for hbw
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SUPPLY CHAIN VS.
SUPPLY CHAIN THEHYPE
& THEREALITY
ADVANTAGE TECHNOLOGY NETWORKS PRACTICE PROCESS BALANCE PERFORMANCE
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A n increasingly vocal and popular sen-
timent holds that the nature of com-
petition in the future will not be
between companies but rather
between supply chains. If this does,
in fact, represent the future, how
will these chains actually compete against each
other? And what can practitioners do now in
anticipation of this future?
In contemplating the much-ballyhooed supply chain vs. supply chain (SC vs. SC) proposition, we first sought exam- ples of this competition in action. Yet for as many examples of SC vs. SC competition that we found, there were at least as many places where the model didn’t fit. On the one hand, we saw vivid examples where one company or a series of companies had designed supply networks to act with singular focus against other unique companies or groups of compa- nies—for example, Brax, Perdue Farms, and Tyson Foods. Yet more often, we found a different kind of competitive sce- nario playing out, as in the automotive, aerospace, and per- sonal computer (PC) industries, where many original equip- ment manufacturers (OEMs) share common suppliers. (The sidebar on page 49 gives more detail on these and other examples where supply chain vs. supply chain competition does—and does not—work.)
Although true SC vs. SC competition appears to apply to relatively few situations, that vision of the future continues to gain widespread acceptance. Why?
Recent business trends might offer part of the answer. Shrinking product life cycles and innovative information technology applications started a reaction that has raised the performance expectations of supply networks. Specifically, they need to deliver more value in new ways, to be faster to market, to become more flexible in responding to demand changes, and to reduce costs. To achieve these higher service
levels, many companies have turned to external suppliers to provide them with capabilities that they themselves could no longer provide. This increases the need for higher and deeper levels of coordination (alliances)1 among these companies.
Similarly, many companies have chosen to build a supply network that depends on external suppliers to help them cre- ate a unique offering. By integrating the capabilities of others into its supply network, a company can effectively create unique value. That value is maximized when the supply net- work acts in unison, almost as if it were one company in the marketplace. Given these trends toward outsourcing and integration, it’s not surprising that so many view the nature of future competition as supply-chain based.2
Before examining the SC vs. SC vision in depth, a few notes on terminology are in order. Although we use the term supply chain throughout the article, supply network is proba- bly a better term because it more accurately describes the nature of supply relationships today (that is, nonlinear flows, network-like systems, and webs of suppliers and customers).
The Delphi Study on “SC vs. SC” To better understand the perceptions and expectations sur-
rounding supply chain vs. supply chain competition, the Integrated Supply Chain Management (ISCM) Program at the Massachusetts Institute of Technology (MIT) conducted a Delphi study with more than 30 supply chain experts from industry, academia, and consulting. The study found that the great majority of respondents who answered the question (70 percent) agreed that supply chain vs. supply chain accurately characterized the competitive future. (See Exhibit 1 on the fol- lowing page.) Yet probing into that majority viewpoint, we observed that the respondents interpreted the SC vs. SC con- cept in distinctly different ways. Specifically, when asked, “What does ‘supply chain competing against supply chain’ mean to you?” they offered a broad range of interpretations. This lack of a common understanding and language can lead to potentially damaging impact on a business. It presumes align- ment within an organization but in reality reflects conflicting priorities that would likely undermine a supply network’s abili- ty to align and coordinate activities.
We segmented the responses into three different interpre-
By James B. Rice, Jr. and Richard M. Hoppe
The conventional wisdom is that competition in the future will not be company vs. company
but supply chain vs. supply chain. But the reality is that instances of head-to-head supply
chain competition will be limited. The more likely scenario will find companies competing—
and winning—based on the capabilities they can assemble across their supply networks.
James B. Rice, Jr. is director of the Integrated Supply Chain Management Program at the Massachusetts Institute of Technology. Richard M. Hoppe, a former research assistant and Master of Science in Transportation candidate at MIT, is now a consultant with McKinsey & Co.
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SC Vs. SC
tations, or scenarios, regarding the nature of competition and the supply network. (See Exhibit 2 for a complete breakout of the responses):3
1. Competing as SC vs. SC Literally. The nature of compe- tition will be between groups of companies from across the supply network competing as one entity, formally or informal- ly. (Forty-one percent of the respondents held this view.)
2. Competing on Supply Network Capabilities. The nature of competition will be between individual companies compet- ing on their internal supply network capabilities (37 percent of the respondents). From this point of view, competition will be based largely on two capabilities:
� Internal supply network cost and/or service capabilities, which refer to the effectiveness, efficiency, and respon- siveness of the supply network. An example of this capabil- ity is having the right configuration of products available. � Internal supply network design, which refers to the sup- ply network design used. Examples would include either a vertically integrated or heavily outsourced design; build-to- stock, build-to-order, or postponement production; or a retail, direct, or distributor (or a combination of the three) distribution channel. Dell’s competing against Apple in the personal computer market arena, for example, is based on competing supply network designs. 3. Competing on Supply Network Capabilities Led by a
Channel Master. The nature of competition will center on the single, most powerful company of a supply network, which will determine the terms of trade across the entire supply network. The single most powerful company is sometimes referred to as the channel master. Twenty-three percent of the respondents held this view.
The data indicate that although just over 40 percent of the respondents describe the future in literal terms, that number is well below the 70 percent who concurred that the SC vs. SC model characterized the future. (The sidebar on page 50 discusses the literal interpretation of supply chain vs. supply chain.) The disparity is consistent with the definition and language difficulties mentioned earlier. Perhaps the underly- ing message here is that the question of how companies will
compete in the future is a complex one with multiple dimen- sions. It’s not as simple or straightforward as the supply chain vs. supply chain concept.
Analyzing the Three Scenarios To better ascertain the validity of the three scenarios iden-
tified, we analyzed the feasibility of each and examined instances where they would—and would not—work.
SScceennaarriioo 11:: CCoommppeettiinngg aass SSCC vvss.. SSCC LLiitteerraallllyy The Limitations Closer examination of the SC vs. SC proposition reveals
some inherent limitations that help explain why it is not prac- tical or valid for all conditions. In particular, certain realities challenge the validity of literal SC vs. SC competition. The first relates to the presence of common or overlapping suppli- ers, a condition that makes it difficult for a supply network to compete as a unit for several reasons:
� Common suppliers limit the ability to source unique capabilities (products or services). Some can argue that it is possible for a single supplier to provide unique value offerings to different customers. Yet at the very least, a common supplier is presented with a conflict of interest. � Common suppliers limit the customer’s ability to foster and develop unique capabilities within a particular suppli- er. Ultimately, any investment in a supplier will provide a “free” benefit for competitors using the same supplier. � When common suppliers are used, it becomes difficult to compete without compromising other supply network participants’ business plans. The existence of common or overlapping suppliers complicates the task of aligning business strategies and sharing intimate business intelli- gence. By responding to one customer’s requirements or developing new capabilities for one customer, the supplier effectively signals that customer’s proprietary business intelligence to all other customers. � Common suppliers inherently pose a barrier to open information sharing with customers. Information shared by one customer with a common supplier may be inadver- tently disclosed to other customers, despite the supplier’s
EXHIBIT 1
A Supply Chain vs. Supply Chain Future?
80%
70%
60%
50%
40%
30%
20%
10%
0%
R es
po ns
e R
at e
Academia Industry Consulting All
Yes No
EXHIBIT 2
How Will Companies Compete? (% of respondents)
Formal SC vs. SC (strategic set of supply network companies compete) 36%
Informal SC vs. SC (group of supply network companies compete) 5%
Most powerful company determines competion ("Channel Master") 23%
Single company competes on supply network design 14%
Single company competes on supply network cost and/or service capabilities 23%
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best efforts and intentions. It may be unrealistic to expect that an entire organization could completely protect its knowledge of one customer’s activities from getting into other customers’ hands. Another inherent limitation to the SC vs. SC model is that
suppliers often compete with customers, making true collab- oration extremely difficult. Two cases serve as illustrations. Siemens sells circuit breakers both to panel board OEMs and to an internal Siemens business that competes with those same OEMs. Dell and Intel collaborate to market their prod- ucts, but they also compete to get the consumer to purchase
a computer based on their respective brand and value-add. Intel wants the customer to choose a PC for the Intel proces- sor inside. Dell wants the customer to buy the PC for the convenience, fast service, and reasonable cost it can offer.
The benefit of coordinating across more than three tiers in the supply network is not clearly proven—one more reality that limits true SC vs. SC competition. (In fact, the only clearly demonstrable advantage relates to sole-source suppli- er-customer relationships.) Data are difficult to use beyond one tier upstream and one tier downstream for several rea- sons. Demand data need to be aggregated, segmented for var-
Where It Works Fashion vs. fashion. Apparel manufacturers use different sup-
ply networks to achieve different capabilities. Rather than depend on production operations in the Asia-Pacific, Spanish apparel manufacturer and retailer Zara relies on a local supply network, which it largely owns and controls. That network can design and replenish hot-selling fashion products in the stores within three weeks. Zara’s supply network entails a near-vertically integrated company that owns retail, product design, dyeing, and fabric cut- ting operations. Only the sewing operations are outsourced.
