1. Telematic International University Uninettuno
Department of Statistics
Economics and Business Administration
Bachelor's thesis – academic year 2013/2014
Emiliano Bigozzi
STRATEGIES FOR SUPPLY CHAIN
COLLABORATION: BENEFITS AND BARRIERS
ABSTRACT
The supply chain collaboration strategies are increasingly studied by contemporary researchers in
Economics and Business Administration; moreover, the scientific literature can witness a large number of
case studies of successful cooperation. However, a closer examination reveals the lack of a generally
applicable model for the cooperation in a network of small and medium-sized enterprises, where there is no
dominant player who may take the responsibility to coordinate the collaboration.
In the present study, we put forward the hypothesis that the collaboration among the supply chains of small
enterprises shouldn't rely on a difficult and complex coordination; on the contrary, one have to build the
appropriate operating conditions, so that the supply chain collaboration will establish itself as a natural
balance, in the absence of an active coordination.
A basic requirement for the establishment of such conditions is an overall knowledge of the benefits and
barriers to collaboration inside small enterprises' networks; for this purpose, we've designed a questionnaire
for the collection of primary data by means of a survey.
To avoid emphasize some specific aspects of a single company or industry, we've selected a sample of
companies from different sectors, either of manufacturing and of services delivery, to which the
questionnaire was administered through mailing.
The number of received responses was too small to have a statistical significance, yet some qualitative
conclusions can be drafted: the respondents had generally a good sentiment about supply chain
collaboration, although some significant barriers of cultural nature emerged; moreover, the upstream
collaboration (with suppliers) appeared to be preferred rather than downstream one (with customers).

3. Summary
INTRODUCTION.....................................................................1
1 Supply chain collaboration..........................................................7
1.1 Why collaborating? Comparing strategies................................................7
1.1.1 Market and Value..........................................................................7
1.1.2 Building a standard: a consortium example.......................................9
1.1.3 A continuous improvement..........................................................11
1.2 Is it all a Game?...................................................................................13
1.2.1 Missed collaboration: the prisoner's dilemma..................................13
1.2.2 To sum it up: when you have to collaborate...................................16
1.3 The problems of exasperated competition..............................................18
1.3.1 A race to be the last loser..............................................................18
1.3.2 A whip to all...............................................................................20
1.4 When is collaboration unfitting?...........................................................23
1.4.1 Incentives against cooperation.......................................................23
1.4.2 The missing link..........................................................................25
2 Comparing models...................................................................27
2.1 Being driven: model with coordinator...................................................27
2.1.1 Supply chains with a dominant firm...............................................27
2.1.2 It's a pleasure working with you: case study Toyota.........................29
2.1.3 It's not easy to work for you: case study Walmart............................31
2.1.4 Who's pulling all these strings? The textile case...............................32
I

4. 2.1.5 You can't make it peer. the limits of coordination...........................33
2.2 We must trust: model with trustee........................................................35
2.2.1 Cooperatives and consortia...........................................................35
2.2.2 Application limits.........................................................................37
2.3 Small businesses: peer to peer models.....................................................38
2.3.1 Collaboration for few: networks of small businesses ........................38
2.3.2 Models for the case......................................................................39
2.4 The tird way: a difficult balance............................................................41
2.4.1 The invisible hand of collaboration................................................41
2.4.2 Obstacle Course. Barriers to collaboration......................................43
2.4.3 I did it my way. Cultural barriers...................................................44
2.4.4 Who gets the lion's share? The barrier of distribution.......................45
2.4.5 No escape! Barriers of constraint....................................................46
2.4.6 knowing them, avoiding them. How to remove barriers..................47
3 The sample survey...................................................................49
3.1 The data collection model....................................................................49
3.1.1 The sample..................................................................................49
3.1.2 The structure of the questionnaire.................................................50
3.1.3 Section A: the company...............................................................51
3.1.4 Section B: internal collaboration....................................................51
3.1.5 Section C: the supply chain...........................................................52
3.1.6 Section D: risks and benefits..........................................................53
3.1.7 Section E: the binding level..........................................................53
3.1.8 Section F: motivations..................................................................54
3.2 Validation of the questionnaire.............................................................54
3.2.1 Pilot survey: mode of application...................................................54
3.2.2 Pilot survey: results......................................................................55
3.2.3 Pilot survey: conclusions...............................................................55
II

5. 3.3 Questionnaire application.....................................................................57
3.3.1 Modes of contact.........................................................................57
3.3.2 Results of survey: responses..........................................................58
3.3.3 Results of survey: bivariate analysis of relations...............................85
4 Conclusions............................................................................93
Appendix A –Questionnaire.........................................................99
Appendix B –Letter of invitation to participate in the survey...........117
Bibliography.............................................................................121
III

7. INTRODUCTION
The modern Economy is based on the division of labour, which allows all of
us to benefit from the advantages of specialization: if everyone does their job to the
best, the ending result is a high quality product at an affordable cost.
However, this means that any product, even the simplest, is the result of a very
complex task sequence, called supply chain.
It's extremely difficult organizing, controlling and coordinating a supply chain. Due
to the inefficiencies of the supply chains, a large portion of the value generated
through the division of labour may be wasted.
Many problems of supply chain management can be solved, or their effects
mitigated, with a cooperation between the involved firms; for this reason, the
Business Administration science is increasingly studying in depth the collaborative
strategies as alternatives or complementaries to the more traditional competitive
strategies, and is capable of documenting some important cases of success.
Unfortunately, the supply chains of small and medium-sized enterprises are rarely
present neither in the theoretical works nor in the practical applications of
1

8. collaborative strategies, perhaps because of their complexity and dispersion, the
objective difficulties in developing a general model of collaboration, or other
reasons. Yet, in this type of supply chain the collaborative strategies would be
particularly advantageous because they would allow to overcome the structure and
size limits.
The purpose of this paper is to analyse the collaboration strategies in supply
chains of small firms, highlighting the potential benefits they stand to gain, together
with the barriers that can prevent their success.
In the first chapter, we frame the issue of collaborative strategies for the
industry in general; the theory on the subject is vast and almost impossible to
summarize in such a small space; therefore, we've selected a few basic theoretical
principles, fitted out with some examples.
First, we compare the competitive strategies with the collaborative ones, showing
that the former are related to the value appropriation, while the latter to value
creation. The concept is illustrated by a few historical examples: the establishment
of the consortium for the definition of the specifications of the Universal Serial Bus
and the development of the Toyota Production System.
Secondly, we introduce the Theory of Games, through which we show how the
equilibria of non-cooperative games are often unsatisfactory for every player. With
this powerful tool, we can prove either the benefits of collaborative strategies (they
2

9. allow to obtain the best possible result for the whole group) and the difficulties
encountered in pursuing them (the natural competitive balance is almost always far
from this ideal result).
In the third part, we discuss some limitations of purely competitive strategies; the
products' and markets' life cycle analysis shows that competitive strategies are so
effective in the maturity stage, as they're poor during the decline; Moreover, with
the example of the Bullwhip Effect, we show how the pure competition between
individuals sharing a minimum of information can cause harmful side effects, which
have serious repercussions along the entire supply chain.
The chapter closes with a discussion of the difficulties involved in defining valid
models of cooperation within a supply chain; the Oligopoly example clarifies that
there is always a big incentive, for some individuals, to break the collaboration pact
in order to maximize their own benefit, but this behaviour causes the failure of the
entire strategy; a good model of cooperation must take account of these issues,
providing the missing link that is used to complete the chain.
The second chapter examines some basic models for the implementation of
collaborative strategies, through case studies drawn from the recent scientific
literature.
The first described model is the supply chain with a Dominant Company; at the
state of the art, it's also the most important model, because it guarantees the best
chance of success for the collaborative strategy; the two different examples of
Toyota and Walmart show how this model is very flexible and is applicable to very
3

10. different collaborative philosophies; however, the example of textile industry allows
to highlight this model's main limitation: it needs that the dominant firm be actually
in a position of strength, as compared to the other actors, otherwise it cannot
impose its own organization and coordination throughout the supply chain; This
limit makes the model unusable in networks of small businesses.
The second model, the supply chain with a Trustee, can be seen as a more general
and abstract than the former; in this case, a third party acts as an intermediary
between the different actors of the supply chain, allowing them to overcome the
lack of mutual trust. Practical applications, in the form of Consortia and
Cooperatives, show that it's a valid model for small businesses, at least in the
solution of specific problems such as the purchase of raw materials or distribution of
products; However, the need to establish a Trustee is a major obstacle to
cooperation, because it's a very complex task.
The review of literature shows a lack of Peer to Peer models, the only one which
would be suitable for an open collaboration along the dynamic networks of small
businesses; the example of Digita Oy demonstrates that the case study driven
approach tends to propose models tailored for the specific companies analysed,
which often are nothing but specializations of previous general models.
In the last part of the chapter, we describe a radically different approach to Peer to
Peer cooperation models which, at the state of the art, it is nothing more than a
working hypothesis; all previously studied models are based on the principle that
cooperation must be coordinated, which is an almost impossible task to perform in
a network of small businesses. Conversely, if one had built the necessary conditions
4

11. under which the supply chain's "cooperative game" has a stable equilibrium, he
would have eliminated the need for coordination at the root; In fact, systems with a
point of stable equilibrium are self-regulating.
To make the collaborative equilibrium possible, we must identify and remove the
barriers to collaboration: barriers of Trust, Culture, Share and Bond.
The experimental part of this work is directly related to the study of the benefits
and barriers in collaborative strategies.
In the third chapter, we present the experimental method that we used,
describing step by step the construction of the sample survey, and we discuss the
results. To avoid running into the same limits of the case studies focused on a single
firm, the survey is designed so as to be carried out on a diversified sample of varied
firms, either from the manufacturing sector, either from those of services.
In the first part, we describe the construction of the questionnaire, highlighting the
structure, consisting of several thematic sections, and the logical links between the
questions and issues being studied.
Then, we show how the questionnaire has been validated by a preliminary
investigation, during which it was administered to a small sample of respondents.
We summarize the results of the preliminary investigation and the information that
it provided.
In the third part, we describe the sampling method used for the collection of
primary data and we present the main findings of the survey.
5

