tory because they knew from experience that the supplier may not
always be reliable. When information is shared, then uncertainty is
reduced and hence inventories can be dramatically cut.
The benefits of shared information go beyond cost reduction,
however. There has been a clear tendency for companies to become
increasingly mutually dependent as they start to link information
systems together. The use of Electronic Data Interchange (EDI) to
create an environment where ‘Electronic Commerce’ can eliminate
documentation such as purchase orders and invoices leads inevitably
to the supplier taking on more and more of the activities that previ-
ously were performed by the customer. For example, in retailing there
has been a trend, particularly in North America, for the suppliers to
become very actively involved in ‘Category Management’. This
entails the supplier assisting the retailer in making decisions on shelf-
space allocation, on layout and merchandising and by managing the
flow of product from the factory to the shelf.
The same phenomenon can be encountered in industrial markets,
where suppliers of equipment and materials may take on the actual
operation of that part of their customers’ processes where they have
specialist skills. Thus BOC, the industrial gases company, will build,
operate and run gas production facilities at their major customers’
premises.
These patterns of collaboration in the supply chain are gradually
starting to change the shape of the competitive environment. It was
suggested earlier that companies no longer compete against other
companies as single entities but rather as supply chains or net-
works. Under this model a key determinant of success or failure in
the marketplace is the extent to which the supply chain can be
managed as an integrated network with shared strategic goals and
closely linked processes to support those goals. It follows from this
argument that an increasingly important source of competitive
advantage will be the strength and the quality of the relationships
between members of the network – both ‘vertical’ supply chain
partners and ‘horizontal’ alliance partners.
Creating successful alliances
As we suggested earlier, supply chain partnerships may be thought
of as ‘vertical’ relationships, alliances could be described as ‘hori-
The supplier and alliance market domain 173