In a previous post, I presented a discussion about the relationship between transaction cost economics (TCE) and supply chain management (SCM), which was started by Williamson (2008) and continued by Zipkin (2012). This discussion called attention to several theoretical gaps at the TCE/SCM interface. In their 2012 article, Supply Chain-Wide Consequences of Transaction Risks and Their Contractual Solutions, Wever et al. argue that “a shift [is needed] within the TCE literature from a focus on bilateral transactions, to examining transactions within a supply chain context”. They present five models which “(1) provide justification for moving the TCE framework beyond the dyad; and (2) explain the implications of the shift toward an extended TCE framework for the (optimal) use of supply chain contracts”. It turns out that supply chain members need to take into account both transactions on the supply side and transactions on the demand side, as only this can reduce exposure to transaction risks.
Wever, M., Wognum, P.M., Trienekens, J.H., & Omta, S.W.F. (2012). Supply Chain-Wide Consequences of Transaction Risks and Their Contractual Solutions: Towards an Extended Transaction Cost Economics Framework. Journal of Supply Chain Management, 48 (1), 73-91 DOI: 10.1111/j.1745-493X.2011.03253.x
A Munich court is currently hearing a case that involves several members of a supply chain: (1) Alfred Ritter, a manufacturer of chocolate (“Ritter Sport”), (2) Symrise, Ritter’s supplier of piperonal, an aromatic compound, (3) Stiftung Warentest, an influential consumer organization, whose verdicts frequently lead to an increase or decrease in sales in Germany, and (4) the end consumers. Stiftung Warentest conducted tests on Ritter’s hazelnut chocolate. They argue that piperonal, a vanilla flavoring, cannot be gained in a natural way and is, thus, falsely labelled by Ritter as a “natural flavor”. According to Symrise, “[t]he piperonal contained in this flavor is not ‘chemically’ manufactured, contrary to the statements made by Stiftung Warentest”. The court’s decision will be announced on January 13th. The case has confused consumers and influenced their shopping behaviors in the important winter season. It demonstrates that reputation is a strategic asset and reputational dependencies exist in the supply chain.
Update (2014-01-13): Alfred Ritter won the dispute against Stiftung Warentest.
We have to admit that there is still no such thing as a “theory of supply chain management”. A new article by Mena et al. (2013), titled Toward a Theory of Multi-Tier Supply Chain Management, might bring us one step closer to such a theory by taking into account that supply chains have become more complex, more fragmented and longer. This piece of research, which is based on an inductive case study research design, hands theory-testing researchers interesting propositions on a silver platter: First, depending on the supply chain position, the members of the supply chain draw power from different sources. Second, the buyer needs to connect directly with the supplier’s supplier (“closed supply chain”) to influence product characteristics. Third, with a growing degree of such a direct connection, power is increasingly replaced by trust. Finally, closed supply chains are more stable, but require more management resources.
Mena, C., Humphries, A., & Choi, T.Y. (2013). Toward a Theory of Multi-Tier Supply Chain Management. Journal of Supply Chain Management, 49 (2), 58-77 DOI: 10.1111/jscm.12003