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The three crucial elements of a successful supply chain are people, people, and people – ©123RF.com

The importance of supply chain social networks – By Professor Paul Childerhouse

People and their relationships are the key to a supply chain. You can have the most advanced information systems and efficient processes, but if your staff lack good people skills, you won’t win business.

Supply chains are complex adaptive systems and as such require a network lens to appreciate their dynamic, multi-layered characteristics. In order to achieve this, here at Massey we’ve been exploring supply chains from a social network perspective, and we’ve discovered the three crucial elements of a successful supply chain: people, people, and people.  

Initially we explored the triadic relationships that exist between 3PLs, their customers and suppliers. These fascinating mini-networks allowed us to apply balanced theory to explore how one actor can mediate the relationship between the other two. Think of it like playground politics where three mates need to not only befriend each other, but also help the other two get on. 

We found that successful firms were well embedded into their clients’ businesses, both in terms of process integration and, more importantly, in regards to daily operations and problem solving. 

During a three-year study we explored the human social networks – ego networks – of 3PLs and found that the people at the coalface were building cross-firm working friendships. These relatively junior staff were adept at wearing multiple hats, sometimes being the enforcer of contractual obligations and at other times adapting the processes to enable inter-firm interactions. 

The top-level agreement and pragmatic means of achieving the goals co-evolve as firms learn from one another and adapt to expedite the synergistic value creation process. Interestingly, these operational relationships can go too far, where the provider goes native. As a result, loyalties become conflicted and the 3PL may be disadvantaged. It may be necessary to move key interface personnel from one client to another to minimise this risk of over-embeddedness.

Multiple layers of networks

Social network analysis allows us to explore beyond the direct interactions within and between firms. New Zealand is a small place and we’re only removed from one another by two degrees. 

We’ve been mapping the personnel networks that operate in parallel to professional interactions, like the people we know whose children go to the same school as ours, or play rugby at the same club. These multiple layers of networks are called multiplexity and they are often the hidden drivers of procurement decisions or failed partnerships, as personal ties endure indefinitely and can be negative as well as positive. 

As a result, it’s not only the interpersonal skills of staff that are important, but also their integrity built over a lifetime of personal relationships.

A recent PhD study investigated how social networks affect the development of supply chain partnerships in New Zealand. Personal credibility is the most important attribute initially as this drives the selection process and enables trust to be built. 

As the parties interact, the more personal attribute of affection takes over as the key determinate of success. We don’t mean love – more in regards to finding common areas of interest and being able to empathise with one another. 

Finally, personal communication takes precedence once the initial agreement is in place. It remains the dominant driver from here on and can make or break a partnership if it’s overlooked. 

We found that there is no substitute for old-fashioned face-to-face communication as electronic modes can lead to misunderstandings and transactional behaviour.

Collective values

Last year we studied the value creation and value capture of high-performing New Zealand exporters – how they get the most value out of their products and secure as much of the profit for themselves. Once more, the importance of people came to the fore: in this instance, we saw how the collective values of the firms we focused on were transmitted downstream to the customer. 

These producers focused on building positive relationships based on trust and a shared culture throughout their supply chains. They walked the talk and incentivised others to join them along the journey. Here once more, the integrity and interpersonal skills of both the senior management and operational staff were fundamental to maintaining the firm’s values and the resultant product value in the market.

Currently we’re exploring the resilience of rural supply chains by using social network analysis to model the agility and robustness of a network of over 500 firms. The major discovery so far? The secret to coping with dramatic disruption lies in how people treat one another. It’s the integrity and trust built up between individual parties that allow these supply chains to bounce back from bad times and return even stronger. 

So the next time you’re wondering how to boost your supply chain performance, you don’t have to look very far. The answer can be found in your people, their capabilities, and the development of their interpersonal skills.

Paul Childerhouse is a professor in logistics and supply chain management at the School of Food and Advanced Technology, Massey University

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