Penn State Professor, Veronica H. Villena, on "Managing the Dark Side of Close Buyer-Supplier Relationships"

Penn State Professor, Veronica H. Villena, has published an article that will appear in the Supply Chain Management Review website for the November/December 2015 issue. She discusses the relationships between companies and their suppliers - how some companies merge to the "Dark Side" of business, how to avoid this transition, and how to get out of this stage.

November 2015 - Assistant Professor in the Department of Supply Chain & Information Systems at the Smeal College of Business, Veronica H. Villena, has recently published an article in the November/December issue of Supply Chain Management Review, where she, along with professors from Arizona State University and Instituto de Empresa Business School in Madrid, Spain, discuss "Managing  the Dark Side of Close Buyer-Supplier Relationships." The team of supply chain researchers discuss how relationships between companies and their suppliers can often become lax and devoid of critical checks and balances, causing companies to creep into the "Dark Side;" a dysfunctional business relationship where complacency, closed-mindedness, and shortcuts overshadow the positive outcomes of close interactions. The article also explains how to identify and guard against the problems associated with the transition to the "Dark Side."

The Supply Chain Management Review article breaks down the sources of risk into three categories:

  1. Loss of objectivity - companies placing too much trust in their suppliers and thus becoming less objective.
  2. Partner opportunism - buyers who trust their suppliers too much are reducing their monitoring effort beyond what is optimal while suppliers might take advantage of this situation.
  3. Knowledge redundancy - the value of information decreases as the information becomes repetitive and redundant. 

The authors lists three mechanisms that organizations should implement to reduce the risks of moving into the dark side:

  1. Set challenging goals - challenging goals reduce overconfidence and promote new ways of thinking.
  2. Implement a rotational policy – rotating purchasing managers avoids excessive camaraderie between the organization’s employees and their counterparts in the supplying organizations. It also ensures the disclosure of more accurate supplier performance data.
  3. Use contracts as a coordination and control tool – clearly defined contractual terms help organizations promote objectivity, reduce incentives to misbehave and move more confidently out of a dysfunctional relationship.

The article recognizes that supply chain managers must “be vigilant to detect early signs of often-overlooked negative outcomes of too much collaboration. They must learn how to manage the paradoxical tension of benefiting from the closeness of relationship while dealing with its downside.”

To read the complete Supply Chain Management Review article, please visit: