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Vertical Collaboration in the Supply Chain
Sanda Renko

Faculty of Economics & Business
University of Zagreb
Croatia
1. Introduction
Supply chain is a research area which has attracted the attention of many researchers for more than 20 years (Mehrjerdi, 2009) due to costs and time involved in managing materials, information and financial flows from the point of origin to the point of consumption. The simplest definition of the supply chain suggests (Waters, 2003) that it consists of series of activities and companies that move materials through on their journey from initial suppliers to final customers. On that journey each company somehow is adding value to the product.
However, due to an increasing competition on the market and due to more demanding and more sophisticated customers, the picture of supply chain is getting more complicated. If we take into consideration that many companies have crossed their borders and have included some geographically separate operations into their supply chain, it is very difficult to successfully integrate and to manage all related activities. In the praxis, it is normally that every company is working for its own benefit resulting in duplicating effort and reducing productivity, lowering efficiency, higher costs and decreasing the level of customer services.
However, environmental uncertainty expressed through shortening product life cycle, expanding product proliferation, and more demanding customers requires from companies to coordinate production processes across company borders, to tackle problems from the viewpoint of the whole organization, and to look for the greatest benefit of all chain members. Namely, organizations’ opportunities for value enhancement and cost reduction are clearer when they look beyond their own operations. Supply Chain Management is built on the principles of