Reassessing the management of the global
supply chain
Keywords
Risk, Supply chain,
Relationship marketing,
Partnering, Global marketing
Abstract
Focuses on specific elements of
supply-chain and partnering
arrangements to assess the
contribution of these to managing
the supply chain and making it
more responsive to the changing
business environment. The initial
sections of the paper articulate
the key elements of supply chain
management, risk management
and relationship marketing. A
model is then developed that
displays the complementarity of
these elements. Conclusions are
drawn from three case studies in
relation to certain key elements of
the model, with suggestions for
further development of the model
in terms of conceptual and applied
research.
Received: August 2000
Accepted: October 2001
Integrated Manufacturing
Systems
13/2 [2002] 110±116
# MCB UP Limited
[ISSN 0957-6061]
[DOI 10.1108/09576060210415446]
[ 110 ]
Bob Ritchie
Department of Business and Management Studies, Crewe and Alsager Faculty,
Manchester Metropolitan University, Crewe, UK
Clare Brindley
Department of Business and Management Studies, Crewe and Alsager Faculty,
Manchester Metropolitan University, Crewe, UK
Introduction
Recent developments in information and
communication technology (ICT), coupled
with the collapse of barriers to market entry
and other trading barriers has meant that
managing the supply chain in the twenty-
first century presents a rather different
proposition for the manager. Recent evidence
has suggested that not only will the present
approach to interfacing with elements of the
supply chain and the marketplace alter
fundamentally (Ritchie and Brindley, 1999)
but that the knowledge and skills required of
the manager will also change (Andersen
Consulting, 1999). Operating in the global
economy is no longer restricted to large
international organisations, even the
smallest of businesses now has the potential
to trade in the global economy by virtue of
the ICT developments. In addition to these
developments, assessments have been made
that the rate of innovation, in terms of
product/service outputs, the production/
delivery processes and consequently
consumer preferences/markets will continue
to increase more rapidly and result in
increased complexity (Rycroft and Kash,
1999). It is perhaps not surprising, therefore,
to expect predictions of radical changes to
supply chain structures, processes and
relationships. Traditionally, management of
the supply chain has been based on a linear
input-output model comprising fairly
regulated structures, processes and
relationships, each member of the supply
chain performing a specific added value
function in relation to the product/service as
it progresses towards the final consumer.
While this is recognised as a somewhat
simplistic model of the supply chain it
nevertheless represents the conceptual
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model underpinning the traditional view of
supply chain management and relationships.
The premise of this paper is that in order to
achieve an agile enterprise, management
must look towards effective adaptation of the
organisation to the developing amorphous
supply chain management model, where a
multitude of dynamic relationships must be
managed. The analysis at this stage will
identify factors at three levels:
1 changes in the global competitive model
and associated competitive parameters;
2 modifications to the supply chain
structures, processes and relationships
resulting in the amorphous supply chain
model; and
3 changes within the business organisation
in terms of strategies, processes and
skills.
It should be noted that these three levels are
inter-related from the business perspective
and will influence each other. A key feature
of this interaction and hence the amorphous
supply chain is the increasing complexity of
all dimensions of an organisation's activities
and the dynamic nature of the elements at
the three levels. The amorphous supply chain
model is evaluated in relation to three case
studies representing different competitive
scenarios, car manufacturing, technology
services and domestic furniture
manufacturing.
Global competitive model
The global competitive model may be
presented in terms of three levels of
economic activity:
1 Strategic global and national competitive
environment.
2 Industry structures and supply chains.
3 Business level strategies, processes and
skills.
While models of global competition have
always been subject to evolution and change,
the nature and scale of the present ICT
Bob Ritchie and Clare Brindley
Reassessing the management
of the global supply chain
Integrated Manufacturing
Systems
13/2 [2002] 110±116
innovations together with changes in
international competition will cause more
significant and arguably more rapid change
in the future. It is appropriate at this stage to
be clear that we are not advocating a model
based solely on ICT developments. There are
other changes in the competitive
environment (e.g. common currency
developments such as the Euro or changing
political situations such as the opening up of
the East European economies) which may
have an equal or greater impact in certain
sectors than the ICT developments at present.
