The risk relationship between trust and information sharing in automotive supply chains

Abstract

The South African automotive industry is recognised as important for the economy and has thus been prioritised by the government. The success of the manufacturers depends on the efficiency and effectiveness of their supply chain. Due to the large number of suppliers involved in these supply chains, enhancing trust in the inter-organisational relationships is important to improve competitiveness. Additionally, the existence of risk in the relationship needs to be considered together with the role of trust and information sharing in the mitigation of this risk. Insufficient trust can disrupt information sharing between supply chain partners which further impacts on supply chain operations. Thus, both insufficient trust and information sharing are viewed as contributing factors to the inefficiency and ineffectiveness of a supply chain's operations. As in the Prisoner's Dilemma, when supply chain members share information freely, trust levels are increased, hence supply chain effectiveness and efficiency is achieved and the competitiveness of the supply chain is optimised. In this paper, it is shown that by addressing the trust issues in the supply chain relationship, which enables information flow, risk concerns are addressed. Thus this paper proposes a model to mitigate risk caused by poor information flow in a supply chain.