The Internet Encyclopedia (Volume 3)

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Supply Networks: Developing and Maintaining

Relationships and Strategies

Supply Networks: Developing and Maintaining

Relationships and Strategies

Robert H. Lowson,University of East Anglia, United Kingdom

Introduction 398

Demand Complexity and the Need for a Flexible

Response 398

The Stimuli for Greater Flexibility 398

A Classification of Flexibility 399

Mass Customization 401

Strategic Classifications 401

Developing and Maintaining Supply Network

Relationships 402

Genealogy and Definitions 402

Supply Network Relationships 403

Components and Classification of Supply

Network Relationships 404

The Benefits of a Supply Network Perspective 404

The Partnership Process 405

Customizing Supply Network Relationships as

Part of an Operations Strategy 406

The Building Blocks of a Supply Network

Operations Strategy 406

Customization of a Supply Network Operations

Strategy 408

Conclusions and Further Research 410

Glossary 410

Cross References 411

References 411

INTRODUCTION

The world is changing. The consumer is spoiled. Diver-

sity is rampant. We have moved away from the supply

side of business to a“pull” world. Consumer demand is

approaching the chaotic in its insatiable appetite for di-

verse, individualized services and goods that are provided

by flexible and responsive organizations. To understand

this shift, management theorists have developed a whole

galaxy of operations strategies and operational activities,

including supply network management. For many firms

competing in increasingly complex and dynamic sectors,

the correct choice, implementation and evolution of a sup-

ply network operations strategy, can provide considerable

competitive advantage. Pivotal to such strategies are the

core relationships involved.

DEMAND COMPLEXITY AND THE NEED

FOR A FLEXIBLE RESPONSE

Demand tells us exactly what products, services, and value

customers seek. In other words, as Lauterborn (1990) sug-

gests, identifying and delivering the four C’s: customer

needs and wants; cost to the customer; convenience; and

communication.

This chapter examines the nature of supply network

relationships and their contribution in satisfying the de-

mands of the market and customer. Before embarking on

this task, however, we need to spend a little time thinking

about the concept of flexibility. It is a subject that cur-

rently exercises the minds of many managers in today’s

organizations, as flexibility, in its various guises, offers

the potential to answer the increasingly heterogeneous de-

mands of the customer. Flexibility can be examined from

two particular perspectives: the stimuli for greater prod-

uct and service variety, and the various classifications of

flexibility organizations exhibit by way of a response.

The Stimuli for Greater Flexibility

Flexibility in operational systems is a response to the need

for variety and its attendant uncertainty. The former can

be viewed as being demand driven whereas the latter is a

supply dilemma. We examine both of these elements in a

little more detail.

Consumer Demand for Variety

Consumer tastes in the past four decades have altered rad-

ically. Consumer demand in many sectors for both goods

and services is displaying piecemeal, disjointed, and un-

systematic tendencies and, thus, is becoming increasingly

difficult to satisfy. Consumer purchases are more than

ever a reflection of a lifestyle or fashion statement rather

than the satisfaction of a basic need, and this is only the

beginning. To this has to be added the complexity of in-

stantaneous, electronic, worldwide communication, and

an information explosion that has served to educate the

average shopper beyond any level seen to date. To meet

these changing demand patterns, organizations are hav-

ing to react more speedily while avoiding the penalties as-

sociated with increasingly volatile demand. In many sec-

tors, this drive for variety has reached almost chaotic pro-

portions.

Empirical research confirms some of these trends. In

a recent survey of U.K. retailers in fast-moving consumer

goods (FMCG) industries, 85% of respondents agreed that

“for-sale” seasons were becoming much shorter. In addi-

tion, 93% of the survey witnessed a trend toward greater

product volatility, fashion influence, difference, and cus-

tomization over the past 3 years. Similar questions were

posed in a separate survey of supplier manufacturers.

Here, 81% agreed that seasons were much shorter, 87%

saw more volatility in style introductions, and 93% be-

lieved unique and customized goods to be of increasing

importance (Lowson, King, & Hunter, 1999).

398