The Internet Encyclopedia (Volume 3)

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DEVELOPING ANDMAINTAININGSUPPLYNETWORKRELATIONSHIPS 403

We can begin at the bottom of the table with a distinct

species. These are the generic “building blocks” of an op-

erations strategy for a supply network or a tactical supply

network approach. The building blocks will, in practice,

contain certain discernable elements when deployed (sub-

species). Next, groups of building blocks (species) form

a particular operational or tactical focus (genus). Strate-

gic decisions are then made about these building blocks

(order) as components of an operations strategy. A partic-

ular identifiable type of operations strategy (class)consti-

tutes the pattern of organization or form that is a qualita-

tive set of relations. Thus, theclassis an identifiable type of

operations strategy for a supply network. This pattern or

organization is then physically embodied in the structure,

a unique, individual, and quantifiable operations strat-

egy evident or used in a particular supply network situ-

ation (the physical embodiment of the class). We can also

see particularsubclasses,where the strategy is much nar-

rower, as used, for example, in a linear chain rather than

a network, or in just part of a chain (logistics). The class

then forms part of a higherdivisionorphylum,which is

a generic model of an operations strategy that contains

interrelated building blocks. Finally, the generic opera-

tions strategy belongs to a largerkingdomof business

strategies.

We will return to some of these points in a moment.

However, at this stage we also need to provide some clear

definitions of a supply network and a supply network op-

erations strategy. Christopher (1992) offers the following

definition of a supply network: “an interconnection of or-

ganizations which relate to each other through upstream

and downstream linkages between the different processes

and activities that produce value in the form of prod-

ucts and services to the ultimate consumer.”

A definition of any operations strategy for the sup-

ply network can be adopted from Lowson (2002): “ma-

jor decisions about, and strategic management of, cer-

tain medium- to long-term operational capabilities. These

include: core competencies, capabilities and processes;

technologies; resources; relationships; and, key tactical

activities necessary in any supply network; to create and

deliver product and service combinations and the value

demanded by a customer. The strategic role involves the

blending of these various building blocks into one or more

unique strategic architectures.”

For completeness, we can think of supply chain man-

agement as being composed of operational or tactical

activities (genus—see Table 1) and defined as “the man-

agement of upstream and downstream relationships with

suppliers and customers to deliver superior customer

value at less cost to the supply chain as a whole” (Christo-

pher, 1998).

Supply Network Relationships

There are a number of possible relationships in a supply

network. We can picture these as being part of a contin-

uum that to one extreme concerns acquisitions through

vertical integration and to the other, covers transactions

in a pure market (see Figure 3). Thus, inter-firm relation-

ships can vary between transactional with many vendors

(very few activities performed internally) and “in-house”

(few vendors).

Above the line in Figure 3 are the various relation-

ships possible between what we might term full ownership

(acquisition of a supplier or customer, placing it in-house)

or purchase (transactions in the marketplace). In between

are several network relationships that, moving from right

Merger or

acquisition

Equity

Interest

Strategic

Alliance

Ownership

Joint Project

Joint Venture Long-term

Contract

Short-term

contract

Transaction

Minority

Share-holding

Shared fate Product lifetime Spot purchase

Pure Market

(transactional --

many vendors)

Vertical Integration

(in-house -- few

vendors)

Relationship

Legal Status

Figure 3: Relationships in a supply network.