Coordinated Supply Networks

The meaning of coordination is broad, but a good definition applicable to the supply chain context is given by Malone and Crowston. At its highest level, Malone and Crowston define coordination as:

“Coordination is managing dependencies between activities”

Supply chain management is based on the premise that a single company rarely can efficiently perform all the operations in the manufacturing process of a product from raw material to finished product. Correspondingly, the dependencies created among supply participants, require coordination activities to ensure adequate flow of information, materials and financial payments among members.

This inclusive definition of coordination comprises efforts like “cooperation” and “collaboration” which have their own connotations of managing dependencies of activities. The definition further suggests that if there is no interdependence there is nothing to coordinate while on the other hand, the higher the dependency the greater the need to coordinate.

There are two dimensions of coordination. These are;

• The first dimension of coordination is external information integration, to coordinate exchange of information among companies.

• The second dimension of coordination is collaboration with supply chain partners to jointly coordinate information and material flows.

Each dimension of coordination is inclusive, i.e. each higher dimension contains elements and information from the lower dimension. Both of these building blocks in coordination improve the sharing of information and the efficient managing of materials but do not rigorously coordinate mutual dependencies of all three fundamental flows – information, materials, and financial.

The current Supply Chains require coordination in the following areas;

• Information Systems and Sharing Coordination
  • The consensus in information systems coordination is the use of a company centric extranet or portal. This structure is most likely a channel master centric system, in which suppliers are encouraged or required to join. It allows a faster way of establishing communication standards and processes to share information than through industry standardization consortia. The use of such system potentially provides the supply network with a competitive advantage over other supply chains that do not extensively coordinate information flows.
  • ƒA larger role of third parties such as industry consortia and electronic exchanges to facilitate coordination,
    

• Logistics and Operations Coordination
  • Consensus of responses points to 3PLs as taking the role of logistics and operations coordinator in the supply network. This is not only consistent with the current trend to outsource operations to 3rd party value added logistics providers but also foresees the role of these to provide coordination activities. The core competency in the field makes specialized third parties an attractive option for organizations whose logistics costs are a small part of the product value. 3PLs further achieve efficiencies in logistics through the consolidation of volume from multiple supply networks.
    

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• Governance Structures and Financial Allocation Coordination
  • A company centric mechanism to determine financial investments, distribution of benefits in the network, usually performed by the channel master in the chain due to its influential financial position. This conclusion corresponds to the findings of benefit distribution in traditional supply chains from the literature
    
  • ƒThe use of third parties is limited. Separate legal entities to collect and suggest optimal operations in addition to equitably sharing benefits, costs, and risks are
    
    • desirable and would increase efficiency of a supply network but
    • too complex to implement with current business law and practices.

Finally to conclude, I would like to say that organizations have been seeking effective and efficient approaches to integrate with outside supply chain partners for the last decade. As the opportunity of external supply integration has been discovered, there still remains great uncertainty of what role technology, the value of information, and new business models will play in inter-company coordination.