The role of trust in supply chain governance

Abstract

PurposeThe purpose of this paper is to provide and illustrate a framework for the role of governance mechanisms in information sharing among supply chain members. The importance of trust in governing interorganizational relationships is emphasized.Design/methodology/approachTrust, bargaining power, and contract are three key constructs supporting the governance of information sharing and material flow coordination in supply chains. A conceptual framework showing how these governance mechanisms affect coordination and ultimately, supply chain performance is presented. Four types of trust – calculative, competence, integrity, and predictability – are thought to play an important role in determining the efficacy of information sharing. Three research questions are posed on the relationships among trust, bargaining power, contracts, and information sharing in supply chain coordination. These governance issues are shown to be key factors in the supply chain business model, as illustrated in a case study from the retail distribution industry in the USA where collaborative planning, forecasting and replenishment is used to exchange supply and demand forecasts.FindingsAn example from the retail distribution industry shows that the three constructs of the governance framework are intertwined. Trust as a governance mechanism plays a crucial role in sharing information among business partners.Research limitations/implicationsThe proposed framework is illustrated with a single case. It will need to be tested empirically for supply chains across different industries.Originality/valueThe paper presents a governance mechanism framework for supply chain information sharing. Knowledge of the role of governance mechanisms in information sharing coordination will help chain members to realign business relationships and contribute to improved overall operational performance of the chain.