Information technology (IT) as a mechanism to build trust and foster collaborative innovation in the buyer-supplier relationship

Abstract

As companies attempt to remain competitive throughout increasing market forces, many firms develop key operational strategies to differentiate themselves. One method that many companies such as Amazon, Dell, and Toyota, have established a competitive advantage through is supply chain management (SCM). One aspect of a disciplined and effective SCM program is supplier management, both from a risk and cost perspective. In this paper, the author explores an area oftforgotten when dealing with suppliers: trust. During a research project at Raytheon Integrated Defense Systems in Andover, Massachusetts, the author strove to learn how the dynamic of trust in a buyer-supplier relationship affects the companies' interactions, and how SCM leaders can influence this dynamic. First, through an examination of the available literature, the author presents an alternative view of the buyer-supplier relationship, viewed through the lenses of game theory and behavioral economics, in order to develop an impetus for change. Using an existing information-sharing information technology (IT) platform at Raytheon, along with extensive surveys of Raytheon suppliers and employees, the author answers the question: Can trust be built through sharing information in a systematic process through an IT platform? Results of the analysis show that there is a distinct possibility for companies to build trust with their suppliers through "opening up" and sharing information, which will ultimately facilitate collaborative innovation between the two organizations. In determining the types of information to share, the author generalizes the most useful type of information into categories applicable across various industries. Mainly, suppliers most desire and can utilize information that allows them to make more accurate and timely decisions, and likewise abhor information sharing and requirements that add burden to their workday. When determining which suppliers to share information with, companies need to develop some form of objective criteria to rank the potential impact of engaging specific suppliers. As each company's individual cases will differ, the author outlines a process to select Raytheon suppliers as an example of a methodology that others can follow.