increasingly find that they must rely on effective supply
chains, or networks, to successfully compete in the global
market and networked economy.
In Peter Drucker's (1998)
management's new paradigms, this concept of business
relationships extends beyond traditional enterprise boundaries
and seeks to organize entire business processes throughout a
value chain of multiple companies.
During the past decades, globalization, outsourcing and
have enabled many
organizations such as Dell and Hewlett Packard, to
successfully operate solid collaborative supply networks in
which each specialized business partner focuses on only a few
key strategic activities (Scott, 1993). This
inter-organizational supply network can be acknowledged as a new
form of organization. However, with the complicated interactions
among the players, the
network structure fits neither "market" nor "hierarchy"
categories (Powell, 1990).
It is not clear what kind of
performance impacts different supply network structures
could have on firms, and little is known about the
coordination conditions and trade-offs that may exist
among the players.
From a system's point of view, a
complex network structure can be decomposed into
individual component firms (Zhang and Dilts, 2004).
Traditionally, companies in a supply network concentrate
on the inputs and outputs of the processes, with little
concern for the internal management working of other
choice of internal management control structure is known
to impact local firm performance (Mintzberg,1979).
In the 21st century, there have been few changes in business
environment that have contributed to the development of supply
chain networks. First, as an outcome of globalization and
proliferation of multi-national companies, joint ventures,
strategic alliances and business partnerships were found to be
significant success factors, following the earlier
"Just-In-Time", "Lean Management" and "Agile Manufacturing"
practices. Second, technological changes, particularly the
fall in information
communication costs, a paramount component of transaction
costs, has led to changes in coordination among the members
of the supply chain network (Coase,
Many researchers have recognized these kinds of supply network
structure as a new organization form, using terms such as
"Keiretsu", "Extended Enterprise", "Virtual Corporation", Global
Production Network", and "Next
Generation Manufacturing System". In general, such a
structure can be defined as "a group of semi-independent
organizations, each with their capabilities, which
collaborate in ever-changing constellations to serve one or
more markets in order to achieve some business goal specific
to that collaboration" (Akkermans,
management is a cross-functional approach to managing the
movement of raw materials into an organization and the
movement of finished goods out of the organization toward
the end-consumer. As corporations strive to focus on core
competencies and become more flexible, they have reduced
their ownership of raw materials sources and distribution
channels. These functions are increasingly being outsourced
to other corporations that can perform the activities better
or more cost effectively.
The effect has
been to increase the number of companies involved in
satisfying consumer demand, while reducing management
control of daily logistics operations. Less control and
more supply chain partners led to the creation of supply
chain management concepts. The purpose of supply chain
management is to improve trust and collaboration among
supply chain partners, thus improving inventory
visibility and improving inventory velocity.