12. 6

13. 1 Supply chain collaboration
1.1 Why collaborating? Comparing strategies
1.1.1 Market and Value
The classical economic theories have always placed much emphasis on competitive
strategies, based on a model of a market economy where companies act simply as
individuals who tend to maximize their utility function.
Market mechanisms, competitive forces and competitive strategies are undoubtedly
a basic knowledge for any manager; no entrepreneur who aspires to the success of
his business will forget to consider its competitive position.
However, in recent decades, the attention of the research in Business Economy has
gradually moved to the phenomena behind the creation of value, many of which do
7

14. not end in the simple market transactions nor can be explained in any satisfactory
way with the model of competition, perfect or imperfect it is.
To better understand the problem of the creation of value, we need to analyse the
limits of the competitive model, comparing the different scenarios of pure
competition with the cooperative or mixed ones; observing the image below
(Figure 1), you can guess that one of the limitations of the competitive model is in
its extreme simplification.
The matter of fact it's that the presented model doesn't contain anything that may
explain the greater or lesser value creation by an enterprise, but only as may set a
price in a situation of equilibrium between the supply and the demand of a
commodity. To be honest, the former is the simplest competitive model; many
others have been proposed, with an increasing degree of complexity, to take in
account of such phenomena as market's imperfections, products differentiation,
8
Figure 1: The enterprise is simply seen as a production function, which buys its inputs in the market,
through spot transactions, and similarly sells its product; the balance between the product's offer and
demand sets the selling price
ENTERPRISE
Production function
Q
Demand
p Offer
SUPPLIERS
Spottransactions
CUSTOMERS
Spottransactions

15. information asymmetries, and so on (the level of realism of these more complex
models is undoubtedly much better); nonetheless, one must analyse the supply chain
in order to understand how the value is generated.
1.1.2 Building a standard: a consortium example
Year 1994: a group of seven companies of the Information Technologies (IT) and
Telecommunications (Compaq, DEQ, IBM, Intel, Microsoft, NEC and Nortel)
decided to initiate the development of a new technological standard, in order to
make it simple the task to connect different types of devices to any PC.
while some of the companies in the standardization consortium are
complementaries in their market, other are frankly concurrent (think about
Compaq and IBM); if they chose cooperation, it is because they have reason to
believe that the greatest value generated by the new standard will ensure everyone
benefits higher than those achievable with any competitive strategy.
The standard we're talking about is the USB (Universal Serial Bus). After nearly
twenty years since its conception, we can state with certainty that the project was a
complete success and its positive impact on the IT market has been considerably
higher than what one would have imagined, for it extended to an audience of
individuals much more wide respect to the inner circle of the companies in the
consortium.
What would have happened if Compaq, DEQ, IBM, Intel, Microsoft, NEC and
9

16. Nortel had not chosen to collaborate? Surely the the market "pie" would have been
smaller. Figure 2 shows, qualitatively, the effect of the introduction of the USB
standard in the IT and telecommunications.
The figure depicts an important paradox of collaborative strategies: the trade-off 1
between value creation and appropriation of.
From the point of view of the individual firm, the choice of collaborating has a
negative consequence: its market share is subject to the real risk of being reduced;
had the firm adopted a good competitive strategy, it would have gained value at the
expense of its competitors.
1 The concept of "trade-off" is very important in decision theory; it's a scenario where one has to choose between two or
more alternatives, none of which dominates the others, so that it would be preferred, or it's dominated, so that it would be
discarded. In real life decisions, you'll need to seek a difficult compromise under conditions of incomplete information. It
may happen that, in retrospect, one of the alternatives is found to be significantly higher than the other, but this is not
known at decision time; a naive use of "hindsight" often leads to underestimate the objective difficulties of decision-
making process. Indeed, as will become clear later, one of the major barriers to collaboration might be the uncertainty
about the consequences of the decision to cooperate.
10
Figure 2: With collaboration, each company can increase its appropriated value even if its
market share is reduced, because the total market pie is larger

17. On the other hand, the value generated by the collaboration strategy can be so high
to override all the negative effects, increasing the value gained for all competitors.
Last but not least, a larger pie can be divided among several parties; there is no
doubt that a wide audience of consumers have benefited from the introduction of
the USB standard (broad range of devices with many different features, easy to
connect and easy to change, at a cost significantly lower than that of the 90s).
What's more, some goods, such as pen-drives or GSM keys for connecting to the
Internet, would not have existed without the USB; many new businesses have
sprung up to manufacture and sell these new products; many jobs have been created
due to the existence of this communication standard.
1.1.3 A continuous improvement
1948: Japan was defeated in the World War II and its industrial system is on its
knees; Toyota, far from being the automotive giant we know today, is facing a
serious crisis due to a shortage of resources, and its management2
decides to
completely rethink their production system.
The actions taken in Toyota would have completely revolutionized the automotive
production systems in less than three decades: he was born the TPS (Toyota
Production System)3
; at the same time, the traditional Fordist industry was
beginning its slow decline.
2 Toyoda Sakichi, Toyoda Kiichiro, Ohno Taiichi
3 Ohno Taiichi, Toyota Production System: Beyond Large-Scale Production, Productivity Press, 1988, ISBN 0915299143
11

18. The principles of the TPS have been studied, elaborated and applied also in most
large Western companies and an entire strand of the business organization, the lean
production, has seen the light.
Nowadays, Toyotism is more than a production system: it's a corporate philosophy.
What makes it particularly interesting, in this context, is the extensive use of
cooperative strategies inherent in its very principles: continuous improvement
(kaizen) and Total Quality Management leverage on the exploitation of the skills
and initiative of all stakeholders of the industry and the employees themselves4
.
Another example of a collaborative strategy of Toyotism is in managing the
relationship with suppliers; Japanese companies do not waive having their suppliers
4 "The Toyota style is not to create results by working hard. It is a system that says there is no limit to people's creativity.
People don't go to Toyota to work they go there to think " – Ohno Taiichi
12
Figura 3: The Toyota method was created with the goal of eliminating all the waste in the
production system, so as to optimize the use of resources; at least seven “muda” (source if
waste) were identified. One of the operating arms of this system is the “kaizen”, or
continuous improvement.

19. competing in the free market, but once that the best have been selected, they are
offered long-term contracts and relationships in which the exchange of views and
expertise is mutual.
Rarely will an Italian automotive sub-supplier be facing similar conditions: mostly,
its big clients will leverage the bargaining power to impose long delays on
payments, inventories and relative risk by supplier side and a continuous downward
pressure on prices.
What are the effects of such a "free" market on the competitiveness of the Italian
automotive sector is now quite evident, while it is less clear what were the benefits
of this purely appropriative strategy for those who have pursued it.
1.2 Is it all a Game?
1.2.1 Missed collaboration: the prisoner's dilemma
When, in 1944, John von Neumann and Oskar Morgenstern published The
Theory of Games and Economic Behaviour, the term "game" was first used in a
sense anything but playful5
. Indeed, the Teory of Games has proved to be an
5 "A game is a situation of conflict (competition) in which the payoffs received by participants from their actions, choices,
and decisions are at least partly determined by the actions, choices, and decisions of the other contestants” –
http://www.businessdictionary.com. – game, therefore, is essentially a strategic interaction between the participants and
this definition applies either for chess than for war.
13

20. extremely powerful tool in the analysis of the situations of strategic interaction, in
which the results are influenced by the choices of all subjects.
From this point of view, the competition on a market can be seen as an example of
a non-cooperative game, in which each participant tries to maximize its own utility,
given the knowledge of the possible choices of other competitors, as shown in
Figure 4.
The table is a normal form representation of the competitive game between two
firms, which must decide whether to implement a strategy to lower prices for
increasing sales; the numbers in the table are the payoffs (or winnings) of the two
enterprises in different combinations of strategic choices (bottom, for Company B).
Analysing the table, we note that for Company B it's convenient decreasing the
price, because it represents the best strategy given its competitor's behaviour6
; the
6 Had company B reduced the price, it would have a payoff of 35 if company A had chosen to keep the price unchanged,
while it would have a null winning if A had reduced the price. If B had kept the price unchanged, the payoffs were,
respectively, 20 and -5. For company A a similar reasoning applies, even if the values of the winnings are different.
14
Figure 4: The decision of two companies to reduce the price of a product, to increase
sales, or leave it unchanged, can be studied as a non-cooperative game.
30
20
Payoff matrix for A and B
Choice: reduce the price
CompanyA
Unchanged Reduced
CompanyB
Unchg.Reduced
35 0
-5
0
40
10

21. same applies to company A, so both decide to reduce the price.
Besides, once a decision is reached, none of these companies will want to retrace its
steps, because their payout would decrease; it's a stable condition called Nash
Equilibrium7
.
The behaviour of the two firms is perfectly rational and yet, looking at the table, it
seems that their choice is far from being the best: if both had decided to keep the
price unchanged, their winnings would have been much higher (30 and 20 respect
to 10 and 0).
A very famous example, with the same game structure of the former, is the
Prisoner's Dilemma (figure 5), in which two suspects in a robbery are caught by the
police and held in separate cells; each is placed in front of the choice to confess or
not to confess the crime; if both confess, they're sentenced to six years in prison; if
none of them confesses, they'll still have to serve one year in jail for minor offences;
the most interesting situation is when one confesses and the other doesn't: in this
case, who has confessed is set free, while the betrayed partner will have to serve
seven years.
7 The Nash equilibrium is a strategy profile in which no player could improve his winnings by changing strategy if he were
the only one to do so.
15

