The importance of trust

As supply chain executives wrestle with how to manage far-flung global supply chains, it's critical that they be able to "see" what their trading partners are doing. That much is clear in this issue's profile of Teradyne Inc., a maker of electronics testing equipment that uses visibility software to see what inventory its suppliers have on hand. (See "Visibility is instrumental to Teradyne's success.")

What makes Teradyne's story especially interesting is that the company has outsourced 90 percent of its manufacturing to a contract manufacturer. Because it controls the relationships with its key suppliers, Teradyne still oversees procurement for that manufacturer. The company can view what parts and materials its suppliers carry, and then can work with them to make sure the manufacturer has the right inventory for quick turnaround of orders.

Teradyne's story also is interesting for another reason. The suppliers obviously have a high degree of trust in the testing equipment maker, or they would not permit it such open access to their inventory.

This issue of trust has bedeviled trading partners for years. If the business pundits are correct in characterizing the future of global commerce as a battle between rival supply chains for consumers' money, then trust takes on critical importance. Those that refuse to cooperate will find themselves losing out to companies that do. Yet few organizations today seem willing to share the kind of information that is needed to run an efficient, borderless supply chain that will ensure that the right product is on hand when the customer is ready to buy.

One thing that may cause supply chain partners to hold back is that, unfortunately, channel masters do not always treat their partners fairly. It's not uncommon for the company in control to achieve financial gain at its partners' expense. Not so with Teradyne, which provides an example of how to earn the confidence of trading partners: If the supplier obtains parts and materials at Teradyne's behest and the instrument maker does not use those supplies in production, Teradyne picks up the cost.

In short, the supplier is not stuck for obsolete, unused inventory. Such an arrangement clearly builds the level of trust required for a true supply chain partnership. No wonder, then, that Teradyne's suppliers are willing to grant a detailed view of their inventories.

Trust can only come about when all companies in a supply chain share in not just the rewards but the risks, too. Without trust there can be no sharing of critical information. And without sharing critical information, it's impossible for a supply chain to become borderless and win in the global economy—today and in the future.