It is also evident that harnessing ICTs may
facilitate and enhance the speed and nature
of the changes in the other competitive
parameters. The model presented recognises
that this is a model under transition and that
the nature of future competitive structures
and activities is uncertain. Developing this
conceptual model permits the identification
of the key parameters and evaluation of the
potential outcomes on the basis of the
information and knowledge currently
available concerning the relevant
commercial parameters and technologies and
their potential applications. Berthon et al.
(1998, p. 691) support the thrust of this work
by suggesting that ``more systematic research
is required to reveal the true nature of
commerce on the Web''. The research
programme being conducted by the authors
is designed to address this need by
investigating the changing perceptions of
managers and their strategic responses in
terms of supply chain structures, processes
and relationships.
Strategic global environment
The first level of the global competitive model
under consideration is the strategic global
and national competitive environment. The
principle factors influencing the
international or global level and the primary
linkages between them are presented in
Figure 1.
The technology element, in the view of
most observers, is without doubt the key
driving factor within the model. There are a
number of significant differences relating to
the present development of technology,
especially the ICT technologies. The effective
integration or fusion of the present
technologies (i.e. information processing and
communication technologies) has proved
more synergistic than any previous
combination of technologies. Although each
of the individual technologies has
experienced significant developments (e.g.
improved memory and storage capacities;
integration of video and text data; faster and
more reliable communications channels;
wireless communications) it has been fairly
evident that such developments have been
mutually supportive and synergistic. The
rate at which new technologies are
developed, diffused and implemented
commercially has accelerated rapidly over
the last decade. Foster (1986) concluded that
the process of technology adoption and
diffusion was becoming more rapid (i.e.
steeper gradient to the S-curve ) as the global
economy has developed forecasting that this
would accelerate further in the future.
Others (e.g. Rycroft and Kash, 1999) have
predicted that businesses will be more
prepared to migrate on to the next technology
curve than previously and that this may also
generate significant changes in the supply
chains.
Although technological change may be
viewed as the primary driving factor there
are several other significant changes, e.g. in
economic transactions and legislation, that
have either resulted from the ICT
developments or are required to facilitate the
maximisation of the potential benefits. Entry
and exit barriers are becoming less
significant in most sectors. Similarly,
geographic location, size of business or
previous experience present few barriers to
engaging in the new technologies and
associated markets, even on a global basis. A
consequence of these developments, which
has direct relevance to the present review of
the supply chain is that the markets are
becoming less stable and more transient. Not
only are new segments continually evolving
through changes in consumer behaviour (e.g.
Internet shopping, Internet gambling:
Brindley (1999)) but existing markets face
new competitive challenges as a result of
more rapid substitution effects and the
ability to communicate changes in product
attributes and prices more effectively.
The scale and pervasiveness of the
technological and environmental changes
currently being experienced pose challenges
to most aspects of the existing modalities of
commercial and business life. It is now
evident that these modalities require a
fundamental review to accommodate the
needs of business and commerce within the
new technological environment. Associated
with these dimensions within the strategic
global environment is the recognition that
both products/services and manufacturing/
delivery processes are becoming more
complex. Rycroft and Kash (1999) estimate
between 1970 and 1995 that product
complexity as a result of component parts or
manufacturing method, had doubled. With
[ 111 ]
Bob Ritchie and Clare Brindley
Reassessing the management
of the global supply chain
Integrated Manufacturing
Systems
13/2 [2002] 110±116
Figure 1
Strategic global environment
[ 112 ]
the increasing utilisation of ICT it can be
argued that a third source of complexity is
supply chain complexity. An indication of the
overall complexity is reflected in Figure 1
indicating the high degree of
interdependence between the key elements
within the competitive environment.