22. Again, the choice of confessing is a Nash equilibrium, while coinciding with the
worst result for the group (a total sentence of twelve year), when the choice not to
confess would have guaranteed the optimal result (two years).
1.2.2 To sum it up: when you have to collaborate
The above results are only apparently paradoxical, given that the context was a non-
cooperative game among players aiming to maximize only their utility and not that
of the group; is our point of view of parties outside the game that allows us to
capture the overall non-optimality of the choices of the players.
Not always the choice to only maximize one's utility is detrimental to the group;
let's rephrase the example of the two companies, that have to decide whether to
reduce prices or keep them unchanged, modifying the matrix of payments.
16
Figure 5: The prisoner's dilemma. If the two prisoners had collaborated,
choosing not to confess, the result for the group would have been the best;
however, this situation wouldn't be an equilibrium, because each prisoner
had a strong incentive to betray the other, confessing in order to be released.
Because the missed cooperation, each prisoner is sentenced for six years.
-1
-1
Prisoner A
Doesn't confess Confesses
PrisonerB
Doesn't
confessConfesses
0 -6
-7
-7
0
-6

23. Even in this case, the choice of reducing prices is an equilibrium (Figure 6), but it
doesn't seem as paradoxical as before: firm A has lost a part of its profit to the
advantage of firm B, but it would have been worse if it had kept prices unchanged;
on the other hand, company B had a clear incentive to reduce prices, given that it
would have improved its payoff for any choice of A8
.
The reason why the same balance seems consistent in this case and not in the
previous lies in the sum of the payments, which remains constant (50) for any
combination of strategies. In constant-sum games, the selfish behaviour of the
players does not harm in any way the outcome of the group.
The latter observation gives us an insight of when it's convenient to collaborate:
summing it up, we have to collaborate in all situations related to positive-sum
games.
8 In other words, company B had a dominant strategy; when there are dominant strategies, the game can be reduced by
eliminating dominated strategies from the set of possible choices.
17
Figure 6: In the competition between the two companies, you may be faced
with a constant-sum game; then the selfish behaviour of the players does not
damage the group.
40
10
Payoffs matrix for firms A e B
choice: reducing prices
Firm A
Doesn't reduce Reduces
FirmB
Doesn't
reduceReduces
35 20
5
15
45
30

24. 1.3 The problems of exasperated competition
1.3.1 A race to be the last loser
While facing the competitive dynamics, according to the theory of games, we've
seen how the selfish behaviour of individual players leads, in certain cases, to a poor
result for the whole group; nor the players themselves can be satisfied with the
balance achieved, and yet they have no incentive to change it.
Returning to the supply chain, there are some competitive games that have as a
result to decrease the amount of value generated by a given sector; this was the case
of the "price war" game, in the non-constant sum variant, as described previously:
the exasperated competition between the two players ends up to deteriorate the
payoff for both.
This paradoxical situation is very common in supply chains and can be related to
the life cycle of products and markets (Figure 7).
In the early phase of a new product/market development, the generated value is still
relatively low; yet there are few competitors, so the redistribution of this value is
sufficient for the survival of the supply chain.
The growth phase is the one in which the value generated is growing so quickly,
that the "slice" appropriated by each subject of the supply chain is more than
18

25. enough and quite all companies are enriching themselves, even though not in the
same proportion; the competition is almost absent, because competitors are too
busy to cope with the rapidly increasing market demand for going to war.
In the maturity stage, the growth of value stops and it's starting a efficiency-based
competition that, while penalizing many companies, allows the best to survive and
increase their market share; This type of selection can be brutal, but it is to be
considered physiological.
Sooner or later, for any market comes the stage of decline; the value generated
from the production process is no longer sufficient and it triggers a fierce
competition for survival, both among competitors that within the same supply
chain: between customers and suppliers, between employees and employers; this
makes it all a race for being the last loser.
19
Figure 7: The life cycle of a market (or product) is closely correlated to the intensity of the competition; in the terminal phase
(decline), the competition becomes exasperated: it's a negative-sum game, in which the moves of each competitor end up
hurting everyone.
Market life cycle
MATURITY
GROWTH
START-UP DECLINE
Time
Demand

26. Often, this exasperated competition does nothing but accelerating both the decline
of the industry and that of the same players in the sector, while it would take
collaboration and investment to radically change the value system, developing new
products, new production processes or opening new markets .
1.3.2 A whip to all
There are even markets whose demand is quite stable; this may be due to the
specific characteristics of a particular product, such as long life cycle, its use function
that satisfies a basic need, the inability to modify the production technologies while
preserving quality, etc...
More often, a sufficiently stable market is built by aggregating many products with
different life cycles; a good example may be the large-scale distribution of consumer
goods: when a product declines, it is quickly replaced by another one; thus, the
aggregate demand is always similar to that of a mature market.
Even in this case, the supply chain is not exempt from inefficiencies and
dysfunctions that may be drastically reduced with collaboration; one of these is
known as bullwhip effect.
The bullwhip effect is caused by the fact that the supply chain's actors misunderstand
the signals coming from the market, particularly on the demand side; in case of long
supply chains, a modest peak of customers' demand is amplified up to determine
totally disproportionate oscillations in the production, as portrayed in figure 8.
20

27. It all starts with the customer doing a modest extraordinary order, interpreted by the
retailer as an increased demand; this, along with the fear that the stock of the
product will run out, pushes him to increase his orders too; the wholesaler is then
required to manage a higher request than the programmed one, so he will
communicate an increase of the lead time to the retailer, who will thus have another
incentive to increase the level of inventories, ordering yet.
The effect propagates amplifying itself through the supply chain, up to the
manufacturer, who will be forced to significantly increase production, while the
unexpected demand is quickly depleting his inventories.
However, there wasn't a real increase of the market demand, except for the
temporary and modest extra order; very soon, the retailer discovers that his
21
Figure 8: The actors don't share information about purchase planning and inventory management through the supply chain;
everyone is left alone in parsing the market signals and this is cause of the bullwhip effect; the invoked metaphor is that of the
whip, whose small initial fluctuations are amplified to become very large at the end.
The bullwip effect: demand and inventory
WHOLESALERRETAILERCUSTOMER PRODUCER
time
Demand Inventory

28. warehouse is filling up with unsold and interrupts his orders, causing a similar rapid
growing of the wholesaler's inventory and so on, up to the producer; the latter, after
struggling to cope with the sudden increase of the production, finds himself with
machineries stopped, stores full and no order.
Fortunately, this disastrous scenario is not so frequent, because the effects of
unexpected orders on a product's aggregate demand tend to offset each other; the
fluctuations in production, where present, are within acceptable levels; but what if
an external event temporarily alter the aggregate demand for a product? For
example, in coincidence with a particularly hot day, it's likely to experience a
sudden increase in the consumption of soft drinks. In this case, since the instability is
inherent in the production chain, the bullwhip effect happens just as previously
described.
To avoid the bullwhip effect, it would be required cooperation between all the
supply chain's actors who should share between them more information about
market demand and stocks, in order to manage a sort of virtual warehouse9
.
9 Matthias Holweg (op. cit. [6]) proposes several models of supply chain management, with increasing level of integration: a)
traditional, exposed to the bullwhip effect; b) with exchange of information on the basic demand, through which the
producer can improve sales forecasts; c) VMR (Vendor Managed Replenishment), in which the manufacturer takes the
responsibility to replenish the wholesalers' stocks; d) Synchronized Supply, where the orders' intermediate decision points
(wholesaler and retailer) are eliminated and it's like there were a single "virtual warehouse" that aggregates all the stocks in
the supply chain.
22

29. 1.4 When is collaboration unfitting?
1.4.1 Incentives against cooperation
According to what we saw in the previous sections, the benefits of cooperation are
such that collaborative strategies should always be crowned with success; seldom
does it happen in real world, unless under special conditions.
Let's take a case study of collaboration prohibited by law: the oligopolistic cartel10
between ostensible competitors (figure 9).
10 An oligopoly is a market where there are few manufacturers for a particular item (although not less than two); This is, by
itself, perfectly fair and does not exclude (oligopolistic) competition between firms; what is not allowed (almost
everywhere) is the deal between firms to build a "cartel" in order to fix prices, the quantity produced or market shares,
behaving, as a whole, as a monopolist; the antitrust legislation has the dual purpose of preventing these firms from forming
cartels and punish them when they are discovered.
23
Figure 9: Two oligopolistic firms agree to set their own production quotas, in order to obtain monopoly profits; yet, in the
absence of penalties for the breach of the collusive pact, the equilibrium is unstable, because they both have an incentive to
produce more than the fixed quantity to increase profit
OLIGOPOLIST
q
p
Q
Whole market
quantity
Market
Demand
Marginal
Costp
Typical company
quantity
Unit
Cost
Marginal
Cost
Marginal
Revenue
CARTEL
pc
pm
pc
pm
qm
qc
QcQmq*

