Supply chain alignment as process: contracting, learning and pay-for-performance

Supply chain alignment as process: contracting, learning and pay-for-performance PurposeThe purpose of this paper is to understand how buyers and suppliers in supply chains learn to align their performance objectives and incentives through contracting.Design/methodology/approachTwo longitudinal case studies of the process of supply chain alignment were conducted based on 26 semi-structured interviews and 25 key documents including drafts of contracts and service level agreements.FindingsThe dynamic interplay of contracting and learning contributes to supply chain alignment. Exchange-, partner- and contract framing-specific learning that accumulates during the contracting process is used to (re)design pay-for-performance provisions. Such learning also results in improved buyer-supplier relationships that enable alignment, complementing the effect of contractual incentives.Research limitations/implicationsThe study demonstrates that the interplay of contracting and learning is an important means of achieving supply chain alignment. Supply chain alignment is seen as a process, rather than as a state. It does not happen automatically or instantaneously, nor is it unidirectional. Rather, it is a discontinuous process triggered by episodic events that requires interactive work and learning.Practical implicationsDevelopment of performance contracting capabilities entails learning how to refine performance incentives and their framing to trigger positive responses from supply chain counterparts.Originality/valueThe paper addresses supply chain alignment as a process. Accordingly, it stresses some important features of supply chain alignment. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png International Journal of Operations & Production Management Emerald Publishing

Supply chain alignment as process: contracting, learning and pay-for-performance

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Publisher
Emerald Publishing
Copyright
Copyright © Emerald Group Publishing Limited
ISSN
0144-3577
D.O.I.
10.1108/IJOPM-01-2017-0059
Publisher site
See Article on Publisher Site

Abstract

PurposeThe purpose of this paper is to understand how buyers and suppliers in supply chains learn to align their performance objectives and incentives through contracting.Design/methodology/approachTwo longitudinal case studies of the process of supply chain alignment were conducted based on 26 semi-structured interviews and 25 key documents including drafts of contracts and service level agreements.FindingsThe dynamic interplay of contracting and learning contributes to supply chain alignment. Exchange-, partner- and contract framing-specific learning that accumulates during the contracting process is used to (re)design pay-for-performance provisions. Such learning also results in improved buyer-supplier relationships that enable alignment, complementing the effect of contractual incentives.Research limitations/implicationsThe study demonstrates that the interplay of contracting and learning is an important means of achieving supply chain alignment. Supply chain alignment is seen as a process, rather than as a state. It does not happen automatically or instantaneously, nor is it unidirectional. Rather, it is a discontinuous process triggered by episodic events that requires interactive work and learning.Practical implicationsDevelopment of performance contracting capabilities entails learning how to refine performance incentives and their framing to trigger positive responses from supply chain counterparts.Originality/valueThe paper addresses supply chain alignment as a process. Accordingly, it stresses some important features of supply chain alignment.

Journal

International Journal of Operations & Production ManagementEmerald Publishing

Published: Mar 5, 2018

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