Governance of supply chain relationships

1、governance of supply chain relationshipspresentation at nofoma 2002, trondheim, norwayjacques h. trienekenswageningen universitythe netherlandse-mail. jacques.trienekensalg.bk.wau.nlabstractthis article examines organisational issues related to logistics management in inter-company relationships. it

2、 presents the underlying concepts of supply chain management and transaction cost theory and discusses these theories usefulness in understanding various governance forms of inter-company relationships. the value of transaction cost theory for logistics management of inter-company relationships is t

3、hereby investigated. 1 introductionin this presentation i will examine organisational issues related to logistics management in company-to-to company relationships. the central issue concerns the choices a company has to make regarding the governance of its inter-organisational logistics relationshi

4、ps.i will start by identifying the internal and external page: 1het lijkt mij logischer om pressures hier te noemen omdat veel meer tijd wordt besteed hieraan dan aan de consumer demands op zich.pressures that might lead to intensified collaboration between companies on different levelspage: 1dat de

5、ze pressures (of oorspronkelijk consumer demands) leiden tot meer collaboration wordt niet expliciet beschreven in de tekst. i will then define the position of supply chain management (which in my perception is strongly related to inter-company logistics management) and transaction cost theory among

6、 other schools of thought and elaborate on the concepts underlying supply chain management and transaction cost theory. preliminary results of a survey conducted in the netherlands will be presented topage: 1hier moet eigenlijk iets komen over de rede waarom deze results hier beschreven zijn. . i wi

7、ll end this presentation with a discussion of how tct can help in explaining available choices for inter-company logistics systems. 2 demands on companiesin the last decade, many organisational changes have taken place and new strategic directions have emerged in the field of production. because of

8、technological developments, increased international competition, market saturation and new consumer demands, companies are being forced to focus their activities more on customer demands and to adapt their manufacturing planning and control system to cope with these demands.the new demands are for h

9、igh-quality products, customised products, products in broad assortments, short product life-cycles, short lead times and competitive prices. also, markets are changing rapidly, which increases the risk of having to invest in new technology, machinery and other equipment. furthermore, societal const

10、raints and requirements are being imposed on businesses to economise on the use of resources and to ensure, for instance, safe production, and restricted pollution. for the businesses this implies listening more to the demands and expectations of customers, placing more emphasis on quality control a

11、nd environmental issues and shifting from the production of bulk towards the production of specialities with high added value. these changes result in a larger product range, shorter product life-cycles, flexible production and distribution structures and reduced lead times. this also creates new de

12、mands on production planning and control of companies. the table below depicts the most important internal and external pressures on companies.external pressuresinternal pressuresreduce delivery timereduce stockreduce pricereduce costsincrease customisationincrease flexibility (smaller batches, chan

13、ge-ability, agility)reduce product life cyclesincrease assortmenteconomise on resourcesimprove process controltable 1: current pressures on companiesmany authors underline the importance for companies to adapt to these changes. according to some authors companies should aim at lean manufacturing (wo

14、mack and jonespage: 2womack and jones, 1994?, 1994; lamming, 1993), focused on smooth and fast materials flows, optimal use of capacities, and minimal stock levels in production and marketing channels. other authors stress the importance of agility, focused on flexibility and responsiveness (preis e

15、t al. 1996, kasarda and rondinelli 1998). there seems to be no singular right solution for page: 2bedoel jij dat de companies de problemen niet in hun eentje kunnen oplossen(there seems to be no successful way for the companies to independently deal with .), of dat er meerdere manieren zijn (zie ver

16、andering in tekst.)?companies to deal with the new challenges. similarly, in the field of inter-company relationships, there is no one single way for companies to cope with the demands. most authors distinguish between several different forms of inter-company collaboration. for example, lambert and

17、cooper page: 2is dit gewoon lambert and cooper 2000, of een ander artikel dat niet in de referentie lijst staat?(2000) state that in any supply chain different forms of relationships are appropriate. relationships between organisations can range from arms length relationships (consisting of either o

18、ne-time exchanges or multiple transactions) to vertical integration. cooper et al. (1997) use the concept of the value tree. every company has multiple relationships with customers and suppliers. every single relationship has its own characteristics and may have its own design. to support businesses

19、 in their attempts to cope with the new demands, many inter-company research projects have been conducted in the last few years, with objectives such as building new marketing strategies, lowering integral supply chain costs, developing supply chain quality systems, etc. on the theoretical side, man

20、y different theoretical approaches have been developed to analyse and explain inter-enterprise relationships. in research projects we often can recognise the school of thought of the researcher. one major aim of this presentation is to show how different, now often separately operating, schools/appr

