Abstract
Relationships between companies and customers within supply chains are one of the most important aspects of conducting business. Achieving understanding and trust could outline a great potential for mutually profitable collaboration. One of the ways to reach it is to use organizational learning. In this study, organizational learning theory was examined to understand its relation to inter-organizational cooperation in supply chains settings and organization profits. Three different ways of the theory application were elaborated. The first approach implies the use of knowledge to yield benefit at the expense of others. Second infers a company utilizes it for self-development without harming others, and the third entails mutual data exchange. The application of the theory in the real world showed that the self-centred approach did not sever the relationships in large retail shops like Walmart. The two other methods, according to extensive analysis data, showed a positive correlation between the inoffensive and sharing-oriented organizational learning.
Introduction
The relationships between manufacturers, suppliers, and customers are vital for providing high-quality goods to the market and constant development of technologies and strategies. The price, terms of delivery, quality of the final product, and customer satisfaction rely heavily on the ways of cooperation between all said parties and the effectiveness of such cooperation (Singh and Power 189). Organizational learning is one of the aspects that can build strong and long-lasting relationships between companies, their partners, and customers (Alegre and Chiva 493). Investigating how it affects business relationships and whether it has a positive effect on collaboration within supply chains will allow boosting their effectiveness.
Background
Establishing relationships with partners and clients in a way that is beneficial for all parties is a challenging but also rewarding task. Effective communication could result in better deals, lower costs, loans on favourable conditions, discounts, and other benefits. All sides must yield profit from cooperation. Otherwise, the relationship will not last long. There are cases when companies find themselves in a position of power and start dictating their terms to their partners. On the one hand, competitive market will enable dependent organizations in the chain to adjust, remodel, and optimize their business operations making competitors do the same (Billington and Nie 3). This can benefit the supply chain, making it more efficient.
On the other hand, constant rearrangements require additional resources and can be quite costly. This could result in severing relationships or making a company bankrupt. Anderson, Britt, and Favre argue that a more innovational and sustainable approach is the “gain sharing” (46). Opting for a mutually beneficial development offers a more steady and reliable growth. Effective cooperation could also be hindered by overconcentration on selling the product at the best price (Prahalad and Ramaswamy 7). It is especially true in the field of supply chains as establishing an understanding and trust can matter a lot. For instance, if a manufacturer and a shipping company cannot come to terms with each other about the cost of transportation each hour of downtime results in millions of dollars in losses not only for both of them but also for the supplier and customer.
Therefore, establishing mutually beneficial relationships is one the most important part in the sphere of supply chains (Smith 4). If one of the links breaks as a result of a miscommunication, the whole chain stays idle and loses time and money. Collaboration is a two-way process that requires effort from both sides. If companies manage to reach an agreement and seek to uphold it, an understanding usually forms between them, which leads to prosperity.
Organizational Learning as a Way to Establish Sustainable Relationships within the Supply Chain
Organizational learning is a process, in which knowledge is generated and transferred between the structural divisions within the organizations. The knowledge is generated through changes in the environment and adaptation to it (Yu 347). It accumulates, becomes more sophisticated and, eventually, systematized and used to react to the various occurrences.
Almost each piece of information about players on the market, habits of the customers, seasonal changes, fluctuations of currency, and million other facts could potentially result in a profit if relied upon or used at the right moment (Kreiser 1028). In the modern fast-paced world where tons of information is generated each second finding the meaningful facts, sorting them, and most importantly, keeping them up to date becomes one of the most important pursuits.
Recently, the organizational learning theory became popular as a paradigm describing certain aspects of the relationships between companies (Singh and Power 190). One of the reasons for this is that companies, as stated above, not only accumulate knowledge simply to explain events and notions, but they also tend to make use of it when interacting with customers and each other.
