Guidelines for Collaborative Supply Chain System Design and Operation

Over the past decade, firms have adopted supply chain management as a critical element of their corporate strategies. Despite these efforts, it is our observation that many firms do not realize the anticipated benefits of constructing collaborative operating relationships with supply chain partners. Our purpose in this paper is to establish a set of guiding principles for the effective design and execution of supply chain systems. These principles suggest why, what, and how collaborative relationships should be constructed. While constructing and operating a competitive supply chain is the primary objective of supply chain management, we have observed several impediments to achieving this goal. First, demand uncertainty is so substantial in most supply chain environments that if it is not adequately addressed, it can severely degrade the anticipated performance of the supply chain as measured in terms of unit cost, speed, quality, and responsiveness to changing conditions. Second, supply chains with poor physical characteristics that operate with long and variable response times cannot take full advantage of collaborative relationships due to their inability to respond to changes in th