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Loosely-Coupled vs Tightly-Coupled Supply Chain

Cutting-edge companies are swapping their tightly coupled processes for loosely coupled ones, making themselves not only more flexible but also more profitable (Brown et al., 2002)

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chain members acted as competitors and opportunistic behaviour was promoted. However, the adoption of modern supply chain practices such as vendor-managed inventory (VMI), collaborative planning, forecasting and replenishment (CPFR) and early supplier involvement, transformed relationships from purely transactional to collaborative (Karuranga et al., 2008).

The aim of the tightly-coupled relationship model is to reduce inventory and avoid the situation where a manufacturer is out of stock. Close relationships between chain partners and crossing corporate territories helps to achieve this objective (Elmuti, 2002). The loosely-coupled model allows for higher flexibility due to low-interdependency. When applied to the supply chain the model leads to faster integration of the abilities of collaborating participants, known as orchestration (Brown et al., 2002, El Sawy, 2003). Sometimes companies choose to create buffers at different stages of supply. This supply chain approach is referred to as the 'arms-length relationship'. It has been observed that those companies that exhibit the best strategies have swapped their tightly-coupled processes for loosely-coupled ones, thus gaining much-needed flexibility and achieving performance improvements (Brown et al., 2002).

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