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Trust Enabled™ Supply Networks
Enabling trust for collaboration, innovation and
sustainabilityAlex Todd
May 6,2008
TrustYour survival depends on it.
Trust = Vulnerability
Trust ≠ Control
Lack of Trust is Confining
Risk Minimization ⇒ ↑ Costs
The Supply Chain Executive’s Strategic Agenda 2008
Understanding Global Supply Chain Risk: A McKinsey Global Survey
Low Cost Country Sourcing=> ↑ Total Landed Costs
“Low Cost Country Sourcing : Canadian Manufacturing Perspective”http://strategis.ic.gc.ca/epic/site/dsib-logi.nsf/en/pj00384e.html
Operational Risk Costs
Opportunistic Risk Costs?
Coordination Costs
Tradeoff Risk Costs vs. Coordination Costs
Low
Medium
High
Strategic ⇐
Resource Sharing ⇒
None
Fair ⇐ Risk Reward Sharin
g ⇒ Unfair
Centraliz
ed ⇐ Decision Style ⇒
Decentraliz
ed
Low ⇐ Level o
f Contro
l ⇒ High
Coordination Costs
Opportunistic and Operational Risk Costs
$$
“Supply Chain Coordination and Cooperation Mechanisms: An Attribute-Based Approach” – Lei Xu and Benita m. Bearnon, The Journal of Supply Chain Management, Winter 2006
Strategic ⇐ R
esource Sharing ⇒ N
one
Fair ⇐ R
isk Rew
ard Sharing ⇒ U
nfair
Centralized ⇐
Decision Style ⇒
Decentralized
Low ⇐
Level of Control ⇒
High
Trust to Survive & Thrive
Time
Value
High
Moderate
None
Communicative
Coordinated
Trust Gap
Agility
Supply Chain Configuration Maturity
Collaborative
Co-opetitive
ExpedientExpedient
EfficientEfficient
EffectiveEffective
Innovative & Innovative & SustainableSustainable
Trust E
quity
Blazer Barn
StrategicTactical
“Trust Enabled Supply Networks: Uncovering the trust-building secrets of highly collaborative supply chains”, Alex Todd
“Buyers tend to be reluctant players” Robert E. Speckman
Shared values
Common vision
Merits of closer ties
Sharing of key information
Supply chain champion
Seizing opportunities to exploit expertise/capability throughout the entire supply chain
Belief that competitive success depends on the entire supply chain moving in unison
RISK MANAGEMENT
Trust Enablement vs. Risk Management
Trust Enablement
Trust-based
Optimistic
Offensive
Active
Stakeholder-oriented
Bonus: Golden Rule compliant
Risk Management
Control-based
Pessimistic
Defensive
Passive
Organization-oriented
Loss: Isolated self-interest
Let go to Survive
“Collaboration Rules”, Philip Evans and Bob Wolf, Harvard
Business Review, July – August 2005
“Trust Enabled Supply Networks: Uncovering the trust-building
secrets of highly collaborative supply chains”, Alex Todd
“Collaboration Rules”, Philip Evans and Bob Wolf, Harvard
Business Review, July – August 2005
“Trust Enabled Supply Networks: Uncovering the trust-building secrets of highly collaborative supply chains”, Alex Todd
Cut the Red Tape
Orchestrators ↓ Transaction Costs Recruit participants into process
network Structure appropriate incentives for
participants; encourage increasing specialization over time
Define standards for communication, coordination
Dynamically create tailored business processes—involving multiple service providers—to meet customer needs
Assume ultimate responsibility for end product
Develop and manage performance feedback loops to facilitate learning
Cultivate deep understanding of processes and practices to improve quality, speed, cost-competitiveness of network continually
“Loosening up: How process networks unlock the power of specialization” - John Seely Brown, Scott Durchslag, and John Hagel III
Share Risk to ↓ Coordination Costs
Source: Report on Business, May 2008
↑ Trust to ↓ Transaction Costs
and ↑ Sustainability & Innovation
Begin Now
1. Assess the relative roles of control vs. trust in your key supply chain relationships.
2. Identify the relationships that would produce the most value (↓ transaction costs) if you could improve conditions for trust.
3. Define the critical things you will need to trust in order to begin releasing control.
Risk Management Heroes
Thank you.
Alex Todd+1 416.487.1497
AlexTodd@TrustEnablement.comwww.TrustEnablement.com
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