Supply Chain Governance Research Articles

From market to hierarchy: An empirical assessment of a supply chain governance typology

This study performs an empirical assessment of the highly influential supply chain governance typology put forth in Gereffi et al. (2005). In spite of the influence this Global Value Chain (or GVC) Typology has had, there have been few (if any) attempts to empirically assess its alignment with real-world supply chain structures and to establish a baseline for its predictive utility. The GVC Typology is assessed for face and nomological validity through testing of its key dimensions in relation to purchasing-logistics integration and supplier performance measures, using an information-processing theory framework. The GVC Typology appears to have considerable face validity as actual supply chain governance structures aligned well with those it proposes. It also has reasonable predictive power with regards to governance dimensions and integration, and in some connections between governance types, integration, and supplier performance. This study provides researchers with the tools to move this typology beyond the “conceptual” stage in their work, allowing for holistic and higher-level assessments of supply chain governance structures and changes. It may also help researchers and managers to consider when and to what extent purchasing-logistics integration should be fostered.

Governance Through Contract and the Environmental Impact of Supply ChainssStill Waiting for a Rana Plazaa Moment of Global Recognition

Most recent focus on supply chain governance mechanisms has been on contractually organized supply chains from business (e.g. cost management or R&D) or labor perspectives. Relatively little focus has been on the governance of environmental contingencies in contractually organized supply chains. In this paper I argue that recent developments in contractual governance mechanisms, such as the Accord on Fire and Construction Safety in Bangladesh, would provide functional examples for implementing effective supply chain wide governance in relation to environmental contingencies such as scope 3 emissions. A key requirement of any effective governance mechanism is representation. In business to business contexts, such as supply chain wide cost management or R&D, supply chain companies would have an interest in participating in any governance mechanism. In labor context, labor representatives ditto. With such contractual representation, a key additional motivating factor for effective governance is that it may allow lead firms to use contractual governance mechanisms not only to extend effective governance but also to control the liabilities potentially arising out of this extended governance. Without such control, the added governance may translate to major tortious liabilities that are not easily mitigated. However, in environmental contexts the question of representation is more challenging. Environmental NGOs and other similar actors could be seen as potential representatives that increase the legitimacy of environmental governance through their participation as parties to governance contracts. However, they typically do not have power to bind environmental interests in a way that would allow lead firms to control any environmental liabilities arising out of their governance efforts. While this may be offset by the current challenges of tort litigation in relation to scope 3 emissions, the situation is bound to change with the development of climate tort litigation. The question then becomes to what extent the increased legitimacy derived from incorporating NGOs or other actors representing environmental interests can be used to counter the increased liabilities arising from supply chain wide governance of scope 3 emissions, or whether other factors, such as positive image effects or regulatory requirements could offset any new liabilities. In sum, the effective governance of environmental contingencies, in particular scope 3 emissions, is very much possible in global supply chains following recent developments in contractual governance mechanisms. Involving actors such as environmental NGOs as parties in contractual governance mechanisms might help in this regard. From a lead firm perspective, the key challenge is balancing the liabilities potentially ensuing from such governance in a way that makes the implementation of effective governance attractive.

Big Food and Little Data: The Slow Harvest of Corporate Food Supply Chain Sustainability Initiatives

Over the past several years, many of the companies collectively known as Big Food have launched ambitious programs to assess and improve the sustainability of their raw material supply chains. Fueled partly by concerns about the risks posed by climate change and other environmental problems, these efforts differ from earlier corporate food supply chain governance in that they rely more on metrics of continuous improvement than compliance with standards. They also extend beyond high-value, high-profile products to include staple ingredients such as corn and soy. These commodities are sourced through long, complex, and traditionally nontransparent supply chains, where even the biggest food companies exercise surprisingly little clout over producers. This article examines how companies contend with this problem both within their own supply chains and as members of multistakeholder initiatives. The assemblage concept not only describes the many actors, technologies, and practices now working to get certain kinds of data flowing off farms; it also highlights the relational nature of this work and the uncertainty of its outcomes. More broadly, the article points to the limits of both corporate food power and the very notion of Big Food as an explanation for how that power is wielded.