Industry structure and supply
chains
The main elements at this second level
within the global competitive model relate to
the industry relationship and supply chain
structures. These elements are summarised
within Figure 2, the arrows again indicating
the degree of interdependence and hence
complexity involved.
The fusion of technologies, will not only
generate new market opportunities but may
also destroy existing markets. Opportunities
exist for the development of more niche
markets as the costs of offering bespoke
products and services may be greatly
Figure 2
Industry structure and supply chains
reduced. The Web may also be employed as
an effective business communications
channel, providing access to suppliers and
markets that the business was previously
unable to reach. It has been illustrated that
the smaller organisation will increasingly be
favoured by such developments given the
lower fixed overheads and the ability to be
more flexible and rapid in response to
changes in both supplier and consumer
needs. Collaboration across sectors (i.e.
providing a package of products and services
from more than one supplier to meet total
consumer needs) will provide further
opportunities to exploit the new market
opportunities. In many respects the ICTs
facilitate the potential for effective
collaboration.
Another dimension of change within the
industry structures and operations concerns
developments within the supply chain.
Traditionally, the concept of the supply chain
``attempts to capture the idea of a sequence of
interdependent tasks'' (Burns and New, 1996
cited in Saunders, 1997, p. 44). This implied
sequence acts as a channel where each of the
sequence of tasks adds value as the product/
service is moved from the producer to the
ultimate user. Fisher (1997, p. 107) argued
that the sequence of the tasks in the supply
chain ``performs two distinct types of
functions: a physical function and a market
mediation function''. The physical function
involves the transformation of raw materials
into parts, with each member of the supply
chain having a particular role to play or
function to perform in producing the final
product and the market mediation function
ensuring that the supplied products match
consumer wants. Broadly, this process
operates whether the supply chain is
operating in a national or international
Bob Ritchie and Clare Brindley
Reassessing the management
of the global supply chain
Integrated Manufacturing
Systems
13/2 [2002] 110±116
context. Figure 3 illustrates this typical
sequential flow of the supply chain.
It is argued that this traditional linear
supply chain model will be radically altered
and replaced with a new supply chain model
named the amorphous supply chain model
(Figure 4). The catalyst for this change in
supply chain structures will be the
technological and environmental
developments outlined earlier in the global
competitive model. Support for this premise
is offered by Andersen Consulting Europe
(1999, p. 3) whose research identified that ICT
developments require new flexible business
models to be created. The new supply chain
model is called amorphous owing to its
inherent characteristics of unpredictability,
dynamism and instability. For example,
business size no longer dictates whether a
company can use the Internet for competitor
analysis or global promotional campaigns.
The logical development of this process
would be the exclusion of intermediaries
such as sales and promotion agencies
currently supporting the sales to the
marketplace. This disintermediation (Ritchie
and Brindley, 2000) enables business to enter
markets not previously considered
commercially viable in terms of the entry
barriers and entry costs of establishing
representation and agencies. Similarly, the
business no longer has to rely on a single
supply source, which increases competition
and reduces dependency. Thus, the whole
nature of relationships between supply chain
members changes and becomes more
complex as a result of ICT innovations.
Early evidence suggests that the initiation
of new supply chain partnerships may
originate from further along the supply chain
as distributors and consumers seek
alternative sources for products and/or
services. The speed and low cost of the
``search engines'' capable of searching the
Figure 3
Linear supply chain model
web sites for potential suppliers provides a
new dimension to developing supply chain
partnerships.
Supply chain management:
strategies, processes and skills
The third level of the global competitive
model concerns the anticipated challenges to
the decision making and behaviour of the
business organisations themselves. An
example of this may be the recognition of the
need to build strategic relationships both
within the present configuration and
membership of its supply chain as well as
those presently external to the supply chain.
Some of these relationships and interactions
may be more direct (Gummerson, 1994), for
example, the pool of skilled employees
influencing the internal employee markets.
Others may prove more indirect, for example
raw material suppliers to customer markets.