30. Let's assume that two producers oligopolists, A and B, had entered into a collusive
agreement to determine the price of a good, as if they were in a situation of
monopoly.
The former figure shows the points of view of the individual oligopolistic firm (left)
and that of the cartel (right); the cartel behaves like a monopolist, setting the
quantity produced or, equivalently, the selling price, in order to maximize their
profits (best result for the group)11
.
However, the single oligopolistic firm has a strong incentive to break the covenant
of the cartel, because at the level of production allocated by the cartel, its marginal
cost is significantly lower than the monopoly price, then trying to produce more of
that determination would lead to increase his profits (best result for himself at the
expense of the group)12
.
In the illustrated example, the failure of cooperation among the oligopolistic cartel
is a good thing, because it prevents the consumers to be harmed, but the
11 A monopolist maximizes his profits when the marginal cost of producing an additional unit equals the marginal revenue
due to its sale; in fact, as long as the former is less than the latter, increasing production increases profits, while when it
becomes higher, producing more is loosing profits, even if the revenues were increasing. In the figure, this balance is
graphically displayed by the intersection between the curves of marginal revenue and marginal costs of the cartel, resulting
in the production volume of Qm (monopoly quantity). Given the demand of the market, this volume of product has to be
sold at the price pm (monopoly price). The whole production is distributed among the oligopolistic companies in
percentages established in the cartel's agreement; for simplicity we can assume that they are all the same and equal to qm
(production of single oligopolistic firm).
12 The oligopolistic firm A would increase the production up to the quantity q*, where his marginal cost equals the
monopoly price, but this amount, purely theoretical, is not really attainable; in fact, the increase in the volume of
production will lower the market price; this would increase profits for A (although of an amount less than the theoretical
one), at the expense of the other oligopolistic companies in the cartel. In the absence of some kind of binding mechanisms
to make the covenant mandatory, each oligopolistic firm will behave in an opportunistic way, until the price will drop to
the value pc, below which no one has advantage in increasing production.
24

31. mechanisms underlying this failure are common to all forms of cooperation: any
actor can benefit from opportunistic behaviour, violating to their own advantage
the terms of the covenant, unless there is some binding constraint to make it
mandatory.
1.4.2 The missing link
In the previous paragraphs, we've presented the collaborative strategies using a
variety of theoretical tools of Business Management, Microeconomics and Theory
of Games, together with some practical examples, such as consortia for
standardization and the Toyota's lean manufacturing.
We've seen how collaboration is closely related to value creation, while
competition is for value appropriation. If properly governed, the tension between
these two strategies can produce excellent results for all, integrating the effectiveness
of cooperation in increasing the value generated from the production process, with
the efficiency of competition in distributing it between different actors.
Moreover, even in competitive markets, information sharing can be used to
eliminate the inefficiencies and instabilities inherent in certain mechanisms of
production and distribution, as in the case of the bullwhip effect.
Finally, no purely competitive strategy can save a declining supply chain, no longer
able to generate value: in some cases, the cooperation may determine the sector
survival.
25

32. However, many obstacles stand between the ideal scenario and the reality: the
Prisoner's Dilemma and the Oligopolistic Cartel are examples of situations in which
individuals, opportunistically pursuing their own interest, end up hurting both the
group to which they belong and themselves.
Cooperation, without any regulating mechanisms which governs it and punishes or
discourages opportunistic behaviours, it's a situation of unstable equilibrium that at
any time can be broken if even one of the actors is pursuing his own interest at the
expense of the group. Therefore, the choice to implement a collaborative strategy is
always a big dilemma (figure 10).
In the next chapter, we discuss different models in which collaborative strategies can
work; each of these models adds a missing link between the actors in the supply
chain.
26
Figure 10: The collaboration's dilemma. Through cooperation one can
achieve significant benefits for himself and for the group, but it can also
expose himself to big risks
BENEFITS
RISKS

33. 2 Comparing models
2.1 Being driven: model with coordinator
2.1.1 Supply chains with a dominant firm
Most of the successful collaborative strategies rely on that some of the companies in
the supply chain is coordinating the cooperation; the active coordination, by one or
more subjects, can remove the major obstacles to collaboration and facilitates the
entry of new members into the value network13
.
The case studies found in the literature, from which were extracted the examples of
the next few paragraphs, are based on the paradigm of the dominant firm, in which
13 The value network is a concept recently introduced in Business Management, in order to overcome the rigidity of
Michael Porter's value chain model, which explains the creation of value in an enterprise as a result of primary activities
and support; the value network describes it better a supply chain where many activities take place outside of a business
boundaries and makes it possible to follow the dynamic development over the time, while depicting the complex
branching of reports – Cinzia Parolini, The Value Net: A Tool for Competitive Strategy, Wiley, 1999, ISBN 978-0-471-
98719
27

34. one of the enterprises of the supply chain, superior to the others in size, quality of
management and organizational skills, takes care of defining the particular
collaborative strategy and verify its implementation at the partners (figure 11).
Some of the partners in the supply chain will be functional to strategic partnerships,
while others to tactics one; with the firsts, disputes will be mostly resolved through
joint discussion (voice), that will lead to shared solutions and strengthen the loyalty
of the relationship; for the latter, where the discussion isn't conclusive, there will be
an exit from the cooperative agreement14
.
Even in a collaborative supply chain, many occasional transactions survive; in a spot
transaction the subjects are not linked by a special relationship and the contracts are
closed as an "auction to the highest bidder."
14 Albert O. Hirschman, Exit, Voice, and Loyalty: Responses to Decline in Firms, Organizations, and States, Cambridge,
MA: Harvard University Press, 1970, ISBN 0-674-27660-4
28
Figure 11: In a supply chain with a dominant firm, this is responsible for coordinating the collaboration with its partners; the
curved green arrows symbolize the numerous information flows of this coordination. Different actors, involved in different
levels of collaboration, cohabit within the value network.
PARTNER
- voice - PARTNER
- voice, exit -
Spot transactions
- exit -
DOMINANT
FIRM

35. 2.1.2 It's a pleasure working with you: case study Toyota15
Since World War Two, the Toyota Production System (TPS), which has been
already discussed in a previous paragraph, has experienced many changes, in line
with one of its founding principles: continuous improvement. What has not
changed is the guiding spirit of the collaboration of supply chain, aimed at reducing
costs and waste and generating greater value for customers.
According to the Toyota philosophy, the generated value is closely related to the
15 Li, Maani, op. cit. [8]
29
Toyota Supplier
Advantages
Stability and efficiency of the
production chain
Increase the generated value,
through co-design and the exchange
of information and know-how
Long-term relationship
Sharing of know-how and
innovations by other actors along the
supply chain
Responsibilities
Long-term relationship
Training of suppliers on continuous
improvement
Consulting providers on elimination
of inefficiencies
Sharing information on the objectives
and sales forecasts
Reduction of the variability of the
pieces
Co-design of particulars, packaging
and production process
Long-term relationship
Efficiency and continuous reduction
of costs and waste
Constant attention to adequate
capitalization of the company
Co-design of particulars, packaging
and production process
Sharing their innovations throughout
the supply chain
Figure 12:The collaboration in the supply chain cooperative model Toyota; both Toyota than its suppliers have
advantages thanks to the collaboration, as well as the responsibility to make it work properly

36. stability of the supply chain, characterized by long-term relationships, based on
fairness and mutual exchange.
During the design and development of a new vehicle, Toyota's strategy is focused
on trying to identify, together with suppliers, all potential obstacles to mutual
satisfaction; no detail is overlooked: seemingly marginal aspects, such as the
packaging of the parties, could have a major relapse on the efficiency of the
production process; the information sharing regarding the planned volume of
production allows suppliers to choose solutions and investment levels are most
suitable.
After the launch of the production, the focus moves to make it easy and
economical, for providers, the maintaining and, where possible, the improving of
the quality levels and the defect rate of the supplied parts.
In order to achieve certain goals, Toyota can not be limited to defining and expect
certain standards of quality; suppliers, even if pre-filtered by a rigorous selection
process, must be "nurtured" by the philosophy of Toyota and trained in modern
techniques of production and development.
All this has a price: the providers have a responsibility to continuously seek
maximum efficiency in the production process, including through innovations that
will be shared throughout the supply chain (figure 12).
30

37. 2.1.3 It's not easy to work for you: case study Walmart16
Walmart is a leading retail distribution enterprise in the United States and its
strategies of supply chain management, like for Toyota, have made the school.
Based on assumptions similar to Toyota, Walmart has developed its collaborative
strategies according to a different philosophy (figure 13), fully focused on the
customer/consumer who must experience the highest possible satisfaction level.
The exploitation of the benefits of collaboration is more focused on the short term;
some suppliers may encounter many difficulties in supporting the continuous
pressure to reduce costs, up to be eventually driven to the relocation or bankruptcy.
Yet, some of them have benefited from this collaboration, which has led them to
16 Li, Maani, op. cit. [8]
31
Walmart Supplier
Advantages
Obtaining the best quality of products
with minimum expense
Optimization of the investments in
the supply chain
Sharing information on current sales,
for better programming
Improving its efficiency and
competitiveness
Responsibilities
Sharing analytical information on
sales
Redesign of suppliers' processes,
where they don't meet the expected
levels of efficiency
Delivery of products within the strict
limits of time and quality required
Continuous reduction of the price,
year after year
Figure 13: The collaboration of supply chain in Walmart's cooperative model; Walmart's supply chain behaves like a
"extended enterprise"; the level of coordination by Walmart is so high to strictly define also the time of loading/unloading
of goods.