Managing the pork supply chain through a cooperative: the case of Jinzhong Food Co. Ltd.

Food security and supply continuity have become main concerns of food companies and societies nowadays. To address these concerns, Jinzhong Food Co. Ltd. (hereafter abbreviated to Jinzhong) was one of the first Chinese meat companies to establish and integrate a pig production cooperative in 2005. Over the last decade or so, Jinzhong has successfully developed the cooperative to stabilize and improve the quality of pig supply, by building relationships with pig producers (farmers) and achieving an exceptional financial performance in the process. The company-led cooperative represents an innovative supply chain governance mechanism in a Chinese context. However, the pork industry has evolved significantly and the time has come for the senior management team at Jinzhong to decide whether or not to keep the cooperative. This case study is aimed at senior undergraduate students and postgraduate students specializing in agricultural economics/agribusiness and can also be used for executive training for the management of food companies.

Steering CSR Through Home State Regulation: A Comparison of the Impact of the UK Bribery Act and Modern Slavery Act on Global Supply Chain Governance

AbstractThe home states of multinational enterprises have in recent years sought to use public regulation to fill the gaps left by the absence of a binding labour standards framework in international law. This article examines recent home state initiatives to address forced labour, human trafficking, and slavery in global supply chains, and their interactions with private governance initiatives. Focusing on a case study of the 2015 UK Modern Slavery Act and 2010 UK Bribery Act, we analyse two distinct legislative approaches that policy makers have used to promote corporate accountability within global supply chains and explore the varied impacts that these approaches have on corporate behaviour. Empirically, we analyse codes of conduct, annual CSR reports, and supplier terms and conditions for 25 FTSE 100 companies to shed light into the impact of the legislation on corporate behaviour. We find that legislation that creates criminal corporate liability appears to spur deeper changes to corporate strategy, and argue that in the case of the Modern Slavery Act, the triumph of voluntary reporting over more stringent public labour standards seems to have undermined the effectiveness of recent governance initiatives to address forced labour in global supply chains.

Resilience and Livelihoods in Supply Chains (RELISC): An Analytical Framework for the Development and Resilience of the UK Wood Fuel Sector

Bioenergy is an important renewable energy source in the UK, but the bioenergy industry and in particular the wood fuel sub sector, is relatively under-developed. Socioeconomic factors have been identified as critical for facilitating deployment levels and sustainable development. However, previous studies have mostly assessed these factors using quantitative methods and models, which are limited in assessing pertinent contextual factors such as institutional/regulatory governance, supply chain structure and governance, capital resource availability as well as actor decisions. As a step further, this research engages with these under-explored aspects of the system by developing a new analytical framework: the Resilience and Livelihoods in Supply Chains (RELISC) framework, which was designed by linking Value Chain Analysis, the Sustainable Livelihoods Approach and a supply chain resilience framework. Its application to a UK wood fuel supply chain produced useful insights. For example, the structure of the chain revealed a high level of dependency on a particular end user and contractor. Key institutional governance was critical in sustaining natural resources and providing access to finance. Internal supply chain governance was limited in ensuring the sustainability of resources and lack of actor awareness and interest were also limiting factors. In addition, five capital analyses revealed gaps in skills, networking and physical infrastructure. Finally, the design of the novel RELISC framework enables it to engage with diverse aspects of the system holistically and its application generated practical recommendations and strategies for supply chain resilience and sector growth, which are useful and applicable to other emerging sectors.

Governing Global Supply Chain Sustainability through the Ethical Audit Regime

Over the past two decades multinational corporations have been expanding ‘ethical’ audit programs with the stated aim of reducing the risk of sourcing from suppliers with poor practices. A wave of government regulation—such as the California Transparency in Supply Chains Act (2012) and the UK Modern Slavery Act (2015)—has enhanced the legitimacy of auditing as a tool to govern labor and environmental standards in global supply chains, backed by a broad range of civil society actors championing audits as a way of promoting corporate accountability. The growing adoption of auditing as a governance tool is a puzzling trend, given two decades of evidence that audit programs generally fail to detect or correct labor and environmental problems in global supply chains. Drawing on original field research, this article shows that in spite of its growing legitimacy and traction among government and civil society actors, the audit regime continues to respond to and protect industry commercial interests. Conceptually, the article challenges prevailing characterizations of the audit regime as a technical, neutral, and benign tool of supply chain governance, and highlights its embeddedness in struggles over the legitimacy and effectiveness of the industry-led privatization of global governance.