21、oaches can complement one another in finding solutions to empirical problems. in this presentation we focus on logistics theory and transaction cost theorypage: 2 maar de twee sections 4 en 5 gaan over scm en tct. klopt dit dan wel? (logistics theory als term wordt hierna ook niet meer gebruikt.).ho

22、w do these two theories fit among other schools of thought? 3 approaches to inter-enterprise relationshipswe recognise three basic theoretical streams on inter-company relationships (see also e.g. omta et al., 2001): - supply chain management whose main theme is goods flow optimisation (logistics, q

23、uality management, information systems,). supply chain management aims at the integration of business planning and at balancing supply and demand across the entire supply chain. it tries to bring suppliers and customers together in one concurrent business process. it spans the entire chain from init

24、ial source to the ultimate consumer (schorr, 1998; handfield and nichols, 1999). advanced ict (e.g. e-commerce) systems are increasingly becoming the backbone of these integrated supply chains. - business economics and organisational theory whose themes are governance structures, contracts, and exch

25、ange of information. an important example of a school of thought aiming at integration of economic and organisational theory is transaction cost theory (williamson, 1975, 1985). this approach explains vertical governance relationships between organisations. it focuses on how organisational boundarie

26、s should be drawn. - network theory whose theme is relations between organisations in a network context (economic, social, politicalpage: 3economic, social, political relations?, etc.). in network theory forms of collaboration are not only based on economic motivations; power and trust are also key

27、concepts in this approach (uzzi, 1997). actors are believed to act on the basis of their functional role in the network, while goal orientation, interests, rules and power relations determine this role (omta and van rossum, 1999).as already mentioned, i will focus on two approaches in this presentat

28、ion: supply chain management and transaction cost theorypage: 3de twee die boven genoemd waren zijn anders (zie comment 6). en section 5 gaat eigenlijk over tct en niet tce. klopt dit dan wel?. in doing so, i will discuss the relationship between inter-company logistics management and the companys t

29、ransactional characteristics. 4 supply chain management4.1 conceptthe concept of supply chain management (scm) has received a great deal of attention in the literature (cooper and ellram, 1993; ellram and hendrick, 1995; lambert et al., 1996; monash et al., 1996). it originated in logistics literatu

30、re, specifically in purchasing literature (as the term suggests). in the last decade, however, scm has developed beyond a focus on logistics processes in the chain and now also includes quality management, costing methods, etc. the global supply chain forum (lambert and cooper, 2000) defines scm as:

31、 the integration of key business processes from end user through original suppliers that provides products, services, and information that add value for customers and other stakeholders.figure 1 depicts a typical supply chain (lambert and cooper, 2000).figure 1: supply chain network structure (lambe

32、rt and cooper, 2000)the figure shows that scm views a company as being in the centre of a network of suppliers and customers. demand and supply are leading in this approach.major characteristics of scm are (cooper et al., 1997): - it evolves through several stages of increasing intra- and inter-orga

33、nisational integration and coordination; and, in its broadest sense and implementation, it spans the entire chain from initial source (suppliers supplier, etc.) to ultimate consumer (customers customer, etc.).- it potentially involves many independent organisations. - it includes the bi-directional

34、flow of products (materials and services) and information, and the associated managerial and operational activities.- it seeks to fulfil the goals of providing high customer value with an appropriate use of resources, and building competitive chain advantages. 4.2 support of inter-enterprise relatio

35、nships by information and communication technologyin supply chain analysis and redesign, application of ict plays in most cases a prominent role. many authors have described how ict can support relationships between suppliers and customers (e.g. cash and konsynski, 1985; beulens, 1992; clemons and r

36、ow, 1992; ocallaghan et al., 1992; bowersox and closspage: 4is dit bowersox and closs zoals in ref. lijst?, 1996; stern et al., 1996; premkumar et al., 1997).venkatraman (1994) describes some basic ict opportunities for collaboration between businesses:- transaction processing (supporting a seamless

37、 interconnection for exchanging structured data on transactions),- inventory movement (triggered by ict across organisations based on predefined conditions without human intervention),- process linkage (interdependent process linkages for unstructured tasks (for example, design and manufacturing),-

38、knowledge leverage (creation of a network for leveraging skills and expertise).there are also important strategic opportunities for using ict. existing relationships with customers and suppliers can become more tightly coupled, leading to vertical quasi-integration. in this case the advantages of a

39、market-like organisation (flexible relationships with partners) can be linked with the advantages of process integration (efficiency). another example is the enormous increase in outsourcing of activities businesses have experienced in the last years; activities previously performed within the firm

