Social Network Analysis in Supply Chain Management
It is time to take a closer look at Borgatti & Li’s (2009) important article: On Social Network Analysis in a Supply Chain Context. The article has become part of the canon of SCM literature since its publication and it is now a mandatory reading in many SCM master programs across the globe. In simple language, the article offers a very good introduction to the subject of social networks and relates social network concepts (e.g., ego network, node centrality, structural hole, structural equivalence) to the supply chain context. Even ten years after its publication, the article has not lost its relevance for our discipline. Last year, it was one of the ten most downloaded articles from the Journal of Supply Chain Management. The authors argue “that the network perspective has the potential to be a unifying force that can bring together many different streams of management research, including SCM, into a coherent management science perspective”. I agree.
Borgatti, S.P. & Li, X. (2009). On Social Network Analysis in a Supply Chain Context. Journal of Supply Chain Management, 45 (2), 5-22. https://doi.org/10.1111/j.1745-493X.2009.03166.x
A Theory of the Supply Chain
In their very insightful essay, Toward the Theory of the Supply Chain, Carter, Rogers & Choi (2015) argue that “before we continue to build theories of supply chain management, we must first develop a theory of the supply chain – the phenomenon that we purport to manage”. I could not agree more with their argument. Indeed, without focusing on the supply chain before focusing on how to manage it, SCM research would not be more than fishing in murky waters. The authors present six foundational premises to characterize a supply chain. These provide “a holistic conceptualization of the supply chain – what it is and how it behaves”. Moreover, the authors present several future avenues for further developing their conceptualization of the supply chain. I can only recommend reading this important new paper and I am convinced that it will have a major influence on how future SCM research is being conducted.
Carter, C.R., Rogers, D.S., & Choi, T.Y. (2015). Toward the Theory of the Supply Chain. Journal of Supply Chain Management, 51 (2), 89–97 DOI: 10.1111/jscm.12073
Rethinking Corporate Social Compliance in the Supply Chain
Managers are increasingly under pressure to ensure that their products bear attributes like “fair”, “ethical”, “green”, or “social”. Hereby, it becomes clear that solutions cannot just be found in the manager’s company, but in the company’s end-to-end supply chain. This has led companies to audit every company along their global supply chains against the own standards, which resulted in a large volume of auditing. The Rana Plaza building collapse, however, tragically showed that this top-down approach seems to fail. Departing from this observation, a new EY report, Human Rights and Professional Wrongs (pdf), provides an excellent summary of the problem and a set of recommendations for improvement. For example, the authors recommend to use third-party certifiers and auditors more strategically, to prevent orders from factories that have not had their status assessed, and to maintain longer relationships with a smaller number of suppliers. These recommendations could help to sharpen a blunt sword.
Collaboration Networks, Structural Holes, and Innovation
Recently, I discovered an article by Ahuja (2000), Collaboration Networks, Structural Holes, and Innovation: A Longitudinal Study, which was published in Administrative Science Quarterly. It contains a framework that “relates three aspects of a firm’s ego network—direct ties, indirect ties, and structural holes (disconnections between a firm’s partners)—to the firm’s subsequent innovation output.” The author suggests that “[t]he more direct ties that a firm maintains, the greater the firm’s subsequent innovation output”. Similarly, he suggests that “[t]he greater a firm’s number of indirect ties, the greater the subsequent innovation output of the firm”. Here, the impact of indirect ties “will be moderated by the level of the firm’s direct ties”. These hypotheses are supported by the results of a longitudinal study. Two competing hypotheses are presented concerning the effect of increasing structural holes on innovation. The empirical results indicate that this effect is negative. Ahuja’s article is among the most-cited ASQ articles.
Ahuja, G. (2000). Collaboration Networks, Structural Holes, and Innovation: A Longitudinal Study. Administrative Science Quarterly, 45 (3), 425-455 DOI: 10.2307/2667105
Egocentric Network vs. Whole Network Level of Analysis
Supply chains have often been regarded as interorganizational networks. An incredibly insightful article by Provan et al. (2007), Interorganizational networks at the network level: A review of the empirical literature on whole networks, makes clear that two different views on interorganizational networks need to be distinguished: (1) the view from the organizational level of analysis (also referred to as actor level, micro-level or egocentric network level) and (2) the view from the network level of analysis (also referred to as macro-level or whole network level). Egocentric theories often focus on the “embeddedness” of an organization in a network and on dyadic relationships. The authors argue that “[o]nly by examining the whole network can we understand such issues as how networks evolve, how they are governed, and, ultimately, how collective outcomes might be generated”. Their article provides a review of studies of whole networks. I am certain that supply chain management research can benefit from this valuable contribution.