Information Technology, Repeated Contracts, and the Number of Suppliers

Many theories address how information technology (IT) affects the number of suppliers and supply chain governance. However, their predictions are at times contradictory and there is relatively little empirical evidence with which to evaluate them. We therefore develop an integrated, multiperiod model of the optimal number of suppliers that combines search and coordination theory, transaction cost economics, and incomplete contracts theory, and we assess our theoretical predictions using a large new data set on the global IT sourcing decisions of 1,355 firms in 12 countries. Our empirical results support three key predictions about trust, IT, and supply base size. First, investments in coordination IT, which reduce search and coordination costs, are correlated with using more suppliers, while use of vendor-specific IT is associated with fewer suppliers. Second, repeated relationships and trust play a major role in supply chain governance. As firms work with fewer suppliers, they also engage in more repeated relationships. At the same time asset specificity and the need to induce relationship-specific investments are correlated not only with fewer suppliers, but also with a larger fraction of repeated relationships. Third, supply chain governance differs in human capital-intensive and physical capital-intensive industries. The correspondence between asset specificity and repetition is strong in physical capital-intensive firms and not significant in human capital-intensive firms, while the correspondence between fewer suppliers and more repeated relationships is strong in human capital-intensive firms but not significant in physical capital-intensive firms. This corroborates the differential implications of human and physical capital for bargaining power, contractual risk, and trust in buyer–supplier relationships. The online appendix is available at https://doi.org/10.1287/mnsc.2016.2631 . This paper was accepted by Chris Forman, information systems.

Disaster Resilience Through Public–Private Short‐Term Collaboration

While contingency planning may provide a perspective for anticipating critical incidents, supply chain managers must develop competencies to address the long‐term disruptions that stem from both natural and man‐made disasters. The broad‐reaching nature of disasters brings public and private entities together and often requires collaboration to revitalize disrupted supply chains. Leveraging supply chain governance logic through the dual lenses of resource management and competing values, a research framework is introduced to address the nature of public–private short‐term collaboration and its influence on supply chain resilience. The largely unstudied concept of short‐term collaboration is at the heart of a model focusing on the alignment and adjustment of potentially disparate organizational values (public/private) to establish collective responsiveness while facilitating the fulfillment of mutual goals for a single event and/or discrete repeat events. We offer research propositions pertaining to the model and conclude with a discussion of managerial implications and the dire need for future research.

The Role of Beneficiaries in Transnational Regulatory Processes

The editors of this volume highlight the role of intermediaries, alongside regulators and targets, as a way to better understand the outcomes of regulatory processes. Here, we explore the benefits of distinguishing a fourth category of actors: the groups whose interests the rules are meant to protect, the (intended) beneficiaries. We apply that framework to nonstate regulation of labor conditions, where the primary intended beneficiaries are workers and their families, especially in poorer countries. We first outline the different ways in which beneficiaries can relate to regulators, intermediaries, and targets; we then develop conjectures about the effect of different relationships on regulatory impacts and democratic legitimacy in relation to corporate power structures, specifically those embedded in the governance of global supply chains. We illustrate these conjectures primarily with examples from three initiatives—Rugmark, the Fair Labor Association, and the Fairtrade system. We conclude that it matters whether and how beneficiaries are included in the regulatory process.

