Supply chain collaboration alternatives: understanding the expected costs and benefits

Collaboration is a recent trend in supply chain management (SCM) that focuses on joint planning, coordination, and process integration between suppliers, customers, and other partners in a supply chain. Its competitive benefits include cost reductions and increased return on assets, and increased reliability and responsiveness to market needs. Recent advances in inter‐enterprise software and communication technologies, along with a growing use of strategic partnering and outsourcing relationships, has resulted in a confusing assortment of alternative information systems approaches for supporting collaborative SCM. This paper analyzes the alternatives and presents a framework for understanding the expected costs and benefits of each type of system. These costs include not only the total cost of ownership of the system, but also the partnership opportunity cost – the cost of being tied to a partner due to system inflexibility. The benefits of collaborative SCM include process, inventory, and product cost reductions as well as increased cycle times, service levels, and market intelligence.