Supply chain norms and incentives should be aligned internally as well

Have you heard of managers paying liquidated damages to  their employer for defective manufacturing under their watch? Probably not, but sure you’ve heard of suppliers paying liquidated damages for defective supplies. Depending on the alignment of incentives and norms of internal folks the external relationships with the supply chain and distribution channel can work better or worse.

In organizations where managers may lose bonuses or promotions fair and square,you can bet that they’ll make sure that suppliers and distributors are on the same page.  Supply chain managers and related  production managers will device both recognition and financial rewards like prefered supplier status in the supply chain and  the marketing and sales folks will organize  a gala golf event to recognize top distributors!

Exploring these ideas  is a provocative lead article in the current issue (March 2011) of the Journal of Marketing where  Alok Kumar,Jan Heide and  Kenneth Wathne gather data from the apparel industry and encourage companies to look not only at individual relationships but across relationships as well.Read the the full paper here.

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