The effect of the Rana Plaza disaster on shareholder wealth of retailers: Implications for sourcing strategies and supply chain governance

Supply chain and reputational risks are often assumed to motivate firms to source production in developed, high-cost countries rather than developing, low-cost countries. To examine this assumption, we provide evidence from the collapse of the Rana Plaza building on April 24, 2013, which with its 1133 fatalities and 2438 injuries is seen as one of the worst industrial accidents in history. Do markets reactive negatively enough to such events to motivate firms to shift their sourcing strategy? We analyze the stock market reaction to the Rana Plaza disaster in the Bangladeshi ready-made garment industry to address this question. Our analysis is based on a sample of 39 publicly traded global apparel retailers with significant garment sourcing in Bangladesh. Stock market reaction to retailers on the day of the Rana Plaza disaster is negative, but its magnitude and significance dissipate by the following day. We find no evidence of significant stock market reaction during the 11 trading days (approximately two weeks in calendar time) following the disaster. Retailers responded to the disaster by developing two different agreements to improve factory and worker safety in Bangladesh – the Accord on Fire and Building Safety in Bangladesh (AFBSB), and the Alliance for Bangladesh Worker Safety (ABWS). We find no evidence of significant stock market reaction to the announcements of the AFBSB and the ABWS. The insignificant negative economic impact from the Rana Plaza disaster suggests that retailers have little economic incentive to move sourcing out of Bangladesh or other low-cost countries so as to reduce the risk of being involved in such events. We discuss the implications of our results for retailers, non-governmental organizations (NGOs), garment factory owners in Bangladesh, the Bangladeshi government, and academic researchers.

Shaping Supply Chain Governance

The production process is becoming more complex and involving multiple companies and countries. A lot of research has focused on how these activities are coordinated and how interfirm transactions are governed. However, the existing literature is neither complete nor clear enough to understand how external and internal factors influence the shaping of a firm’s choice of mechanisms to govern transactions along the supply chain. Building from the existing literature, this paper proposes a conceptual model with two dimensions. The dimension of determinants includes three components: institution environment, industry structure and transaction characteristics. The dimension of governance patterns consists of five mechanisms a firm may use to govern its economic transactions along the supply chain: market contract, production contract, relational contract, relational production contract, and hierarchy. The paper provides prescriptions for the firm’s choice among five supply chain governance patterns under different conditions of the above three components of determinants.

Impacts of non-GMO standards on poultry supply chain governance: transaction cost approach vs resource-based view

PurposeFollowing a negative attitude of consumers toward genetically modified organisms (GMOs) and the spaces left by the labeling legislation on GMOs of different countries, some retailers and processors introduced their own non-GMO standards, with the intention of avoiding the presence of GMOs in their products. This paper aims to understand how the implementation of these new retailer-driven standards affects governance structures along the supply chain and the determinants of such change focusing on transaction cost approach (TCA) vs resource-based view (RBV).Design/methodology/approachThe non-GMO introduction is investigated as a case study in the poultry industry of France and Italy. The case relies on data primarily collected from interviews with the main actors at five stages of the supply chain from the retailer up to animal feed and crop production.FindingsFindings indicate that the introduction of non-GMO products had different impacts on the transactions along the supply chain, generally leading to more integrated relationships. Theoretical relevance depends on the observed transaction and the type of governance structure considered. Interestingly, only RBV explains the shift toward hierarchical governance when this is observed.Originality/valueThis paper contributes to the empirical literature highlighting the upstream effects caused by the adoption of new standards. On the theoretical side, building on Conner and Prahalad’s (1996) seminal work and leveraging on the concepts of opportunism, “potential” superior knowledge and strategic importance of an activity, this research suggests a comparative framework for identifying governance structures and their determinants under TCA and RBV.

Combating poor-quality anti-malarial medicines: a call to action

The circulation of poor-quality medicines continues to undermine the fight against many life-threatening diseases. Anti-malarial medicines appear to have been particularly compromised and present a major public health threat in malaria-endemic countries, negatively affecting individuals and their communities. Concerted collaborative efforts are required from global, regional and national organizations, involving the public and private sectors, to address the problem. While many initiatives are underway, a number of unmet needs deserve urgent and increased multisector attention. At the global level, there is a need for an international public health legal framework or treaty on poor-quality medicines, with statutes suitable for integration into national laws. In addition, increased international efforts are required to strengthen the governance of global supply chains and enhance cooperation between national medicine regulation authorities and law enforcement bodies. Increased investment is needed in innovative technologies that will enable healthcare teams to detect poor-quality medicines at all levels of the supply chain. At the regional level, a number of initiatives would be beneficial—key areas are standardization, simplification, and reciprocal recognition of registration processes and development of quality control capacity in regional centres of excellence that are better aligned with public health needs; improved surveillance methods and creation of a framework for compulsory and transparent reporting of poor-quality medicines; additional support for national medicine regulation authorities and other national partner authorities; and an increase in support for regional laboratories to boost their capabilities in detecting poor-quality medicines. It is vital that all stakeholders involved in efforts against poor-quality anti-malarial medicines extend and strengthen their actions in these critical areas and thus effectively support global health development and malaria elimination programmes.