38. levels of efficiency and focus on the product which perhaps they wouldn't have
gotten by themselves; moreover, Walmart is the first to claim for itself a continuous
improvement of its efficiency and its ability to inventory management and handling
of goods, year after year. However, it may not be a coincidence that most vendors
who have benefited from this collaboration have big names such as Levi's or Procter
& Gamble.
2.1.4 Who's pulling all these strings? The textile case17
A final example of a model with coordinator is a case study of the Thai textile
industry. In this case, the dominant subject of the supply chain is, in turn, in a
subordinate relationship with respect to its main partner (figure 14).
The Oriental Garment Company (OCG) is a medium-sized Thai firm which
17 Ekkprawatt Phong-arjarn et al., op. cit. [9]
32
FigurE 14: The model with channel integrator is characterized by the dominant firm dealing a close cooperation with a
second firm which carries the responsibility of the supply chain's coordination; in practice, we have two dominant firms.
DOMINANT
FIRM
CHANNEL
INTEGRATOR

39. manufactures apparel; its main partner is Adidas, which is also its largest customer.
OCG, which has a qualified management and a certified production process, has
established a close collaboration with Adidas, by which is coordinated according to
the model of the channel integrator.
Collaboration develops following multiple dimensions: the information sharing,
through an integrated information system; a shared decision-making, for example in
the choice of suppliers; joint processes, such as inspections for quality control; the
sharing of resources and expertise.
Nonetheless, the case study just examined highlights the considerable difficulties
one has to face in building an effective collaborative supply chain when so many
small businesses are involved, even in the case of coordination by a dominant
undertaking; OGC's management is very satisfied with the cooperative relationship
with Adidas, while they have many complaints about difficulties in establishing
similar relationships with their suppliers, mainly because of the different corporate
cultures and the lack of standardization of management tools and operational.
2.1.5 You can't make it peer. the limits of coordination
The example of the textile gives us an insight of the limit in the model with supply
chain coordinator: it's not compatible with a peer to peer18
report.
18 Usually abbreviated to P2P
33

40. Most likely, the Oriental Garment Company doesn't have the size (or purchases'
volume) sufficient to impose to the suppliers its corporate culture, its operational
organization and its IT standards. Respect to its suppliers, OGC is more structured
and can rely on a more skilled management, nevertheless it's perceived by them as
an "equal"; as a result, the suppliers don't accept to be coordinated by OGC.
In our example, if over time the OCG will prove to be a serious and reliable partner
over the time, some of its suppliers will gradually change their business culture and
will integrate some processes with the client, while not reaching the level of
cooperation that OCG has with Adidas.
On the contrary, if the coordinator proves to be unreliable or the other actors, in
the supply chain, suspect him to opportunistic behaving19
, they won't have any
interest in getting involved in a medium or long term partnership and they'll prefer
to deal occasional (spot) transactions at market conditions.
Putting it simply, the model of collaborative supply chain with coordinator can give
excellent results and it's both applicable to strategic collaborations as well as tactic
ones20
, assuming that to at least one of the actors in the chain is recognised (by virtue
19 A typical opportunistic behaviour, unfortunately widely diffused, is it to negotiate the prices for very high volumes of
purchases, in order to gain deep discounts, and then to comfortably withdraw the goods in small batches, so that the
supplier has to sustain the largest part of the burden and the risk of stocks. Many providers have no choice but to accept
these conditions, because they find themselves in a situation of weak bargaining power; yet, the level of trust within the
supply chain becomes very low.
20 In the article by Li and Maani (op. Cit. [8]), the collaborative strategies are classified in a range that varies from "pure
exploitative collaboration" to "pure cooperative collaboration" (where Walmart is closer to the first extreme, while Toyota
to the second one). Given that "collaboration" and "cooperation" are quite synonymous, we prefer to characterise
collaborations by their kind of partnership that could be more tactical ore more strategical. The collaboration of Toyota is
strategical because it focuses on long-term results and all the involved parties are able to stably profit from it, while that of
Walmart is tactical, because it's capable to give results from the beginning and tends to exploit Walmart's strongest position
34

41. of greater size, quality of management, sales' or purchases' volumes, etc ...) the
authority to coordinate the collaboration; therefore, it is a model that doesn't work
in an peer relationship.
2.2 We must trust: model with trustee
2.2.1 Cooperatives and consortia
In the previous section, we mentioned how trust is one of the keys to the success of
collaborative strategies, perhaps the main; sometimes, a high level of confidence can
be placed in one of the enterprises of the supply chain, which acts as a coordinator,
but it's very difficult unless this company is perceived as dominant by the other
parties; in an equal relationship, the model with the coordinator may not work,
partly because of the low level of trust in the relationship.
A possible alternative is the creation of a super partes entity that acts as a mediator of
trust between the actors of the supply chain: the trustee21
(figure 15); this
collaborative model is very general and it can be linked to different specific cases for
different purposes and types, such as mutualistic cooperatives and consortia.
in the long run (this exploitation takes place in an "honest" way, without opportunistic behaviours, hence this tactic
collaboration is a stable model, and some of those involved are also able to obtain long term advantages, as in the case of
Levi's).
21 I is a legal term; in this work, it's associated with cooperatives and consortia.
35

42. The cooperatives are created in order to ensure its members commodities or
services, in a better condition than they would get in the free market (aim of mutual
benefit); members of a cooperative have a high degree of confidence in it; in fact,
membership allows them to participate in collective decisions in a democratic way,
according to the principle of one head, one vote22
.
The consortium is a contract that governs a voluntary aggregation which
coordinates joint initiatives for conducting certain business activities23
and in which
some resources are shared in order to pursue a common goal24
. This time, the role
of trustee is played by contractual obligations that the parties have voluntarily
subscribed.
22 Art. 2538.II c.c. - Italian Civil Code
23 Art. 2602 ss c.c. - Italian Civil Code
24 "A consortium is an association of two or more individuals, companies, organizations or governments (or any combination
of these entities) with the objective of participating in a common activity or pooling their resources for achieving a
common goal" – http://en.wikipedia.org/wiki/Consortium
36
Figure 15: The different actors supply to the low level of trust, which would prevent the collaboration, through the
intermediary of the trustee.
TRUSTEE
Degree of
confidence

43. The consortium is one of the few effective tools to run a successful horizontal
collaboration between competitors in the same market; in one of the earlier
paragraphs we've mentioned the case of a consortium for the definition of
specifications for USB; when it comes to similar issues, the standardization
consortium is the most used form of collaboration.
2.2.2 Application limits
The model with trustee is sufficiently general and abstract to adapt to many concrete
implementations; its main limitation is the necessity to establish an independent
juridical entity, which requires a high level of initiative and specific preparation,
hard to find in a pulverized network of small businesses; paradoxically, if small
businesses were able, by joint initiative, to set up a legal entity with specific goals
and responsibilities, they would have demonstrated to having already reached a level
of trust and cooperation such that make superfluous the trustee.
Another problem is the rigidity of the trustee with regard to the objectives and
methods of organization, which makes this model suitable for the management of
individual projects (e.g.: USB) or for repetitive tasks (e.g.: buying group), but it may
have a scarce evolutionary capacity in dynamic contexts in which the external
environment is constantly changing.
37

44. 2.3 Small businesses: peer to peer models
2.3.1 Collaboration for few: networks of small businesses
The literature is particularly stingy of case studies on collaborative strategies in the
networks of small and medium-sized enterprises (SMEs); it seems there are two
main reasons: the low diffusion of this practice in the real life and the lack of
theoretical tools of general validity (as we've seen, for various reasons, the main
models of collaboration are difficult to apply to SMEs).
Looking at the value network shown in figure 16, we understand the difficulties
you have to deal with in order to build a peer to peer model of collaboration.
First of all, the network of relationships and transactions between the various actors
outlines a highly complex and dynamic system that defies linear modelling as well as
stationary one; secondly, the characteristics of polycentrism and interdependence of
38
Figure 16: The value network, in the supply chains of small businesses, is a complex, multi-centered, interdependent and
highly dynamical system; the linear models or stationary ones are not able to grasp its fundamental aspects
Consumer

45. the system makes it particularly refractory to coordination25
.
In fact, the collaboration between small businesses, rather than the result of a
deliberate and rational strategy, it is often a spontaneous phenomenon, based on
personal and informal relationships, involving only a small number of firms in the
supply chain and it tends to be unstable with the changing of the competitive
environment.
2.3.2 Models for the case
The present case study26
is an example of the difficulties that may be encountered in
the design of a collaborative strategy in a supply chain of small and medium-sized
enterprises.
Digita Oy, object of this study, is a small Finnish company that provides installation
services of communications systems at customer sites; in addition to having highly
specialized human resources in such activities, Digita Oy must manage purchases of
materials and all the related logistics. The collaboration throughout the supply chain
would allow Digita Oy to manage processes more effectively and efficiently,
focusing better on the customers' needs and drastically decreasing the stock
necessary to provide the service.
25 The polycentrism is incompatible with a traditional hierarchical coordination, while the newer technologies, successfully
used in the business organization, are based on the separation of activities in groups of minimal interdependence,
something almost impossible in networks of small businesses.
26 Anssi Kaija, op. cit. [11]
39

46. The study was conducted with the support of interviews with internal and external
staff; its main conclusions regard the key factors of supply chain collaboration, areas
for improvement in supply chain management and collaboration model proposed.
The main limitation of this kind of work is due, paradoxically, to the excessive
knowledge in the firm that you study: the conclusions and the same elaborate
patterns come to depend crucially by the peculiarities of the particular case,
generating a plurality of ad hoc models, with no general validity.
Besides, the model developed for Digita Oy (figure 17) has characteristics similar to
those ones already examined, which are not compatible with peer to peer
relationships.
40
Figure 17: SCC model proposed for the case study "Digita Oy." The integrator partner (tird party logistics integrator) plays
either the role of trustee, with respect to the sharing of information (dashed lines), and the one of co-ordinator, for what
concerns the logistics operations.
Suppliers Customers
Integrator partner
3PL
Enterprise

47. 2.4 The tird way: a difficult balance
2.4.1 The invisible hand of collaboration
“Every individual... neither intends to promote the public interest,
nor knows how much he is promoting it... he intends only his own
security; and by directing that industry in such a manner as its
produce may be of the greatest value, he intends only his own gain,
and he is in this, as in many other cases, led by an invisible hand to
promote an end which was no part of his intention.”27
“It is not from the benevolence of the butcher, the brewer, or the
baker, that we expect our dinner, but from their regard to their own
interest. We address ourselves, not to their humanity but to their
self-love, and never talk to them of our necessities but of their
advantages.”28
The world described by Adam Smith, full of individuals pursuing their own self-
interest, seems to be the farthest one from any cooperative logic, but the metaphor
of the invisible hand is extremely significant: even complex systems defying any
attempt at planning, coordinating, or governing, may regulate themselves.
The free competitive market is a good example of a complex system capable of self-
regulating; it would be impossible to plan the daily supplies of a big city, like New
York; the complexity of the system and the huge number of activities involved are
27 Adam Smith, An Inquiry Into The Nature And Causes Of The Wealth Of Nations, 1776, Book IV, Chapter II
28 Adam Smith, An Inquiry Into The Nature And Causes Of The Wealth Of Nations, 1776, Book I, Chapter II
41