Poultry vs. poultry. Perdue Farms and Tyson Foods pit their respective supply networks to compete against each other and others in the poultry market. Being vertically integrated to a large degree, they compete on their brand as well as on their ability to mass-produce quality chicken products. They also com- pete on their ability to trace product through the supply network.
Wool vs. wool. Brax, the innovative German fashion manufac- turer and retailer, developed a unique line of men’s trousers made from Tasmanian wool that reinforced the company’s image of selling products that “feel good.” The products flow through an aligned and dedicated supply network of selected wool producers, bypassing the auction system, and through to Brax for production. This network helps establish longer-term relationships. And this, in turn, results in higher predictability of supply and higher quali- ty, which are integral parts of Brax’s go-to-market approach.
Chains of success. As part of the Chains of Success initiative sponsored by the Agriculture, Fisheries, Forestry-Australia,1 sev- eral specialty food producers2 structurally realigned into “chains” with their distributors and retailers. Through informa- tion technology and collaboration, they created aligned networks more responsive to customer requirements. This program is designed to promote Australian food producers.
Where It Doesn’t Work The U.S. automotive industry. General Motors’ supply net-
work can’t literally compete against Daimler-Chrysler’s because the two companies share the same suppliers. This makes it diffi- cult for both automakers to get unique value from a common supplier. It also prevents them from leveraging supplier capabili- ties to their sole advantage. (It should be noted that Chrysler did create considerable advantage over GM and Ford in the late 1980s and early 1990s through closer collaboration with its sup- ply chain partners.)
Dell, Compaq, and other PC manufacturers. The modularity and universality of personal computer components results in an overlapping of PC supply chains at multiple tiers. Every comput- er manufacturer uses pretty much the same components. They seek to differentiate themselves through cost and customization
Airbus and Boeing. Both of these aerospace companies rely on the same suppliers for avionics, engines, tires, seats, and many other components. Therefore, the competition takes place not on their supply network capabilities but on other capabili- ties—principally product design and the ability to assemble components cost efficiently.
Suppliers that are also competitors. It is increasingly com- mon to find suppliers competing with their customers. This makes collaboration more difficult, as the two companies may be working toward competing ends. To cite one example, the supplier may also be serving an internal customer that sells to the same end market as its external customer does. Or the retailer may compete with a manufacturer. To illustrate, Dell hopes that customers will buy a Dell computer because of the company’s product, price, and service. Intel hopes that cus- tomers will buy the PC because of the specific Intel processor and its capabilities.
Footnotes 1Agriculture, Fisheries, Forestry - Australia, “Chains of success,” Food and Fibre Chains Programme, www.supermarkettoasia.com.au. 2Miandetta Pty Ltd. (Australian specialty asparagus and pig meat producer), Wood Fisheries (fish trawling and export company), and Pacific
Foods (supplier of portion control meat cuts).
SC vs. SC: Where It Does and Doesn’t Work For every example of supply chain vs. supply chain in action, you can find at least as many instances where that model does not fit.
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SC Vs. SC
ious suppliers, and then adjusted for the latest bill-of-material changes. Those supply networks that can use data beyond one tier by necessity have inflexible and complex systems. This limits customer procurement to a predetermined list of products from predetermined suppliers for a predetermined fixed bill of material. Given that each supplier will likely have a different product design and bill of material for each SKU, the complexity of making the demand data useful for suppli- ers and sub-suppliers exceeds the potential benefits of automating the data.
Yet another problem is that few supply networks have a central control point that can coordinate the competitive bat- tle against another supply network. Further, in some cases, the industry structure may contribute to less-than-favorable conditions for supply network-based competition. In indus-
tries with consolidated supply bases, a handful of suppliers typically possess entrenched vested power. In such cases, these suppliers may have little incentive to coordinate with customers or with suppliers.
Finally, the high sunken costs and large investments in technology dedicated to one supply network pose a signifi- cant limitation to the SC vs. SC model. This is particularly true if high asset specificity is required to service one particu- lar supply network. In many industries, it is not uncommon for a customer to set integration requirements that require a substantial investment on the supplier’s part (for example, Wal-Mart’s RetaiLink) or to require dedicated service (such as Dell’s requesting a supplier to build a distribution center next to a Dell plant).