Balancing detail and scale in assessing transparency to improve the governance of agricultural commodity supply chains

To date, assessments of the sustainability of agricultural commodity supply chains have largely relied on some combination of macro-scale footprint accounts, detailed life-cycle analyses and fine-scale traceability systems. Yet these approaches are limited in their ability to support the sustainability governance of agricultural supply chains, whether because they are intended for coarser-grained analyses, do not identify individual actors, or are too costly to be implemented in a consistent manner for an entire region of production. Here we illustrate some of the advantages of a complementary middle-ground approach that balances detail and scale of supply chain transparency information by combining consistent country-wide data on commodity production at the sub-national (e.g. municipal) level with per shipment customs data to describe trade flows of a given commodity covering all companies and production regions within that country. This approach can support supply chain governance in two key ways. First, enhanced spatial resolution of the production regions that connect to individual supply chains allows for a more accurate consideration of geographic variability in measures of risk and performance that are associated with different production practices. Second, identification of key actors that operate within a specific supply chain, including producers, traders, shippers and consumers can help discriminate coalitions of actors that have shared stake in a particular region, and that together are capable of delivering more cost-effective and coordinated interventions. We illustrate the potential of this approach with examples from Brazil, Indonesia and Colombia. We discuss how transparency information can deepen understanding of the environmental and social impacts of commodity production systems, how benefits are distributed among actors, and some of the trade-offs involved in efforts to improve supply chain sustainability. We then discuss the challenges and opportunities of our approach to strengthen supply chain governance and leverage more effective and fair accountability systems.

Stockout Recovery under Consignment: The Role of Inventory Ownership in Supply Chains

ABSTRACTWe examine how a supply chain firm may implement an incentive contract under inventory consignment to recover stockouts and to retain customers. Inventory consignment allows an upstream firm (e.g., a manufacturer) to own and control inventory at a downstream firm (e.g., a retailer), representing a structural change in supply chain governance. Motivated by cases in pet toy and electronics component industries, we formulate principal–agent models based on the newsvendor framework to capture the strategic interactions in a supply chain. We find that consignment can be effective in reducing stockouts because the ownership and control of the product by the manufacturer allows better prevention of stockouts, which complements stockout recovery and leads to fewer stockouts. However, the lower level of stockout under consignment does not necessarily translate into profitability—when the manufacturer is highly opportunistic, that is, readily exploring outside opportunities for its product, consignment may lead to lower profitability for both the manufacturer and the supply chain. On the other hand, consignment will improve profitability for the manufacturer and the supply chain, if both the manufacturer opportunism and the retailer opportunism are moderate.

Contract-Boundary-Spanning Governance Mechanisms: Conceptualizing Fragmented and Globalized Production as Collectively Governed Entities

Conceptualizing how private actors can and should control their supply chains is a tricky question with both economic and legal dimensions. The topic is of extreme importance in today’s global economy. On the one hand, this importance is highlighted by events such as the catastrophic and deadly collapse of the Rana Plaza factory building in Bangladesh and the economic fiasco of the Olkiluoto 3 nuclear power plant construction project in Finland, both arguably caused by the lack of effective supply chain governance. On the other hand, the potential benefits of successful supply chain governance, shown by examples such as open book accounting in automotive manufacturing, provide another perspective on the importance of focusing on supply chain governance. In this paper, I provide a framework for conceptualizing supply chain governance from a legal perspective. First, I combine the governance analytics of global value chain theory with research into compliance mechanisms and practical examples of contract boundary spanning governance mechanisms. This provides a preliminary typology that helps distinguish between adequate and inadequate governance mechanisms. Second, in contractually organized supply chains, governance mechanisms necessarily transgress contract boundaries and thus privity. This leads me to refer to them as contract-boundary-spanning governance mechanisms. To help conceptualize the requirements for attributing legal normative effects to such mechanisms, I propose using Teubner’s factual framework for evaluating liability in contract networks. Combined together, the typology and the framework provide a tool for evaluating and discussing the appropriateness of liability in different factual situations. This tool is not limited to any specific jurisdiction or doctrine and is thus trans-substantive. It enables further comparison of the legal doctrines available in different jurisdictions and transnationally for their potential in establishing liability in different configurations of supply chain governance.