48. an intractable problem with a centralized planning; and yet, not for this the people
of New York have reason to fear a famine: unless for wholly exceptional events, the
market will be able to meet almost all people's needs, thanks to the work of
thousands of totally independent businesses29
.
The main reason why this system is self-regulating is the existence of a stable
equilibrium point30
; although sometimes the system may suffer dysfunctions or be
disturbed by external extraordinary events, it always tends to return to its efficiency
(maybe not always with due speed), thanks to the stability of equilibrium.
Unfortunately, the model of perfect competition is not realistic: in real markets
there are many barriers to competition that make the market inefficient and, at
worst, they prevent the attainment of equilibrium; this is why numerous models of
imperfect markets are studied, such as, for example, the oligopolistic competition.
Supply chain collaboration between small businesses has some similarities with the
model of free market. First, the companies are small and no one is in a position to
influence, by itself, the success or failure of the collaboration, although this is the
result of the contribution of many. Second, each firm can benefit from the
collaboration, so there is a "collaboration demand" , while the network of
29 Given that free market is often the subject of criticism, because of its failures, we tend to forget that much of our daily lives
and our well-being is due to its successes.
30 In the market model with perfect competition, there are many equilibria: First, the balance between supply and demand of
each product allows you to set prices and production levels; similarly, the balance between capital and labour defines the
total production capacity (frontier of the production capability); the interaction between this one and the preferences of
individuals determines the efficient allocation of resources between capital, labour and production volumes of goods
(which is also a stable equilibrium); finally, the exchange of goods in the market leads to distribution optimization (Pareto
optimality).
42

49. companies, as a whole, can generate a "collaboration offer".
If we're able to find the conditions in which the supply chain collaboration is
established as a natural and stable equilibrium, this could operate between the small
business networks even in the absence of coordination; such a scenario, perfectly
compatible with peer to peer relations, would avoid the major limitations of the
previous models.
2.4.2 Obstacle Course. Barriers to collaboration
Market's “invisible hand” works without requiring, to those involved, nothing
more than pursuing their own interests; we cannot make a such strong hypothesis,
in a logic of supply chain collaboration: the enterprises must have some aptitude for
cooperative culture; on the other hand, the collaboration can be perfectly
compatible with the pursuit of individual interest, because the higher value
generated can increase the appropriated value for all.
Unlike the model of perfect competition, a cooperative equilibrium is an obstacle
course; there are numerous barriers to collaboration that may hinder its success,
even in cases where it would be a significant advantage to the parties involved.
Figure 18 depicts the effect of Trust Barrier; in the matrix of the game, in normal
form, we've assumed the payoffs for two companies, who may choose to cooperate
or not to (or, equivalently, not to be loyal in the cooperative agreement).
43

50. Unlike the apparently similar prisoner's dilemma, the strategy of cooperation is a
condition of stable equilibrium if both firms choose it; However, this balance may
not be achieved: if both companies start from a state of non-cooperation, the first
one that chooses to cooperate would incur in heavy losses if the other company
does not31
.
This game has two theoretical equivalent Nash equilibria, but in real life, the
lacking of trust would result in a stalemate, in which neither firm wants to risk
making the first move.
2.4.3 I did it my way. Cultural barriers
The first barrier we face, when trying to develop any collaborative strategy in
supply chains of small businesses, is the lack of a collaborative culture within
companies.
31 However, company A may choose to cooperate, in the belief that it wouldn't be a rational choice, for company B, to
remain uncooperative; In fact, if A cooperates, B's payoff increases, but it becomes even higher if B chooses to cooperate.
44
Figure 18: The barrier of trust to cooperation; both being loyal and being disloyal are conditions of
equilibrium; yet, the cooperative equilibrium may not be reachable
1
1
Payoff matrix for firms A and B
choice: collaborating fairly
Firm A
Disloyal Loyal
FirmB
DisloyalLoyal -5 50
15
15
-5
50

51. In the model with coordinator, the dominant firm will also coordinate the supply
chain, has the task of forming culturally the suppliers on the modern management
techniques of logistics, production processes and of the information flow needed in
a collaborative supply chain; moreover, in many cases the suppliers are preliminarily
selected based on the quality of their management and their own organization.
In networks of SMEs, on the other hand, it happens to deal with companies
without an effective Information System nor structured processes for the exchange
of information, neither for the supply chain management. However, the most
difficult barrier to overcome is not technological, but cultural; it's a matter of
resistance to change: "we've always done it that way" is the mantra that limits all
innovation.
2.4.4 Who gets the lion's share? The barrier of distribution
The barriers of distribution (or partition's barrier) are caused by the fear to not
receiving a fair share in the distribution of the value generated by collaboration.
The distribution problem is more complex than it sounds, as shown in figure 19; at
first glance, it seems a good sharing principle to allocate the value proportionally to
what firms would have generated by themselves32
and probably would it be
recognized so, in a hypothetical legal litigation. But is it really fair?
32 Surely, it's the method that most easily allows an unambiguous measurement, at least in the initial phase of the
collaboration, when the behaviour of the supply chain as a "group" is still unclear, while performance (eg. profitability) of
each firm is well known.
45

52. Company A is likely to deem to be a fair mechanism rewarding proportionally to its
efforts or to the risks taken in collaborating; equally likely, this will not be
considered to be reasonable by company B, which has everything to lose with such
a distribution criterion.
2.4.5 No escape! Barriers of constraint
Paradoxically (but not too much), a significant barrier in entering a supply chain
collaboration could be the difficulty to exit from the cooperative agreement, once
it's subscribed.
For a company having no previous experience of collaboration, a too binding pact
could be an insuperable disincentive; what if the partnership doesn't give the
expected results (or the firm doesn't succeed in establishing good relations with
other actors in the chain) and the company cannot exit the cooperative agreement?
46
Figure 19: A fair distribution of the value generated by the supply chain collaboration should be proportionate to the risk
taken by each company in collaborating or to the actual contribution it gives to the collaboration, rather than to its
individually generated value
Company A
Company B
Individually generated value
Individually generated value
Risk/cost of
collaboration
Risk/cost of
collaboration
higher value,
generated by
collaboration
Likely value
share of
companyA
Likely value
share of
company B

53. Moreover, when the collaboration is at early stages of development, its goals have
yet to be clearly defined nor there is consensus on the concept of supply chain
collaboration between the actors; by contrast, costs and benefits of the collaboration
are not known, except by rough approximation; as a further complication, the level
of trust between companies is still very low.
This is the time when the barrier of constraint is stronger: each of the parties
involved might want a very binding cooperative agreement on all the companies
except for their own; it's clear that, on this basis, it's difficult to agree.
2.4.6 knowing them, avoiding them. How to remove barriers
The primary goal of this work is to study benefits and barriers to collaboration in
networks of small businesses.
A systematic and thorough knowledge of the barriers to collaboration can provide
the right tools to remove them; understanding what are cultural barriers and where
do they intervene, how to measure benefits and costs of collaboration and how the
payoff is to be divided, what is the "fair" level of constraint for a given strategy allows
you to build up appropriate training programs, develop a shared system of SCC
monitoring and measurement and prepare terms of collaboration agreement
properly structured.
The full knowledge of what is hampering collaboration can be useful to remove all
the barriers and ensure that the collaboration will become the natural equilibrium of
47

54. the system; it can be used during the collaboration, for observing its state of health
and providing early warnings when things do not work properly; finally, it can
improve the estimate of the collaborative strategy's costs and benefits, highlighting
when it's convenient and when it's not.
48

55. 3 The sample survey
3.1 The data collection model
3.1.1 The sample
Most of the literature studies the supply chain collaboration through individual
business cases; this approach allows to significantly deepen the problems treated and,
sometimes, even to interact directly with the staff of the company, with great
advantage in the understanding of the processes; on the other hand, it becomes
difficult to synthesize a model of general validity: very often, in the conclusions of
the case studies, it's stated that collaborative strategies are specific to each sector and
must be tailored to the peculiarities of the involved companies. We believe that this
kind of conclusion is driven by the method used to gather information.
Aiming to conduct an experimentation of general validity, the only alternative is to
49

56. study a numerous and varied sample of companies from different sectors. Thus, it's
inevitable to lose a lot of detail, but you will gain a greater vision that could bring
out some patterns common to all sectors.
3.1.2 The structure of the questionnaire33
The questionnaire for data collection is structured into six distinct sections, each of
which relates to a specific aspect of the collaboration of supply chain; the questions
are, as far as possible, in closed response, in order to facilitate the quantitative
analysis of the gathered data.
Given that the response rate to this kind of questionnaires is always very low, we
tried to make the compilation as simple as possible, minimizing its "cost"; on one
hand, the questionnaire can be answered only on the web34
and you're not
prompted for authentication, eliminating two powerful disincentives to reply: the
need to send a hard copy by mail or fax, and the unnecessary complication of the
logging procedures; on the other hand, the compilation is anonymous: neither the
person nor the company on whose behalf you are responding are traceable35
.
Below, we analyse the different sections of the questionnaire, relating them to the
questions we ask on supply chain collaboration.
33 See Appendix A - Questionnaire
34 For the questionnaire design, we chose Google Forms of the cloud platform Google Drive; you can find the questionnaire
at https://docs.google.com/forms/d/1SKVDLS8z6SbE4u_VzrmDnJVNhgp88PmrzwDGwF98cTc/viewform (in Italian)
35 Some people may give up to fill in the questionnaire, even if willing to do it, for fear of revealing "sensitive" data of the
enterprise or because they are afraid that their personal data is used for other purposes.
50