The flexibility required for competitive supply networks
To gain a better understanding of thenature of supply chain vs. supply chain competition, it’s useful to examine the concept’s literal meaning.1 By definition, supply networks (to use the preferred ter- minology) do compete against other supply networks to a certain extent. Unless a company is completely vertically integrat- ed, it cannot successfully compete alone. It needs to be part of a broad- er supply network.2 As illustrated in Exhibit 3.1, if the companies com- peting in the networks (m) are com- pletely disconnected (no overlaps) at each tier (n) in an industry, these networks do compete against each other.
On the other hand, these networks do not compete against each other when all companies compete in each of the different supply networks. As seen in Exhibit 3.2, each network (m) overlaps the other, with each compa- ny at every tier (n) selling goods to every tier (n+1) company. An exam- ple of this would be modular and commodity products being procured efficiently from multiple members in an open market.
Competition in an industry is gen-
erally somewhere in between these two extremes, reflecting the distribution of flows and relationships as seen in Exhibit 3.3. There are some overlaps and some completely disconnected tiers within the networks. In most cases, many of the poten- tial links are eliminated, since there are closer relationships with some companies,
depending on the nature of the product, price, and capacity of the supply network.
Examples of supply networks in each cat- egory are shown in the chart below. Note that those under the heading “Completely Disconnected Supply Networks” are primari- ly vertically integrated, or historically or geographically dispersed supply networks.
Supply Chain vs. Supply Chain: A Literal Look
EXHIBIT 3
Categories of Supply Networks 3.1 Completely Disconnected
Note: m=3 n=4
3.2 Completely Overlapping
Note: m=3 n=4
3.3 Partially Overlapping
Note: m=3 n=4
Footnotes 1This analysis uses concepts from a personal interview with Thomas Malone, a professor at the MIT Sloan School of Management and director of
MIT’s Center for Coordination Science. 2If the company is completely vertically integrated, it is, in fact, the entire supply chain and it competes as such.
Completely Disconnected Supply Networks
Vertically integrated manufacturers like Perdue Farms vs. Tyson Foods in poultry production.
Near-vertically integrated manufac- turers-retailers such as Zara in fashion apparel.
Automobile manufacturing supply chains of the United States, Germany, and Japan in the 1970s.
Completely Overlapping Supply Networks
Compaq vs. HP (modular product architecture and fragmented suppli- er base create significant overlap).
Private-label apparel retailers that source from contract manufacturers in Southeast Asia.
Airbus vs. Boeing (overlap in engines, electronics, avionics, tires, seats, and other components).
Partially Overlapping Supply Networks
PC vs. Mac supply chains in the 1980s (overlap limited mostly to memory and software).
The Limited vs. branded apparel products, such as Levi’s sold through retailers.
Automotive supply networks of the Unites States in 2000 with many OEMs sharing common suppliers.
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today is inconsistent with the kind of commitment and com- plexity needed to utilize demand data across several tiers. The explicit coordination costs and implicit opportunity costs associated with this kind of complexity and inflexibility may exceed the potential benefits of utilizing demand data across several tiers. The conclusion: The SC vs. SC concept, taken literally, does not provide a universally valid characterization of future supply competition.
When SC vs. SC Applies Despite the limitations noted, supply chain-based compe-
tition clearly takes place in certain limited instances. Here are some examples:
� When the supply chain is a vertically integrated compa- ny, either competing against another vertically integrated organization or against supply networks made up of many companies. In some instances, the organization may own most of the supply chain, outsourcing only selected activi- ties. The critical factor in all cases is that there are no common suppliers shared with any competitors. � When the supply network is composed of companies that have sole-source relationships. � When the industry is fragmented such that there are no common strategic suppliers represented in more than one supply network and most strategic suppliers are dedicated to one supply network. In some cases, these conditions will exist for one company
or set of companies but not for others. This results in a situa- tion where one group competes as a supply network and another group does not. A good example of this is Zara, the highly integrated fashion clothing designer, producer, and retailer. Zara competes against other companies that out- source their design and production activities and that clearly do not compete as a supply network. For these companies, the key determinant of success may not be the degree of ver- tical integration but rather their respective business models (for example, maintaining tight control of the supply chain for fast response or decentralizing the supply chain for low cost and a low capital investment requirement).
