Toward the Virtual Supply chain: The Convergence of IT and Organization

Abstract

Any chain (or network) connected through electronic links can be considered virtual. However, a virtual supply chain often encompasses much more than electronic links. It represents an organization structure that facilitates efficient and effective flows of both physical goods and information in a seamless fashion. What distinguishes the virtual chain from the traditional supply chain is its inherent flexibility to quickly adopt and adapt to changes in the business environment. As a result, new members can be continually added and old members deleted or have roles reassigned to them within the chain. Consequently, the ability to reconfigure organizational structures (sometimes on a real‐time basis) provides the chain the capability to customize solutions for different segments of customers or keep up with changes in customer requirements. This adaptability of the chain is likely to lead to competition between chains rather than between organizations. In this paper, we describe what “virtual” means in the context of a supply chain. We sketch out the evolution of the supply chain over the last few decades and elaborate on why organizations are being forced to confront the reality of “virtual organizations”. Then we present both technical and managerial issues associated with virtual chains and conclude with a projection of how the chain could look in the future.