Development of effective mechanisms for conflict resolution - Supply Chain Management

Develop effective mechanisms for conflict resolution

Effective conflict resolution mechanisms can significantly strengthen any relationship in the supply chain. In any relationship, the emergence of contradictions is stipulated by agreements. Unsatisfactory resolution of conflicts leads to a deterioration of cooperation, while a satisfactory solution strengthens the cooperation of counterparties of the chain.

The initial formal specification of rules, rules of financial procedures and technological transactions contributes to building trust between supply chain partners, disseminating information among them. The distribution of information over time helps to develop a relationship from trust based on deterrence to trust based on the process of interaction. When trust is built on the basis of the process of interaction, it helps to resolve the contradiction.

Effectively managed relationships in the supply chain foster cooperation and trust, thus increasing coordination in the supply chain. Conversely, a relationship managed unsuccessfully leads to the fact that counterparties behave contrary to the arrangements, having as a result a loss of the total profit of the supply chain.

Partnership in the supply chain faces difficulties if the perceived benefits of cooperation diminish or somebody acts in contradiction with existing agreements. Problems arise when there is a weak exchange of information between participants, and the mutual benefits of cooperation are not regularly reviewed. When managing supply chain relationships, managers should focus on the following factors to improve the chances of success for supply chain cooperation.

1. The availability of the flexibility, trust and obligations of counterparties helps the cooperation in the supply chain to achieve the goal. In particular, the obligations of top management on both sides are decisive for success. A SC manager with direct responsibility for cooperation can also promote the development of relationships by accurately establishing the value of partnership for each participant in comparison with his own expectations.

2. Good organizational DRM-structures, especially for the distribution of information and conflict resolution, increase the chances of success. The lack of information exchange and the inability to resolve conflicts are the two main factors that lead to the destruction of partnership in the supply chain.

3. The mechanisms by which each counterparty's operations are performed, and the mechanisms for achieving visible results help to resolve conflicts and resolve controversial issues. Such mechanisms make it difficult for each counterparty to act contrary to agreements and help identify defective processes, increasing the importance of cooperation in the supply chain.

4. The more just a stronger counterparty refers to a weaker partner, the stronger he strives to cooperate in the supply chain.

The equity issue is extremely important in the context of DRM, since most of the relationships will affect counterparties with unequal power. Often there are unforeseen situations that harm one of the participants more than another. The most powerful counterparty often has more control over how the problem is resolved. The validity of the resolution of the problem has an impact on the strength of the relationship in the future.

Equity implies that the benefits and costs of the relationship must be shared between the two partners so that both are in a win. Mutual relations based on strength would maximize all the benefits for one side. In this case, it is impossible to maintain long-term cooperation in the supply chain. In order to develop close cooperation in the supply chain, a stronger partner must fulfill its obligations regarding the profitability of its partners.

Procedures and rules regulate the interaction between participants in the supply chain relationship. Therefore, it is important that a weaker partner is aware of the fairness of the procedures and rules of a stronger partner when communicating with other participants. A stronger partner monitors the rules and procedures, and it should not exert influence in a way that violates the arrangements and does not benefit the entire supply chain. Legitimate procedures should support the bilateral exchange of information between counterparties. Procedures should be unbiased and provide a weaker partner with access to stronger solutions. Finally, the stronger participant should be prepared to explain all his decisions.

As discussed above, SC managers can build trust and cooperation in the supply chain relationship by building relationships and managing them in a way that is mutually beneficial and fair. The existence of trust and cooperation facilitates coordination in the supply chain, increasing profits for all related links.

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