40、due to high transaction risk may be shifted to third-party providers, allowing the firm to benefit from the providers higher production economics, such as scale and specialisation. a third example is the opportunity for quasi-diversification. firms may cooperate across markets and across industries

41、in order to leverage their key resources in new areas, exploiting increased economics of scale and scope in those resources. relationships with other firms that were previously not possible due to high coordination costs or high transaction risks may thus become feasible (clemons and row, 1992).4.3

42、typical scm research issuesthe supply chain management approach supports a number of typical research issues, such as (e.g. ellram and cooper, 1993page: 5is dit cooper and ellram 1993?; lambert and cooper, 2000):- analysis and design of supply chain information-sharing and monitoring systems,- analy

43、sis and design of coordination systems of multiple levels for inventory reduction,- analysis and design of joint planning systems on different management levels,- the reduction of supplier bases for better coordination,- speed of operations, information and inventory flows,- analysis and design of s

44、upply chain costs and benefits-sharing systems- the evaluation of supply chain performance.supply chain management approaches can help us in the analysis and redesign of value creation and the product flow throughout the chain from primary producer up to the consumer. they do not explain, though, wh

45、y companies choose one form of collaboration over another. in the following section i will examine the organisation (the governance forms) of vertical relationships. 5 transaction cost theory5.1 conceptas has been pointed out, an important school of thought aiming at the integration of economic and

46、organisational theory is transaction cost theory (williamson, 1975, 1985). it explains governance relationships between organisations.in tct, the transaction between companies is the basic unit of analysis. marion page: 5is dit marion 1986 zoals in ref. lijst?(1986) identifies four elements of a tra

47、nsaction:- making the deal- transfer of ownership- establishing a price- physical delivery of the product to the buyertransactions include ex ante and ex post costs:ex-ante costs include:- searching for potential exchange agents- screening potential agents for characteristics such as honesty, credit

48、-worthiness- bargaining over terms of exchange and price determination.ex-post costs include:- transferring property rights- monitoring compliance with contractual terms- enforcing sanctions in the event of non-compliance.according to tct, transactions are governed under conditions of bounded ration

49、ality and opportunism of the economic agents involved. bounded rationality means that those who engage in economic transactions are intendedly rational, but only limitedly so (simon, 1947). indeed, decisions based on complete information are extremely rare in businesses. regarding opportunism: while

50、 traditional economics assumes simply that economic actors behave out of self-interest, tct assumes the possibility of self-interest seeking with guile. tct does not assume that all economic actors are always opportunistic. rather, it assumes that some of these actors may behave opportunistically an

51、d that it is costly to distinguish them from the non-opportunistic parties (e.g. barney and hesterley, 1999).in tct, transaction costs are related to three dimensions of transactions: frequency of the transaction, uncertainty in the transaction and asset specificity of the transaction. - frequency o

52、f transactions. repeated transactions between the same parties lead to self-enforcing cooperative solutions. where the exchange is not to be repeated, opportunism creates the need for third-party enforcement of contractual terms.- uncertainty. uncertainty is related to: asymmetric information exchan

53、ge (buyers and sellers do not have equal access to information), opportunism of the agent, bounded rationality.- asset specificity. asset-specific investments are related to a particular transaction. assets with a high amount of specificity have little value outside of a particular exchange relation

54、ship; redeployment of such investments is not easy or even possible. types of asset specificity are:- site specificity: firms or plants are located in close proximity to customers in order to economise on labour skills, transportation costs, inventories- physical specificity: plant, machinery and te

55、chnology that are specific to a transaction- human specificity: labour skills, social and managerial relationships specific to a transaction- branch specificity: buyer and seller cooperate in branch formation.transactions are governed by the market, a hierarchy or a hybrid form of governance. tct as

56、sumes that if the transaction has a high asset specificity, if uncertainties are involved and/or the transaction has a high frequency, vertical integration (the hierarchy) becomes the more efficient governance structure. if, however, the transaction has a low frequency, low uncertainty and low asset

57、 specificity, the market becomes the more efficient governance structure. if transaction costs are (relatively) low, the market governance structure will be the obvious choice for the economic agent. if transaction costs are (relatively) high, vertical integration will be the obvious choice. 5.2 gov

58、ernance relationshipslet us look closer at the governance relationships between organisations.tct first posed a discrete choice between hierarchy (vertical integration) and the market as the main governance structure. the current version of the theory explicitly acknowledges, however, that features of internal organisation can be achieved without complete vertical integration. inter-organisational information systems and contractual arrangements are in this respect examples of hybrid forms of vertical integration (rindfleisch and heide, 1997). in