Article 15 - Article 15: Aligning Incentives in Supply...

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Article 15: Aligning Incentives in Supply Chains Junko Nichols 1. Key takeaways: • Effective Supply Chain management can help increase the Pie size. This is achieved by aliening the incentives across the supply chain e.g. “The Economics of Incentive Alignment” • The Author has identified three reasons for the incentives not being aligned in a particular supply chain a) Lack of necessary data when the actions of a supply chain partner upstream or downstream are hidden. b) Fear of sharing the information as it could be used against itself c) there are incentives but they are not designed/ aligned properly • The following steps can help to improve supply chain performance: a) Acknowledging that such a problem exists. b) Diagnosing the cause of hidden information, badly designed incentives c) coming up with better incentives to improve supply chain performance. • To Redesign Incentives we can either change contracts, share information that was hidden and use a effective relationship. 2. Applicable SC principles:
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