In addition to addressing strategic
relationships with suppliers there are an
increasing number of examples of
manufacturers making direct contact and
building relationships with customers
further down the supply chain, including the
final consumers to improve their logistics,
services and marketing. The primary
purpose is to manage their exposure to
strategic risks and to minimise the
consequences, should such risks be realised.
The complexity and dynamism implied by
the amorphous supply chain model in terms
of the interaction between all of the
dimensions poses difficulties in the practical
context of deciding where to focus attention.
Given the limited resources typically
available in most organisations, especially in
relation to management time, the business
needs to develop new paradigms for strategic
management and risk management.
[ 113 ]
Bob Ritchie and Clare Brindley
Reassessing the management
of the global supply chain
Integrated Manufacturing
Systems
13/2 [2002] 110±116
Figure 4
Amorphous supply chain model
[ 114 ]
The evidence available concerning the
impact of the amorphous supply chain model
on the strategy, structures, relationships and
practices are still largely anecdotal. Evidence
from related studies into the impact of e-
business (e.g. SECTEC, 1999) have suggested
an increasing awareness of the potential
opportunities and the issues involved though
little evidence of significant changes in
strategic responses to these. The larger
organisations are generally more responsive
to the challenges presented with the majority
of businesses employing more than 200
employees having a Web presence. The most
significant feature from a study of 500
businesses (SECTEC, 1999) was the almost
doubling in the installation and utilisation of
ICTs from 1998 to 1999 in almost every sector
and size grouping. Further studies (Ritchie
and Brindley, 2000) have confirmed this trend
especially in relation to influencing the
advertising and promotional strategies of the
business. A more detailed study of a sample
of 12 businesses confirmed that all were
experiencing pressures on the supply chain
though such pressures were not primarily
related to the ICTs, but rather due to
increasing pressures on price, quality,
delivery etc.
It is impractical to develop a full
exploration of the consequences in relation to
strategies, structures, processes and skills.
However, the illustration of responses by
particular organisations to the challenges
encountered should provide an insight to the
issues. These have been selected from the
research undertaken to illustrate dimensions
of the amorphous supply chain model:
. Distribution agencies illustrating
disintermediation forward along the
supply chain to reach new consumers.
. Raw material suppliers demonstrating
backward disintermediation along the
supply chain to suppliers of primary raw
materials.
. Output service suppliers engaging in a
process of strategic collaboration and
partnering with existing members in the
supply chain to engineer new solutions.
Distribution agencies
Rolls Royce and Bentley Motor Cars face a
somewhat unique strategic challenge. The
acquisition of the manufacturing
organisation by Volkswagen and the
simultaneous acquisition of the Rolls Royce
brand name by BMW has meant that the
existing organisation will continue to
market, manufacture and distribute both
brands of car for the next two years. After
this period the Rolls Royce marque will be
marketed, manufactured and distributed by a
separate company owned by BMW. The
emerging Bentley Motor Cars business is
simultaneously planning a significant
increase in the manufacturing output to
compensate for the loss of the Rolls Royce
products. The challenge facing Bentley Motor
Cars is how to establish brand recognition
within the international marketplace. The
more usual supply chain approach would be
to work through the usual distribution
agencies, the dealerships or agents in each of
the main potential markets to utilise their
expertise to build the Bentley brand image.
The dual problem is that the Bentley market
niche targeted is different from the
traditional Rolls Royce niche and the new
products that will be sold in two years time
have still not been designed. The solution
adopted is to employ a marketing strategy
designed to communicate directly with the
consumer using ICT. Forging relationships
with potential and existing consumers may
be undertaken directly without any
intermediaries, providing potentially more
effective and efficient communications.
Having established the database of potential
clients the organisations may build a
relationship via the Internet. While this
approach may enhance the earlier stages of
marketing, strategy solutions for later stages
in the supply chain involving delivery,
maintenance and continuing customer
support will need equally innovative
solutions if the traditional distribution
agencies are being circumvented.
