Collaboration among trading partners can unlock great value. Mistrust is the barrier. Here are six ways to build confidence.

Reader ROI

• Where savings can be found in collaboration efforts
• Why lack of trust among trading partners is so difficult to overcome
• What some CIOs are doing to lay the foundation of trust

Thomas Fisher is getting ready to peel back the covers on his company's confidential information so that suppliers can better serve his needs. But before he takes that big step toward collaboration, he's got to take a deep breath.

"There's some leeriness on our side. Suppliers will need to have a lot of our proprietary information to fulfil our raw materials needs in real time. That could be used against us if we're not careful," says Fisher, vice president of global information technology for Applica, the $US850 million maker of small appliances (including the Black & Decker line).

In June, Fisher is planning to launch a Web-based front end to his manufacturing system, based on QAD's MFG/PRO, that will give suppliers unprecedented access to Applica's production data. Sharing the information will allow Applica to do real-time procurement of raw materials it uses, which Fisher expects to lower costs and increase production flexibility. But with that big win comes the risk that the information will be misused - for example, specifics on Applica's manufacturing processes or product design might somehow make their way to competitors. "We're working on rules and procedures on how that information should and should not be used," Fisher says. His sense of unease is pretty universal. Seventy-five per cent of senior IT managers cited lack of trust as the number-one barrier to electronic collaboration in a recent survey conducted by NerveWire, a Massachusetts-based consultancy. "It is a tradition that we don't trust our business partners," says Hau Lee, professor of operations, information and technology in the Graduate School of Business at Stanford University and an authority on supply chain management. "People don't have a clear understanding of how sharing information would result in better performance.

The lack of understanding induces fear and scepticism: 'I'm not sure, so it's better not to do it.' " Yet the potential benefits of collaboration are huge, be it integrating supply chains, product development or even business processes.

Companies - and their supply chains - can cut out waste, speed time to market and be more responsive to customers' needs by sharing information. During an otherwise grim year in 2001, for example, Applica cut $US60 million out of its average inventory and trimmed the number of days product remained in inventory from 136 to 94, thanks to collaboration projects already in place, Fisher says. Sooner or later, companies in all industries must face the fact that competition is increasingly between supply chains rather than between companies. Hardly any big-name manufacturers actually make anything themselves any more - they leave it to contract manufacturers so that they can compete on the basis of superior information and efficiency. "All companies will have to do collaboration as a core competency, or they will not survive," asserts Denis Mathias, a partner in IBM Consulting Services. Supply chain partners "need to have a different value proposition not based on exploitation but win-win".

Spalding Holdings, a maker of sporting equipment, finds its collaboration with Wal-Mart Stores to be a win-win, says Spalding CIO Christine Rousseau. "Getting their forecast and [point-of-sale] data is beneficial to us because it allows us to keep our inventory levels down. It lets us serve [Wal-Mart's] needs better," she says. Wal-Mart, in turn, runs short of Spalding goods less frequently than it did before the companies exchanged data and has a better understanding of Spalding's capacity and costs.

In contrast, companies that screw their trading partners to the proverbial wall will find they cannot work as effectively, says Mathias, as those that collaborate seamlessly in an electronic environment designed to help all parties thrive. The age of specialisation demands that companies lay down their age-old adversarial relationships with trading partners.

Of course, company practices won't change overnight. And neither will human nature. Fear, uncertainty and doubt (FUD) has always driven people to hold information close to the vest, even among co-workers. At this early stage of collaboration, companies are struggling to find ways to safely open up. Unless and until partners can see that it is in their own best interest to collaborate, getting them to trust each other will be an uphill battle. Just ask Jack Lowry.