The need for third-party coordination in supply chain governance

Abstract

During the last few decades, companies have moved away from hierarchical, integrated supply chains in favor of fragmented networks of strategic partnerships with external entities. This change has caused ripples throughout the old supply network and raised questions about the future. The authors consider the impact of vertical disinteJ gration in large-scale supply networks, particularly in the textile and electronics industries. They focus on supply chain strategies that have been adopted by network players in order to accommodate for the changing governance and ownership structures. Their broad hypothesis is that the process of disin tegration in many industries is not sustainable from a coordination and control viewpoint, and therefore will be followed by eventual reintegration -although it may take different forms in different industries. They discuss the expanded role of the systems integrator, which, in many cases, goes beyond critical coordination services and extends into issues related to control and governance of portions of the supply network. They also explore the challenges that systems integrators are likely to face, and they contrast two different models of coordination and governance that could be adopted by such players. Copyright © Massachusetts Institute of Technology, 2007. All rights reserved.