Will a vertically integrated producer always outperform the nonintegrated supply network? No evidence exists to answer that question one way or the other. The best answer may be that it depends on the situation. For example, if the critical factor in a market were low cost and if there were cost advantages to having integrated operations, then the ver- tically integrated company would have a distinct competitive advantage. If, on the other hand, fast cycle time and high product innovation were the key market drivers, a noninte- grated supply network might hold the competitive edge. In short, there’s no universal answer to the question of which supply chain model is always best.
SScceennaarriioo 22:: CCoommppeettiinngg oonn SSuuppppllyy NNeettwwoorrkk CCaappaabbiilliittiieess As suggested by the respondents to our Delphi study, this
scenario entails a single company or entity (this would
include cooperatives, joint ventures, and other legal entities) competing based mainly on one of two factors: (1) the cost and/or service capabilities of their internal supply network4 or (2) internal supply network design. Increasingly, companies are competing on network capabilities. They are expanding
the supply network by utilizing and integrating (not just adding) the capabilities of other members of the supply net- work, such as an upstream supplier or a downstream cus- tomer, to offer a unique and compelling solution. This ability to integrate capabilities from other supply network partici- pants often can be leveraged for competitive advantage.
Companies are integrating additional capabilities from their immediately adjacent upstream (suppliers) or downstream (cus- tomers) supply network companies via joint marketing arrange- ments, joint product development programs, and collaborative initiatives such as just-in-time (JIT), vendor-managed inventory, and collaborative planning, forecasting, and replenishment (CPFR), among others. These are among the compelling advan- tages of integrating the capabilities:
� The benefits of one-to-one or next-tier coordination are quantifiable. � Successful one-to-one relationships add value. � Data and information sharing is more immediate and useful. � Relationships with adjacent upstream or downstream companies are more manageable and controllable than those with more distant participants in the supply network. � It may be possible to develop unique added value by working closely with one supplier, developing a unique relationship, a unique product or service, a unique con- tract, or a unique combination of these. It is harder to do this with multiple companies in the supply network across multiple tiers. So, though it’s useful to consider various methods of coor-
dinating across multiple tiers of the supply network, the more practical view of the future may be one of a single company or entity competing on its own supply network capabilities.
Our analysis further supports this practical picture of sup- ply network capabilities being leveraged as a single company rather than as a group. This entails competing by focusing on your company’s own capabilities (your “ecosystem,” as one respondent termed it) rather than attempting to build extend- ed relationships with distant members of the supply network. It’s important that the ecosystem be developed not just by adding capabilities but by integrating them into the business. Integrated capabilities are not readily copied and can provide some measure of competitive differentiation, whereas capa- bilities that are just added offer little competitive differentia-
There’s no universal answer to the question of which supply chain model is always best.
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SC Vs. SC
tion. To illustrate, a company achieves little differentiation when it offers a package tracking capability simply by direct- ing customers to use UPS or FedEx. By contrast, it does achieve differentiation by seamlessly integrating the UPS or FedEx tracking capability into its own system. In this way, customers would enjoy an enhanced service level over simply using the UPS or FedEx system.
In short, the development of integrated supply chain capa- bilities needs to be an important part of a company’s go-to- market effort. Good examples of such capabilities can be seen in the following activities: early supplier engagement on product development, supplier and customer involvement in critical decisions, and the commingling of supply network operations between two adjacent-tier companies. (Exhibit 4 gives representative examples of how companies have enhanced their supply network capabilities.)
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Under this competitive scenario, the single most powerful company of a supply network will determine the terms of trade across the entire supply network. This dominant player is sometimes referred to as the channel master.
The channel master uses its market power to coordinate processes and activities among some of its suppliers and cus-
tomers. Examples include the supply networks of Dell Computer, Procter & Gamble, and Wal-Mart.5 These chan- nel masters range from being benevolent and working to pro- vide benefits to the entire network (the “Lord of the Chain,” as described by Christiaanse & Kumar)6 to being entirely company-focused and transaction-oriented. In the latter case, the channel master acts solely for its own benefit, regardless of the potential detriment to the rest of the supply network.
In some cases, a company that is competing with a chan-
nel master is a supplier to, or a customer of, that channel master. The nature of the channel master typically dictates the nature of that relationship. Yet the value added by the suppliers can somewhat offset the power exercised by the channel master.
The Chrysler Corporation of the 1990s serves as a good example of a Lord of the Chain-type of channel master. The automaker considered suppliers to be an integral part of its “extended enterprise” and worked aggressively to integrate supplier capabilities into Chrysler’s business. Though Chrysler did establish many of the rules of the game, its relationships with suppliers were far more constructive and collaborative than anything the automotive industry had seen in the past.
