Supply chain partners' trust building process through risk evaluation: the perspectives of UAE packaged food industry

Abstract

Purpose -This paper seeks to identify the up-stream supply chain member's (manufacturers, suppliers, supplier's service providers) characteristics, economics, dynamic capabilities, technology and institutional perspectives of risk in relationship to develop a trust building model through risk evaluation and to address the issue: should a supply chain member strive to build the trust or strive to reduce the risk with its members and from which perspectives? Design/methodology/approach -A conceptual framework was developed considering five key perspectives (characteristics, economics, dynamic capabilities, technology and institutions) to evaluate the member's risk in relationship and derived the hypothesis from the framework. A survey was conducted in UAE packaged food industry upstream supply chain covering senior managers of 102 companies. Data were analysed using multiple regression analyses through SPSS. The selected supply chain members of this industry include packaged food products companies as manufacturers, packaging material converters as suppliers of packaging material to manufacturers and packaging raw material suppliers as supplier's suppliers of manufacturer. Findings -From the survey results it is found that characteristic and institutional risk perspectives influence significantly to initiate a trustworthy relationship. Economics, dynamic capabilities and technology risk perspectives play a significant role to maintain trust in relationship. No perspective of members is found to be significantly risk-free. Research limitations/implications -This study has identified the perspectives of risk that can initiate and build trust between supply chain members in the context of a global business environment with a strong institutional system. Further research is required to identify the supply chain member's riskworthy characteristics, threshold levels of risk bearing capacity and the extent to which the institutions can reduce the membership risk to build trust. Practical implications -The study results suggest that the supply chain members should strive to reduce the membership risk levels to build trust rather than striving to build trust to reduce the risk. As long as a member's risk levels are within their bearable limits trust can be considered as a risk coping mechanism and when the risk levels exceed their bearable limits the subject of trust turns into risk management/security management. Originality/value -This study may be one of the first to develop a trust building model through a risk evaluation process and also one of the first to study the trust in supply chain member's relationship in UAE. Findings from this research should prove useful to management researchers and practitioners.

Measuring trust in supply chain partners' relationships

“…We can take the view that, uncertainties are related to characteristics of partners such as competence, reliability, dependability, credibility; and institutional systems such as legislation, trade organizations etc., and risks are related to economics, dynamic capabilities, and technology, which are both measurable and manageable subject to the availability of right verbal and non-verbal (cues) information. Considering the risk perspective of trust, some researchers have defined trust as willingness to take risk (Mayer et al, 1995) and trust is a supply chain member's threshold level of risk bearing capacity (Laeequddin et al, 2009). According to Tan and Thoen (2001) the determinants of the trustor's trust threshold include attitude towards risk or risk propensity, potential profit and the risk involved (i.e.…”

Capturing food logistics: a literature review and research agenda

“…Spence and Bourlakis (2009) investigate corporate social responsibility in food supply chains, Bourlakis, Maglaras, and Fotopoulos (2012) examine the key members within food chains in terms of their value creation, Martens and Dooley (2010) show that efficient consumer response adoption benefits both operational and financial performance, Laeequddin et al (2009) analyse the trust-building process through risk evaluation in the packaged food industry, Salin and Nayga (2003) focus on business relationships in food exporting cold chains, Skilton and Robinson (2009) analyse barriers to traceability associated with different types of network structures within food supply networks, and Cunningham (2001) conducts a literature review of agri-food chain management.…”

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Value chain laboratory : alternative evaluation method for assessing value chain dynamics

“…Most actors are independent, but trade with each other is based on formal agreements such as contracts, and informal agreements, such as trust. Such collaboration and compliance relations within value chains are considered to be largely determined by mutual trust between VC partners (Laeequddin et al 2009;Kwon and Suh 2005). Loyalty in deliveries (contract compliance) and control on free-riding and opportunistic behaviour (side sales) are key factors for capacity utilisation in processing, storage and trade.…”