Supply Chain Coordination: The Problem of Risk And Benefit Sharing

Every firm has to manage its strategic relationships to reach a distinctive competitive advantage. In practice, collaboration is much less adopted than predicated. Especially when a leading actor is missing and mutual trust is lacking, it all becomes a matter of bargaining power. Thus, full collaboration and integration is often far from realized, the two largest barriers being the lack of availability of a supply chain performance measurement system (PMS) and not effectively sharing the risks and benefits derived from collaboration. Within this framework, the contract design plays a relevant role because contracts are primarily seen as a means of coordination. The aim of this article is twofold: to classify risk- and benefit-sharing tools initiating from contract typologies and to identify the drivers in order to choose the most appropriate form of coordination. In order to develop their theory, the authors reviewed evidence that derived from multiple in-depth case studies from different industries. Relevant data and information were collected through direct interviews with operations and supply chain managers and through secondary sources.