The benefits of applying HRM practices to Supply Chain Management

To begin to fill this gap in research, Vlerick Professor Ann Vereecke and colleagues – Sandra Fisher and Mary Graham (of Clarkson University) and Stephan Vachon (HEC Montreal) – have explored the HRM-SCM relationship. Their findings make a strong case for applying HRM practices to supply chains in order to help organisations better manage their supply chains to the point of creating competitive advantage.

Supply Chains Are Made of People

A supply chain is a set of organisations that work together in the upstream and downstream flows of products and services to provide finished products to customers. The ‘set’ of organisations can be as simple as a single firm (within which supplies are delivered and a product is produced), or it can be a complex network of raw material suppliers, third-party service providers, distributors and sales outlets. The purpose of supply chain management is to improve the long-term performance of the individual companies and of the supply chain as a whole.

Although most organisations recognise the importance of strategically managing their supply chains, they are less likely to capitalise on the fact that successful supply chain management rests on the performance of the people in the supply chain. At the same time, human resource practitioners have established practices and processes that improve worker and firm performance – but rarely do they consider the implications of those practices for the company’s supply chain.

In brief, both HRM and SCM have incomplete – but potentially promising – perspectives on managing people in supply chains.

Broadening the HRM Perspective

In their Human Resource Management article, Prof Vereecke and colleagues propose a broader view on how traditional HRM activities can be applied to supply chain management. Established HRM activities range from developing an HR strategy and recruiting, selecting, developing and rewarding the workforce, to change management and labour relations. What are the benefits of applying these activities to SCM? Here are some examples:

Traditionally, HR strategy involves developing flexible systems of HR best practices that promote an organisation’s business strategies. Applying these activities to the supply chain context produces these progressively broader benefits:

• Considering supply chain strategy, characteristics and partners when developing the HR strategy.
• Using HR systems (e.g. incentives, performance management, long-term relationships) to manage supply chain partners.
• Collaborating with the supply chain partners to develop and coordinate HR systems for the supply chain as a whole.

Applying traditional (intra-organisation) HR planning and recruitment activities to the supply chain partner firms produces these larger (inter-organisation) benefits:

• Aligning recruitment practices among the supply chain firms.
• Sharing applicant pools.
• Forecasting labour demand and supply across the entire supply chain.

Broadening applications of HR training activities produces these benefits:

• Identifying training needs and objectives specifically for supply chain positions, and designing training to meet those needs.
• Identifying the training needs of the supply chain partners, and training those partners (or vice versa).
• Joint training and cross-organisational training of workers across the supply chain.

Similarly, HR performance appraisal systems can be leveraged across the supply chain to reap greater benefits:

• Developing performance metrics for the supply chain.
• Aligning performance appraisal dimensions across supply chain partners.
• Learning from supply-chain partner feedback on individual and group performance.

Using HRM Practices to Unify the Supply Chain

Today’s increasingly complex business environments – which are characterised by shorter product life-cycles, product proliferation, ongoing outsourcing, and the globalisation of the supply base and markets – magnify the challenges of human resource management in supply chain settings.

But meeting these challenges is well worth the effort. HRM practices can be used to encourage supply chain partners to develop valuable inter-firm relationships and to create knowledge-sharing routines. The result is a better coordinated, streamlined supply chain and, ultimately, new competitive advantage.

Related article

“Don’t Miss the Boat: Research on HRM and Supply Chains” by Sandra L. Fisher, Mary E. Graham, Stephan Vachon, and Ann Vereecke, which introduces a special issue of Human Resource Management. Vol. 49, No. 5, September-October 2010.