationships. The method also takes into deliberation the fact that there needs to be no joint work for the need to drive efficiency. The objective of the strategy is to work with various suppliers in the market for every supplied material or product in the economy. It also tries to decrease the number of suppliers in the market to develop longitudinal relationships with the other suppliers in the market. However, it does not attempt to reduce the number of suppliers as a means of avoiding dependence on one supplier. When using the cooperative strategy, the price is a significant parameter when making the vital decisions in the firm. Another critical metric that needs to be taken into consideration when making decisions using this approach is the quality of the services or products in question.

The competitive strategy on the other hand advocates for the need to amicably integrate the process of strategic development in the economy. Unlike the cooperative approach, this mechanism often integrates the information systems as well as ensuring that there is a joint orientation on the ultimate clients in the market. The competitive approach also ensures that the parties involved in the transactions mutually benefit from each other just like it is the same case with the cooperative plan. The proposal also provides that there are longitudinal relationships and joint work for driving efficiency. However, unlike cooperative strategy, the competitive approach does not encourage the aspect of working with several suppliers for every supplied material or product in the market. Also, it does not try to decrease the number of suppliers in the market as a means of developing longitude relationships with several suppliers (Tachizawa 2015, 1557). However, it reduces the number of suppliers to avoid dependence on one supplier. It is for this purpose as to why quality is the primary factor that is taken into consideration when making critical decisions linked with this approach. Price of the products or services is not a crucial parameter for the various choices made under the competitive strategy.

Every relationship between two parties can either be classified as collaborative or competitive. This is when we assume that every relationship follows all the approaches and does not only stick to one of them. Marketing perspective of the SCM implies that firms would collaborate to generate more value. The extra benefit is often obtained in more innovative or modified products. It suggests why companies utilize the existing supply chain as a means of establishing a network of knowledge which in turn allows them to invest in new and modified old goods according to the ultimate consumer value system. The primary motive as to why organizations collaborate is that they need to increase their flexibility and capabilities in reaction to the requests made by the buyers in the market. Also, in both approaches, the interface of the SCM could be applied. Also, both the arranged procedures and use of administrative routines are helpful in enabling the business to realize its significant targets in the economy. The aspect of increasing value implies that the organizations would increase contract price and the net revenues achieved.

Six core factors make companies collaborate effectively in the market. One, the companies need to cooperate in areas where they have a solid footing. Even though firms are usually tempted to use collaboration as a means of filling gaps in their capabilities, the most successful partnerships by companies have often been built on the strengths as opposed to the compensating weaknesses. It is for this reason as to why a manufacturer seeking to collaborate with a vast retailer as a means of improving its forecasting performance will have little to gain. Thus there would be little point in getting into the collaboration(Tachizawa 2...