57. 3.1.3 Section A: the company
In section A36
, we gather information on the company which the respondent works
for; the company is framed in absolute (size, organizational structure, etc.) and in
relation to the supply chain to which it belongs (product, industry, etc.);
Furthermore, we identify functions and role of the respondent (eg: if he's a
contractor or an engineer, if he belongs to the research and development or to
commercial, etc.) that could have a relationship with his vision and understanding
of supply chain collaboration and with his preferences about it.
3.1.4 Section B: internal collaboration
Also this section collects data "internal" to the company, but was separated because it
has a direct link with one of the barriers that you want to study: the cultural barrier;
if a company has a very low level of internal collaboration, hardly can it collaborate
with other companies.
Since the involved topics (management of information flow, interdependence of
processes, etc.) were not simple, and we had to keep the questionnaire accessible to
a wide audience of respondents, we've limited this section to only two questions,
accompanied by detailed explanation.
Internal collaboration reappears in section D (risks and benefits), as a strategic
alternative; we expect the respondent to be consistent in the two different sections;
36 This section has been modified after the analysis of the pilot survey results.
51

58. for example, if his answers showed a remarkable lack of internal collaboration, he is
expected to indicate it as the most advantageous collaborative strategy.
3.1.5 Section C: the supply chain
The framing of the company in the supply chain has mainly the aim to determine
the relative size compared to the ones of customers and suppliers; in fact, relative
sizes could be strongly linked to either the perception of risk (section D) and the
type of bond of the collaborative pact (Section E); for example, if a company is
smaller than its suppliers, it might consider very risky an upstream collaboration,
whose pact may be preferred asymmetric, more binding for its suppliers.
The belonging sector of suppliers and customers identifies the position of the
company within the production cycle, including the extreme cases of companies
selling to final consumers, as well as companies whose only "providers" are the
workers.
52

59. 3.1.6 Section D: risks and benefits
In Section D we focus the questions that are more directly related to the topic being
studied; on one hand, we try to understand how much a collaborative strategy is
perceived to be advantageous and where it should be oriented (if upstream, with its
suppliers, downstream, with their customers, or internally to the company itself); on
the other hand, we examine the risks of collaboration, which often are inseparably
linked to the benefits themselves.
The combination of different answers should also give us an idea of how risks and
benefits are divided, and if there is some asymmetry between the company and its
counterparts (customers and suppliers).
3.1.7 Section E: the binding level
This section is devoted specifically to the barriers of constraint; this separation was
recommended, because the barrier of constraint is very complex: a too low binding
level can prevent collaboration, due to the lack of confidence, while a too high one
may discourage to even start it. In this section, there are questions that, more than
others, can bring out the internal contradictions in the subjects themselves: in fact,
the level of binding that you want for the other subjects is often greater than that to
which we are willing to obey.
Finally, section E should provide a measure of the degree of consensus that the
collaborative strategy would enjoy within the company.
53

60. 3.1.8 Section F: motivations
Section F only contains optional open questions; in fact, it was not designed for a
quantitative study, but for a qualitative analysis of the motivational aspects; these
influence the success or failure of any strategy, more so if collaborative, but they are
difficult to pin down in a systematic way.
The questions in this section want to highlight what the respondent values and what
he feel is lacking, both in his daily work, that in the relationship with customers and
suppliers.
3.2 Validation of the questionnaire
3.2.1 Pilot survey: mode of application
For the validation, the questionnaire was applied to a small sample of the writer's
work colleagues; of course, the sample was devoid of statistical significance, given
that respondents all belonged to the same enterprise37
, but it was equally suitable to
check if all the questions were complete, properly interpreted and self-consistent
(did not lead to contradictory answers).
37 Bimatech - Bottero Spa (Pesaro - Italy) is a company for designing and prototyping numerical control machines for glass
and stone processing; it's a small working group of just over twenty people, completely controlled by the holding, Bottero,
by which it also depends for the administrative, logistical and commercial services, while production is shared. During the
design, it's usual to have informal working relationships with the major suppliers, but otherwise the level of supply chain
collaboration is very low.
54

61. 3.2.2 Pilot survey: results
About half of the sample has participated to the pilot survey, for an overall of eleven
questionnaires delivered; in order to check whether the questions were properly
phrased, no additional explanation was provided to the respondents but the one
already integrated into the form.
Almost everyone has answered at least one optional question from section F (the
majority answered it all), thus demonstrating a remarkable sensitivity regarding the
motivational aspects.
3.2.3 Pilot survey: conclusions
Although lacking statistical significance, we want to summarize some qualitative
results: first of all, we can state that the theme of collaboration is at least recognized
as important, regardless of one's own personal evaluation on the feasibility of
collaborative strategies.
Most of the respondents indicate a preference for downstream cooperation with
customers; the internal collaboration, within the company, gains the second place,
while few respondents look favourably on the upstream collaboration with
suppliers, primarily because of an unfavourable risk to benefit ratio. This could also
suggest that the main perceived problem is the properly setting of goals, rather than
the efficiency (and perhaps the effectiveness) of their pursuing.
55

62. Moreover, the pilot survey has highlighted some shortcomings in the structure of
the questionnaire:
1. the closed answers related to the role in the enterprise were not sufficiently
clear; in particular it was not obvious that the roles of the workmen were
aggregated with the homologue ones of technicians and employees;
2. given that the firm in question is the branch of a larger company, the
indication of the company's size was somewhat ambiguous, so that who had
duties related to services common to the entire group indicated a number of
employees of "250 and more", while the others responded "20-49 ";
3. the above problem was also reflected in the indication of the relative sizes of
customers and suppliers, with the additional complication that, on this
matter, quite a half of those who had responded "20-49" now thought in
terms of holding company, applying a practical consistency (the holding
maintains all the relationships with customers and suppliers), but not a
logical one (because it contradicted the previous answer).
It was decided to modify the questionnaire to overtake these issues, making explicit
the roles of workmen and adding three questions that make it clear whether the
firm is independent, is controlled by other companies or it is part of a larger group
and, if so, who maintains the relations with customers and suppliers.
56

63. 3.3 Questionnaire application
3.3.1 Modes of contact
The sample of companies for the statistical research has been selected from a
database freely accessible on the Internet38
; it resulted in more than 25,000 e-mail
addresses, which were divided by macro-sector; they've been the subject of a
mailing, requesting the participation to the survey.39
About one third of the addresses used were no longer valid (probably they belonged
to companies now closed); besides, this type of mailing has typically a very low
response rate; However, it was still possible to get nearly ninety responses, which
can be considered an acceptable sample, considered the exploratory purposes of the
study and the limited amount of time available to carry out the investigation.40
38 This is the archive of Italian companies on http://www.guidamonaci.it/dir/; There are many similar lists whose the most
consulted is probably that of the yellow pages (http://www.paginegialle.it/ ); However, the site of "Guida Monaci" is
characterized for being made up of static HTML pages, all with an identical structure, which made it quite easy to write a
C# program that sailed automatically on the site, extracting the names of individual companies, classified either by sector
and macro-sectors; doing the same with the yellow pages would have been vastly more difficult, since they are dynamic;
doing it manually, would have been nearly impossible. Once the companies were indexed, their email addresses were
extracted by each company site itself, where existing.
39 See Appendix B – Letter of invitation to participate in the survey
40 The pilot survey had a duration of ten days, while the mailing and the collection of the responses to the final questionnaire
took place over a period of about a month.
57

64. 3.3.2 Results of survey: responses
Below is shown an analysis of each survey question41
, in the form of percentage
frequency distributions of categoric variables; the sample has a size of 89
respondents.
(Q1) – §A – How many employees are working for your company?
The majority of the sample (60.7%) is made up of small businesses with less than 20
employees; medium-sized enterprises, up to 249 employees, account for nearly all
of the remaining portion (38.2%); indeed, only one company in the sample can be
41 For the sake of readability, the long answers are presented in summary form; the original formulations can be compared in
the questionnaire in Appendix A. For the same purpose, modes with frequency below a certain threshold (for example,
2%) are grouped together under the heading "other".
58
Question n.1: Percentage frequency distribution of the responses on a sample of 89 respondents – pie chart
4.5%
34.9%
21.4%
23.6%
14.6%
1.1%
1
2-9
10-19
20-49
50-249
250 or more

65. defined as big, having more than 250 employees.
(Q2) – §A – What is the main sector of activity of your business?
The distribution of the sample in the different sectors of activity is quite varied;
although more than half of the companies belong to the macro-sector of
59
Question n.2: Percentage frequency distribution of the responses on a sample of 89 respondents – table
A-AGRICULTURE, FORESTRY AND FISHING 4 4.5%
2 2.0%
7 8.0%
3 3.5%
2 2.0%
7 8.0%
5 5.5%
2 2.0%
8 9.0%
2 2.0%
9 10.0%
2 2.0%
4 4.5%
I-SERVICES OF ACCOMMODATION AND RESTAURATION 2 2.0%
6 6.5%
2 2.0%
3 3.5%
N-HIRE, TRAVEL AGENTS, SUPPORT SERVICES FOR BUSINESSES 3 3.5%
P-EDUCATION 2 2.0%
S-OTHER ACTIVITIES OF SERVICES 8 9.0%
OTHER 6 6.5%
Answer Frequency Percentage
C-MANUFACTURING : Manufacture of food products and beverages
C-MANUFACTURING: Textile and packaging of clothing
C-MANUFACTURING: Manufacture of paper and paper products, printing and
reproduction of recorded media
C-MANUFACTURING: Manufacture of chemical products
C-MANUFACTURING: Manufacture of rubber and plastics
C-MANUFACTURING: Manufacture of fabricated metal products (except machinery
and equipment)
C-MANUFACTURING: Manufacture of electrical and non-electrical equipment for
domestic use
C-MANUFACTURING: Manufacture of machinery and equipment not otherwise
classified
C-MANUFACTURING: Manufacture of furniture
C-MANUFACTURING: Other manufacturing
F-CONSTRUCTION: Other construction activities
G-WHOLESALE AND RETAIL TRADE; REPAIR OF MOTOR VEHICLES AND
MOTORCYCLES
J-SERVICES OF INFORMATION AND COMMUNICATION: Production of software,
IT consultancy and related activities
J-SERVICES OF INFORMATION AND COMMUNICATION: Other services of
information and communication
M-PROFESSIONAL, SCIENTIFIC AND TECHNICAL ACTIVITIES: Other
professional, scientific and technical activities