The channel master scenario is commonplace in today’s marketplace and will likely remain a viable competitive sce- nario for the future.
A Realistic Look at the Future It’s clear that “SC vs. SC” does not universally characterize
the nature of competition and the supply network of the future. Granted, it does describe some limited situations. But as our study suggests, other competitive scenarios are likely to be far more commonplace.
It’s important to note, too, that the three main competitive scenarios identified are not mutual- ly exclusive. Even today, we find examples where a vertically inte- grated company (Zara) competes based on its supply network against a channel master (The Limited) and also against other retailers (like The Gap) that are parts of intercon- nected supply networks but that compete based on their own supply network capabilities.
In preparation for their competi- tive future, companies may find some value by recog nizing the importance of language in describ- ing their supply network and under- standing the environment in which they compete. Does your company compete as a supply network, as a channel master or under a channel master, or as a lone company solely based on your supply network capa-
bilities? What are the supply network capabilities that your company has, and what unique set of capabilities is needed for success in the marketplace? How can you integrate the desired capabilities—through contracts, unique products and/or services, or relationships? What new entities should the company explore in order to integrate the needed capabil- ities? What are the trade-offs between the explicit coordina- tion costs and the implicit opportunity costs required for the benefits of coordinating and integrating new capabilities?
Enhancement
Supplier integration
Supplier co-location
Selective and dedicated outsourcing
Company and Initiative
Bose Corporation’s JIT II initiative gives suppliers purchasing responsi- bilities. Suppliers have in-plant offices and operate as Bose employees.
Volkswagen’s Resende, Brazil, plant is designed so that each sup- plier can perform an operation as vehicles move sequentially along production line.
Apparel manufacturer and retailer Zara is almost completely integrat- ed, outsourcing only its sewing operation.
Benefits
Enhances Bose’s ability to design new products faster at lower cost and with higher quality. Lowers operating costs and improves ser- vice levels.
Improves VW’s ability to reduce capital plant requirements while engaging suppliers in production.
Enhances Zara’s ability to cus- tomize production rapidly by using local small sewing operations. Dedicated set of sewing suppliers lets Zara act as though vertically integrated.
EXHIBIT 4
Examples of Supply Network Enhancements
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These are the kinds of questions that companies have to con- sider in developing their future supply chain strategies.
Looking ahead, we’re careful not to discount the possibili- ty of new approaches being developed that would permit coordination across multiple tiers of the supply network. Many questions about governance across the entity including control, authority, ownership, and benefits and cost sharing need to be answered. In fact, we are currently undertaking such a study.7
Much of the innovation affecting the nature of competi- tion and the supply network of the future will relate to new and different entities that will coordinate across the supply network. These new entities will likely provide unique sets of capabilities, enabled by new governance methods that work equally well for each supply network participant. It’s possible that the proliferation of collaboration initiatives and the blur- ring of company l i n es may i n deed l ead t o this end. Ultimately, we still envision competition based on the indi- vidual company or entity and its assembled ecosystem of capabilities—but, to borrow from the Beatles, not without a little help from their friends.
Footnotes
1In this instance, we use the term alliance to connote a unique arrangement with a company that entails one or more of the following: a
unique relationship, a unique product or service, a unique contract, or a unique combination of these three.
2Consider this quote from Rob Rodin, CEO of Marshall Industries: “It’s a supply chain vs. supply chain world today. Companies don’t only compete with each other but with an extended web of suppliers.”
3The data in Exhibit 2 represent the responses from the 70 percent of total respondents who agreed with the idea that competition in the future will consist of “supply chain competing against supply chain.” Totals add up to 101 percent due to rounding.
4We define the capabilities as being a company’s internal capabilities plus integrated capabilities (a set of unique products, services, and/or contractual agreements resulting from relationships with supply network participants).
5It is possible to have more than one channel master in a supply net- work. In these cases, the companies are not explicit competitors although there is clearly a competition for control of the supply network.
6Kuldeep Kumar and Ellen Christiaanse, “From Static Supply Chains to Working Webs: Principles for Radical Redesign in the Age of Information,” Primavera Working Paper 99-14, Sept. 1999.
7A recent study by MIT has explored structures and entities that could possibly provide necessary control and coordination of multiple tiers of the supply network. The researchers have introduced the con- cept of a “network master,” as an entity or entities that would coordinate the various information and material logistics flows and overall system benefits allocation.