Raw material suppliers
Heblon plc, a medium-sized business with a
turnover of £10 million, manufactures high
quality wooden furniture. The company has a
very small share of the UK traditional
furniture niche market specialising in
handcrafted wooden products. While the
company has managed to insulate itself from
many of the risks in the strategic global
Bob Ritchie and Clare Brindley
Reassessing the management
of the global supply chain
Integrated Manufacturing
Systems
13/2 [2002] 110±116
environment for a significant part of its
history, more recently this has become
problematic. An example of this is the
increasing pressures on raw material
supplies in terms of availability, long and
unpredictable lead times, escalating prices
and a reduction in the number of potential
suppliers. This characterises many business
situations where increasing international
competition, upheaval, acquisitions and
mergers lead to a change in, and often fewer,
suppliers and a reliance on a number of
intermediaries that may be scattered across
the globe. The first and probably the most
important lesson was the recognition that
Heblon is in essence part of a series of
interlocking relationships within the supply
chain. The second development was to forge a
direct relationship with the hardwood
suppliers seeking to bypass the host of
intermediaries and to focus on the
development of these relationships as
opposed to seeking only to resolve specific
issues or problems as they occur. The
sharing of information and knowledge, the
building of trust and mutual respect and the
development of an open and transparent
process of decision making has helped both
partners to manage their supply chain
relationship more effectively.
Output services suppliers
Europa Scientific is a hi-tech company based
in the UK specialising in designing and
developing computer-driven test instruments
for the isotopes research market. The
company exports around 80 per cent of its
sales and has therefore been accustomed to
the pressures represented in the global
competitive model. Europa also experiences
the risks shared by businesses operating in
the advanced scientific technology sector
which require significant investments in
research and development and encounter
rapidly changing demand patterns as
technologies evolve and change. The primary
competitive resource of the business is the
organisation's technical knowledge and
expertise. The key added value that Europa
offers to its customers is the ability to
identify, analyse and develop solutions to
unique problems. The effective development
of this service requires the establishment and
maintenance of a network of specialist
suppliers, comprising both hardware and
software expertise in often unrelated
technological areas. This does not necessarily
imply leading edge technologies but may
frequently link to more traditional areas of
science and technology. Europa seeks to
capitalise on this element of its supply chain
management strategy to enhance its
competitive advantage and to reduce risks.
The staff will source technical equipment,
software, expertise etc. from various
suppliers, which is then modified to meet
client needs. A relationship is then built both
between the differing suppliers and Europa
staff and between the suppliers and Europa's
customers. Thus, for Europa Scientific the
key to effective management and minimising
risk in their rapidly changing technical
environment (i.e. amorphous supply chain) is
the maintenance of simultaneous links with
suppliers and customers.
Conclusions
The research reviewed provides support for
the three levels of the conceptual model
presented. The empirical evidence from
recent studies, including the authors',
suggests an increasing awareness of the
potential opportunities and risks concerning
the new supply chain relationships and
recognition of the new global competitive
structures and processes that are emerging.
The trends indicate that the larger
organisations are already engaging in a
number of the developments identified in the
amorphous supply chain model, though the
smaller organisations are only beginning to
recognise the potential global opportunities
available. The emphasis for most
organisations is still towards product/service
marketing via the generation of Web sites and
other marketing strategies employing the
Internet and other ICT technologies. Few
organisations have addressed the other
dimensions of the amorphous supply chain
though the illustrations provided indicate the
potential opportunities and consequently the
risks to all businesses.
A significant task facing research within
this field is assessing the contribution of the
dimensions of the supply chain model
towards enhancing global competition for all
sizes of enterprise. More research is needed
to provide improved understanding of the
dynamics, the structure and the rate of
transition to the new model. An improved
insight is required into the appropriate
skills, culture and decision making
approaches to managing strategic
development of the supply chain and
managing the ensuing risks.
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[ 115 ]
Bob Ritchie and Clare Brindley
Reassessing the management
of the global supply chain
Integrated Manufacturing
Systems
13/2 [2002] 110±116
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