Importance of Trust in Supply Chain Management

One of the most critical factors in a committed and collaborative relationship between supply chain partners is trust. If trust is present, it can improve the chances of a successful supply chain relationship; if not, transaction costs can rise through poor performance.

Organizations need trust in order to be flexible and agile. However, establishing trust can be elusive and even harder to maintain. It is also true that trust is both individual and institutional. Trust in a supply chain evolves based upon commonalities among the partners and can take patience and time to develop.

There is both risk and interdependence in a supply chain relationship and there must be an implicit agreement not to exploit the partner’s vulnerabilities. This takes development, honesty and openness to be successful.

In fact, the main components in trust in supply chains are honesty, loyalty, fairness, openness and competence.

Companies must be careful to “optimize” this trust as it can take resources from other aspects of the supply chain (and risks) to develop this. So they must be careful not to over or under invest in developing trust. The value of the specific relationship must first be made clear so that it can be determined what effort will be put forth in developing this trust.

It is apparent that trust only exists when both parties think it exists, that it is critical to treat supply chain partners like they are important, information needs to be shared freely, and that partners need to follow through with promises made.

LPA, LLC is a Supply Chain software and consulting business offering affordable, easy-to-implement solutions to complex planning problems. Our Managing Partners have over 40 years of combined Supply Chain and Information Systems experience.

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Read current information on Five Stages of Supply Chain Maturity