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410 SUPPLYNETWORKS:DEVELOPING ANDMAINTAININGRELATIONSHIPS ANDSTRATEGIESit operates), and the integration of the supply system
(data/information availability, technology, strategies used,
and culture).Importance of supply network relationships.Supply
network relationships are both a driving force shaping
the strategy and an important component of it. As was
seen earlier, the type of relationship, its purpose, degree
of integration and commitment, power balance, strategic
importance, strengths and weaknesses, cultural expecta-
tions, and so forth, will all exert certain pressures on the
shape of the operations strategy.Vertical integration.The consideration of vertical inte-
gration strategies of pipeline members includes direction
of any expansion (upstream and downstream), the extent
of the process span required (number of supply system ac-
tivities undertaken by firms), and the balance of the verti-
cally integrated stages (capacity and operating behavior),
whether fully or partially balanced.Supply Network Performance Metrics
Research has now demonstrated that in practice, the
building blocks are composed of certain elements
(Lowson, 2002). The types of building blocks applied
and the degree of significance each receives will be dic-
tated by certain performance factors across the whole
supply network. First, each of the individual elements
contained within the building blocks can be assessed
and weighted in terms of its contribution to competi-
tive advantage (negative, low, medium, and high). Sec-
ond, the individual building blocks themselves can be
evaluated as to performance impact. Here, the measures
will be particular to the sector or supply network. Pre-
vious studies have, however, included impact on profit,
turnover, quality, and customer service levels. The exer-
cise to apply a weighting to these various building blocks
and their elements can be conduced at the supply net-
work level; this will include the input of key suppliers
and customers as part of a relationship. The supply net-
work operations strategy profiles subsequently created
will reflect the differing degree of importance placed on
each component with the resulting strategy, thus, be-
coming customized. Any subsequent supply network op-
erations strategy will incorporate high-scoring elements
giving a unique blend and emphases. This exercise can
also be conducted by a particular product group and/or
customer.CONCLUSIONS AND FURTHER
RESEARCH
This chapter emphasized the strategic nature of supply
network relationships. They form an important part of
an operations strategy. Such strategies are increasingly
adopted to respond to the complex and dynamic trad-
ing environment. The chapter began with a review of this
domain and a discussion of demand complexity and the
need for an organization to offer a flexible response. At
that point a model was introduced that demonstrated the
evolution of supply systems and gave a future vision: thecluster of value. Using this concept, we considered
the response of an organization and the calls for mass
customization.
The second part of the chapter addressed supply net-
work relationships as part of a network operations strat-
egy. Here, perhaps for the first time, a genealogy of op-
erations strategies and operational approaches was pos-
tulated. This allowed a definition of the supply network
operations strategy to be elicited and the role of network
relations to be explained. Finally, we described how such
supply network operations strategies, and their necessary
relationships, can be customized to demand. This process
entailed the revolutionary concept that firms will have a
number of such strategies and each may be composed of
certain building blocks with an emphasis on their inter-
relationships.
We concluded by describing how the supply network
operations strategy and its various relationships could, in
practice, be tailored to various demands.
Further research should address a number of key con-
cerns. First, the process by which the various building
blocks are chosen must be ascertained. Whether the or-
ganization can unilaterally decide for itself or whether
it must decide based on powerful suppliers and/or cus-
tomers is an important point. This has implications for
the role and outcome of any relationship forming part of
the operations strategy. Second, the performance of the
operations strategy itself must be addressed. Its exact im-
pact and the role of relationships on that impact remains
far from clear. As the research continues, constructive sug-
gestions from industry and academia are, of course, more
than welcome.GLOSSARY
Building blocks The generic components of supply net-
work operations strategy.
Cluster of value A futuristic vision of the demand and
the supply network structure necessary to provide a
flexible response.
Filtration process The “drivers” (product or product
group demand behavior, network behavior, network
performance) that shape the building blocks of a sup-
ply network operations strategy.
Flexible response The ability to satisfy demand in all
its many forms.
Operational effectiveness Performing similar activi-
ties better than rivals.
Strategic positioning Competition on the basis of a
unique competence, such as flexibility, cost, and dif-
ferentiation; the ability to perform activities different
from those of rivals, or to perform the same activities
in different ways.
Supply network An interconnection of organizations
using different processes and activities to add value.
Supply network operations strategy Major decisions
about certain medium- to long-term operational capa-
bilities in the supply network and the blending of these
into distinct network strategies.
Supply network relationships Key external strategic
interconnections and associations formed over time by
an organization with its supply networks.