There appear to be three ways of using the information when dealing with partners within the supply chain: self-centred, inoffensive, and sharing-oriented. One is to use it against others to gain profit for oneself. The other is to conceal the information using it only for sole advantage while intending no harm to partners and clients. The third way is to share it to benefit mutually. The first approach rarely supposes an acquisition of new information leading only to short-term benefits. For instance, when the manufacturer experiences a shortage of buyers and the informed supplier could try to lower the price for goods. In this situation, organizational learning works for the benefit of a supplier who uses the information to gain profit at the expense of the partner’s losses.
The obvious disadvantage of such approach for the supply chain relationships appears to be that the obstacles created for one of the members of the chain could result in short-term and long-term problems in the whole system. In the situation mentioned above, the manufacturer could either withdraw from the partnership with the supplier or lower the output of production to cover its losses. The first would force the supplier to seek for new partners, which takes time, and there is no guarantee that the new partner will offer same or better prices. This situation could lead to the supplier’s losses and negatively affect customers. The second case scenario leads to short-term issues within the manufacturing company, which can result in either bankruptcy or seeking to recoup for the financial damage at the expense of its employees reducing the staff population. Both situations sever the relationships within given supply chains and bring financial difficulties, which seems to speak against the usage of organizational learning for sole profit while harming others.
Accumulation of the verified information, synthesizing experience into knowledge, and using it all to develop as an organization seems to be a good choice (Mellat-Parast 511). However, in supply chains setting it can also pose some issues. If one of the partners’ outgrows the others, it could lead to the situation when the prospering company could not be satisfied with the terms of the past arrangements and develop the new ones, which requires adjustment to the new environment. For the less developed and successful members of the chain, this means that they need either to conform or to continue playing in their league. Some companies may not have the resources to facilitate such change at short notice.
Yu argues that the usage of organizational learning with a purpose of sharing knowledge and collaborating with the help of it provides an opportunity to strengthen the ties between partner organizations (347). Moreover, it positively affects the relationships with customers, who in turn, boost the financial performance of the company.
Application of Organizational Learning Theory in Supply Chains Setting
The application of the organizational learning could illustrate how the three approaches work in the relationships between supply chain members. One of the examples of using knowledge for self-empowerment at the expense of others is the relationship between large retail shop network, Walmart, and its suppliers. After becoming one of the top players on the U.S. market and realizing it can negotiate using its strong sides, Walmart continues to create more and more demanding atmosphere for its partners.
It arranges deals with lower prices and better delivery conditions for itself forcing the suppliers and brands to optimize and adapt (Billington and Nie 3). Strong organizational learning allowed Walmart managers to assess the market, the customers’ demands, and organizational strengths using the latter to its advantage. Interestingly, though, the chain does not break and even prospers. The probable cause is that it is still beneficial for the suppliers to work with Walmart as it is a reliable partner with whom it is still possible to make profit despite the changing conditions.
The quantitative study conducted by Yu among Chinese companies showed the positive correlation between the levels of external integration or mutual organizational learning and the financial health of the company (354). These results are backed by another study performed by Singh and Power who measured the effects of collaboration in the relationships of the companies within supply chains (191). They also found productive trends and an increase in performance at multiple levels (Singh and Power 196).
Evidence collected by Zhao et al. (310) suggests that self-empowerment and mutual empowerment that result from the extensive use of organizational learning leads to gaining profit. An analysis of the responses collected from a sample comprised of 607 limited, joint-venture, and private manufacturing companies in China showed positive correlations between the sole and mutual knowledge creation and performance (Zhao et al. 311). Thus, the collaboration in the sphere of learning strengthens the ties between businesses, which leads to better financial outcomes.
Conclusion
All in all, organizational learning as a paradigm that emphasizes knowledge as a primary factor in business relationships seems to apply well in the supply chains set. Extensive evidence proves the fact that cooperation through knowledge use and exchange could lead to mutually profitable partnership. Even in the case when organizational learning is utilized in a self-centred way it does not seem to contribute to severing relationships.
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