66. manufacturing (52.8%), they are divided, in turn, in several areas whose the most
represented are the textile industries, the manufacturing of rubber and plastic
materials and those of machinery (we don't give a mention to "other
manufacturing", with 10.1%, since it's likely to be a rather heterogeneous
aggregate). Service activities are also well represented; in particular, as it's best
depicted by the answers related to the type of product, they're mainly about
software design, marketing consulting and market research.
(Q3) – §A – Is your company independent?
Almost all of the sample (88.8%) consists of independent firms, while only 9
respondents (10.1%) indicated that their company is either controlled by other
companies or part of a group; this means that the next two questions provide little
60
Question n.3: Percentage frequency distribution of the responses on a sample of 89 respondents – histogram
Don't know
It's controlled by one or more companies
It belongs to a group of companies
It's a branch of a larger company
It's independent
0% 20% 40% 60% 80% 100%
1,1%
6,8%
3,4%
0,0%
88,8%

67. information, because they are significant for only a small portion of a sample yet
numerically small.
(Q4) – §A – Who maintains relationships with the suppliers?
Given the results of the former question and the information provided with the
questionnaire, only 10% of respondents (the nine not independent companies) were
supposed to answer this question; therefore, we retain that the results for this
question are substantially devoid of information content.
61
Question n.4: Percentage frequency distribution of the responses on a sample of 89 respondents – pie chart
68,6%
1,1%
5,6%
24,7%
Your company
The holding
Don't know
[Not responded]

68. (Q5) – §A – Who maintains relationships with the customers?
The same as in the commentary to the results of the former question.
(Q6) – §A – What is your company's main product/service?
62
Question n.5: Percentage frequency distribution of the responses on a sample of 89 respondents – pie chart
69,7%
2,3%
28,1%
Your company
The holding
Don't know
[Not responded]
Question n.6: Absolute and percentage frequency distribution of the responses on a sample of 89 respondents – table
The products were grouped retrospectively in similar categories, based on the actual responses
12 13.5%
12 13.5%
Software 7 7.9%
7 7.9%
6 6.8%
6 6.8%
5 5.6%
5 5.6%
5 5.6%
4 4.5%
4 4.5%
16 18.0%
Answer Frequency Percentage
Textiles, leather and footwear
Machines and components
Marketing and promotion
Materials for industry
Farming and food
Logistics and transport
Industrial packaging
Furnishing
Tourist accommodation
Training and consulting
[Other]

69. Once the products were grouped into categories, their distribution of frequencies
allows to integrate the information related to each particular sector (Q2), identifying
better the supply chain. Almost half (45%) are products of manufacture (textiles and
leather, machinery, materials for industry, industrial packaging and furnishing),
while services (software, marketing and promotion, logistics and transport, tourist
accommodation, training and consulting) represent one quarter of the total (25.8%);
finally, 6 companies (6.8%) belong to the food supply chain and the remainder are
dispersed in a multitude of heterogeneous products.
(Q7) – §A – What is the key Function in your company?
For the vast majority of companies in the sample (83.2%), the key function is
production or sales; this is consistent with the size of the companies and the type of
products seen in the table above; let's compare, for example, the exact
correspondence between the number of respondents who indicated "marketing and
63
Question n.7: Percentage frequency distribution of the responses on a sample of 89 respondents – histogram
[Other]
Logistics and Product Support
Administration and Finance
Marketing and Communications
Research and Development
Sales
Production
0% 10% 20% 30% 40% 50% 60% 70%
3,4%
1,1%
1,1%
7,9%
3,4%
16,9%
66,3%

70. communication" as key function (7) and "marketing and promotion" as product.
(Q8) – §A – What Function does your activity belong to?
You may notice a difference between the function whose the respondents belong to
and the one indicated as key function of the company (for example, production gets
now only 43.8% of the responses, against 66.3% of the former question).
This apparent inconsistency can be explained by comparing the responses to the
question about the role played in the company, where we can see that many
respondents belong to the ownership or management.
For the survey, it's very useful having answers also from individuals not directly
involved in the key function, because they are bearers of a different point of view.
64
Question n.8: Percentage frequency distribution of the responses on a sample of 89 respondents – histogram
[Other]
Logistics and Product Support
Administration and Finance
Marketing and Communications
Research and Development
Sales
Production
0% 10% 20% 30% 40% 50%
6,8%
3,4%
10,1%
9,0%
3,4%
23,6%
43,8%

71. (Q9) – §A – What is your role in the company?
55% of the respondents belongs to the property in a broad sense, as entrepreneurs,
managing partners, members of a cooperative or self employed workers, while
about one-fifth (21.4%) has a directional role (executives, managers and officials); it's
even a good sign that an almost identical fraction (20.3%) is made up of technicians,
employees and workers, despite the complexity of the questionnaire.
65
Question n.9: Percentage frequency distribution of the responses on a sample of 89 respondents – histogram
[Other]
Unskilled worker
Clerk
Highly qualified Technician / Employed
Framework / Officer
Executive
Self-employed
Member of a Cooperative
Associated / Administrator
Entrepreneur
0% 5% 10% 15% 20% 25% 30% 35%
3,4%
0,0%
13,5%
6,8%
10,1%
11,3%
2,3%
1,1%
29,2%
22,5%

72. (Q10) – §B – What is the level of horizontal communication in your
activity?
The communication level is high or very high for 59.6% of the cases, while only
14.6% of respondents indicate a communication level low or very low; this is fully
compatible with the role of the respondents: in fact, low levels of horizontal
communication are more common between the unskilled workers.
(Q11) – §B – What is the level of integration of your activity in the
company's processes?
The results are similar to the former, regarding to the level of integration of one's
activities in business processes; in fact, both characteristics should depend strongly
66
Question n.10: Percentage frequency distribution of the responses on a sample of 89 respondents – histogram
Very low
Low
Medium
High
Very high
0% 5% 10% 15% 20% 25% 30% 35% 40%
4,5%
10,1%
25,9%
33,7%
25,9%
Question n.11: Percentage frequency distribution of the responses on a sample of 89 respondents – histogram
Very low
Low
Medium
High
Very high
0% 5% 10% 15% 20% 25% 30% 35% 40%
2,3%
11,2%
32,6%
36,0%
18,0%

73. on the type of business organization, but we can assume that many of the
respondent's companies are structured according to a traditional functional form, in
which the level of horizontal communication and integration processes are almost
exclusively related to the role.
(Q12) – §C – How do you rate the size of the main customers,
compared to your company?
Two-thirds of respondents (66.3%) believe that customers have larger size than their
own company; given that the majority of the firms in the sample are small, it's
understandable the little fraction (10.1%) indicating that a smaller size for the
customers; however, we could expect a higher percentage of companies of size
comparable to the customers' one, this could indicate that small businesses tend to
have few large customers.
67
Question n.12: Percentage frequency distribution of the responses on a sample of 89 respondents – histogram
Don't know
They're individual consumers
Smaller
Similar or equal
Larger
0% 10% 20% 30% 40% 50% 60% 70%
2,3%
5,6%
10,1%
15,8%
66,3%

74. (Q13) – §C – What sector of activity do your customers belong to?
Respect to the sector of the companies, customers belonging to manufacturing
activities are less frequent, while wholesalers and retailers are increasingly significant.
(Q14) – §C – How do you rate the size of the main suppliers,
compared to your company?
68
Question n.13: Absolute and percentage frequency distribution of the responses on a sample of 89 respondents – table
Manufacturing 34 38.2%
16 18.0%
7 7.9%
4 4.5%
4 4.5%
13 14.6%
11 12.4%
Answer Frequency Percentage
Wholesale and retail trade
Construction
Public Administration and Defense
Other activities of service
[Other]
[Not responded]
Question n.14: Percentage frequency distribution of the responses on a sample of 89 respondents – histogram
Don't know
They're individual workers
Smaller
Similar or equal
Larger
0% 10% 20% 30% 40% 50% 60%
2,3%
0,0%
14,6%
27,0%
56,2%

75. As for the customers, the majority of the respondents (56.2%) indicate suppliers of
greater dimensions, while a more balanced proportion (27%) answered "similar or
equal"; finally, the suppliers are perceived to be smaller by 14,6% of the sample,
perhaps it's not a coincidence if this number matches the fraction of medium-sized
enterprises.
(Q15) – §C – What sector of activity do your suppliers belong to ?
Also for the suppliers, we see a decreasing in the rate of who belongs to
manufacturing (although less markedly than customers); if we aggregate the services
of information and communication (software) with the professional, scientific and
technical ones (design) and other service activities, we reach the significant share of
18%; by linking this fact with the proportion of those who have indicated as main
function production or sales, we could infer that some of the other business
functions are outsourced.
69
Question n.15: Absolute and percentage frequency distribution of the responses on a sample of 89 respondents – table
Manufacturing 42 47.2%
8 9.0%
7 7.9%
5 5.6%
4 4.5%
3 3.4%
8 9.0%
12 13.5%
Answer Frequency Percentage
Wholesale and retail trade
Wholesale and retail trade
Professional, scientific and technical activities
Agriculture, forestry and fishing
Services of information and communication
[Other]
[Not responded]