Provan, K., Fish, A., & Sydow, J. (2007). Interorganizational Networks at the Network Level: A Review of the Empirical Literature on Whole Networks. Journal of Management, 33 (3), 479-516 DOI: 10.1177/0149206307302554
Logistics Clusters (Guest Post by Yossi Sheffi, MIT)
Logistics clusters play an increasingly important part in logistics & supply chain management. I am happy to share the following guest post by Professor Yossi Sheffi, a distinguished expert in logistics clusters. Thank you for contributing to my blog.
Logistics clusters are agglomerations of firms that come together to share logistics expertise and know-how. As I argue in my new book Logistics Clusters: Delivering Value and Driving Growth (MIT Press, October 2012), these entities have a number of unique, and generally underestimated, attributes. First, they are self-reinforcing in that logistics clusters use the high volumes of freight they generate to capture economies of scope and scale and reduce costs while improving service quality. These benefits attract more companies, which in turn bring further efficiencies within reach. Second, resident companies use the cluster to pool expertise and equipment, which buffers them against fluctuations in demand. Third, logistics clusters are major creators of employment opportunities that tend not to be “offshorable” and not tied to the fortunes of any one industry. Finally, these entities are building considerable expertise in environmental sustainability. These are some of the reasons why I believe that the private and public sectors need to invest more in logistics clusters.
Yossi Sheffi is a professor at the Massachusetts Institute of Technology, where he serves as Director of the MIT Center for Transportation & Logistics.
The Network Inertia Perspective
In their insightful AMR article, Framing interorganizational network change: A network inertia perspective, Kim et al. (2006) argue that it is often unlikely that firms will replace their network partners based solely on economic motivations. The authors use the term “network inertia” for these constraints on network change and define it as “a persistent organizational resistance to changing interorganizational dyadic ties or difficulties that an organization faces when it attempts to dissolve old relationships and form new network ties”. In their theoretical framework, Kim et al. describe causal mechanisms for the action of constraints on network change and formulate twelve propositions. For instance, the likelihood of an organization to change its network ties is higher if its environment is competitive or its status is high, but this likelihood is lower if the organization is large or old. The framework can be applied to different units of analysis, particularly to supply and demand networks.
Kim, Tai-Young, Oh, Hongseok, & Swaminathan, Anand (2006). Framing interorganizational network change: A network inertia perspective. Academy of Management Review, 31 (3), 704-720 DOI: 10.5465/AMR.2006.21318926
The Relational View in SCM Research
Published in 1998, The relational view: Cooperative strategy and sources of interorganizational competitive advantage by Dyer and Singh remains one of the most influential business papers. Ten years later, the authors discussed their paper in an interview with ScienceWatch.com. They argue that “the main contribution of the [paper] was that it outlined a theory for considering dyads and networks of firms as a key unit of analysis for explaining superior individual firm performance”. The relational view extends both the industry structure view (unit of analysis: industry) and the resource-based view (unit of analysis: firm), because from this view a critical resource can span firm boundaries. The four sources of interorganizational competitive advantage identified by the authors are: (1) relation-specific assets, (2) knowledge-sharing routines, (3) complementary resources/capabilities, and (4) effective governance. While researchers are still searching for the paradigm of SCM research, the relational view can be an important building block to explain the supply and demand network. The relational view has later been extended by Lavie (2006).
Supply and Demand Network Management
“Supply chain” is not the right word. The system it describes is not restricted to the supply side and it does not take the form of a chain. Should it be “supply and demand network management” rather than SCM?
Supply Chains as Complex Adaptive Systems
As recently discussed on this website, the paradigm of SCM research should refer to the system “supply chain” rather than to the system “company” or to the system “supplier-buyer relationship”. In their interesting conceptual note, Supply Networks and Complex Adaptive Systems: Control versus Emergence, Choi et al. (2001) acknowledge the notion of a supply network as a system. The authors go even further and argue that supply networks should be recognized as a complex adaptive system (CAS). Choi et al. propose that many supply networks emerge rather than result from purposeful design by a singular entity. They also emphasize that when managing supply networks, managers must appropriately balance how much to control and how much to let emerge. A similar viewpoint has later been taken by Surana et al. (2005; Supply-chain Networks: A Complex Adaptive Systems Perspective). Can the notion of a supply chain as a complex adaptive system be a building block for the missing paradigm of our discipline?
