6/26

Above: A view of the Supply Chain "commons" by the Association for Healthcare Resource and Materials Management

Mutuality is one approach to managing strategic risk across supply and demand networks (see prior posts).  In the United States, collaboration is probably more often used to describe similar behavior.  But the two concepts are not identical.

Mutuality implies innately interdependent relationships. Collaboration suggests something more voluntary. Collaboration is typically opportunity-oriented. A strategy of mutuality is much more likely to give serious attention to shared risks.  A strategic relationship featuring significant collaboration may actively seek to minimize mutuality.  A strategic relationship characterized by substantive mutuality may involve otherwise fierce competitors.

Mutuality has an especially long and rich history in the insurance industry.  There may be important analogies for mutuality among supply chain players.

David Wilkie explains:

Mutuality is the normal form of commercial insurance, whether or not it is run by a mutual insurance company or one owned by shareholders. Applicants contribute to the pool through a premium that relates to their particular risk at the time of the application, perceived as well as it can be at that time on the basis of all the facts that are available and relevant, with or without application to any astrologers. The pooled funds then pay those insured who suffer losses in accordance with the scale of their losses for things like fire, household and marine insurance, or in accordance with the agreed sum assured for life insurance. 

Supply chain collaboration is often focused on generating greater efficiency. Mutuality may do this too, but it does so from a risk-informed position. Further, at least in my fevered brain, when I hear mutuality I immediately think of solidarity.

David Wilkie again:

Solidarity is a concept that has some similarity to mutuality, but also a profound difference. The similarity is that losses are paid according to need, and the difference is that contributions are made not in accordance with the risks that each applicant brings in with him, but perhaps according to ability to pay, or just equally. 

Many contemporary supply chains - especially those serving dense urban environments - are mutually dependent on electricity, telecommunications, fuel, continuity (and integrity) of pull signals, trucks, truckers, and more.  While individual supply chain participants may "bring in" differentiated risk, most share a very similar risk profile, especially in regard to catastrophic possibilities.

Solidarity effectively describes systemic risks to supply chains.  Mutuality describes a potential -- but today, underutilized -- approach to mitigating these systemic risks.  To participate in mutual efforts to prevent, reduce, and mitigate risk, supply chain participants need to recognize more fully how much they depend on the "commons" they have co-created over the last generation.