Private Environmental Governance in the Ethiopian Pesticide Supply Chain: Importation, Distribution and Use

Agricultural pesticides are important chemicals that are used to mitigate crop damage or loss and improve productivity. However, pesticides may cause negative environmental and human health effects depending on their specific distribution and use. Securing environmental safety and sustainability of pesticide distribution and use is widely seen as an important challenge for pesticide governance. This paper analyses how, why and under what circumstances Ethiopian pesticide supply chain actors deal with (un)safe distribution and use of pesticides and assesses their potential contribution to securing the quality, environmental safety and sustainability of pesticides importation, distribution and use. The framework developed for this is based on sustainable supply chain governance in order to assess the roles of and the interactions between the different chain actors, supporters and influencers. On the basis of field research in Ethiopia among key chain actors (importers, retailers, farmers) we analyse their involvement in three different environmental governance mechanisms: governing material flows of pesticides, managing information on health and environmental safety and providing training and capacity-building services. The study found the organisation of the pesticides supply chain in Ethiopia as atomistic. Environment and health hardly played a role in pesticides handling by the different supply chain actors, which was dominated by immediate profit motives. As a consequence smallholder farmers are put at risk because they are refrained from training, support or information provision on pesticides. Indeed, it was a failure of state governance that led importers and retailers to aggressive marketing and distributing pesticides unsafely and hinder the proliferate of private mode of governance. At the same time, a small signs of hope have also been identified at the supporters’ and influencers’ side of the chain. Successful environmental supply chain governance for safe pesticide distribution and use requires coordination and as well as training and information sharing (interaction) among pesticide supply chain actors, supporters and influencers at all levels-local, national and global as elements of one system of governance. Finally, the evidence presented in this paper suggests that due to limits in governmental capacity and concerns on commercial viability and on social and environmental impacts among private actors, there will be a role for private actors alongside public actors to ensure safe pesticide distribution and use. Public-private partnerships might constitute an attractive strategy for this aim.

Benchmarking global supply chains: the power of the ‘ethical audit’ regime

AbstractThis article critically investigates the growing power and effectiveness of the ‘ethical’ compliance audit regime. Over the last decade, audits have evolved from a tool for companies to track internal organisational performance into a transnational governing mechanism to measure and strengthen corporate accountability globally and shape corporate responsibility norms. Drawing on original interviews, we assess the effectiveness of supply chain benchmarks and audits in promoting environmental and social improvements in global retail supply chains. Two principal arguments emerge from our analysis. First, that audits can be best understood as a productive form of power, which codifies and legitimates retail corporations’ poor social and environmental records, and shapes state approaches to supply chain governance. Second, that growing public and government trust in audit metrics ends up concealing real problems in global supply chains. Retailers are, in fact, auditing only small portions of supply chains, omitting the portions of supply chains where labour and environmental abuse are most likely to take place. Furthermore, the audit regime tends to address labour and environmental issues very unevenly, since ‘people’ are more difficult to classify and verify through numbers than capital and product quality.

Exploring Information Technology and Supply Chain Governance

The aim of this study is to investigate how information technology (IT) investment supports and relates to SCG and its conceptions (transactional and relational. The authors conducted exploratory case studies in two large Brazilian companies and two major suppliers, interviewing top supply chain executives. In the first case, they identified a more relational type of governance that was mainly based on the company's relationship with its suppliers which was driven by the desire to achieve a greater market share. IT investments focused on sales and operations planning projects where all systems were being integrated. In the second case, they identified transactional governance as the predominant form. This reflects the presence of a great number of suppliers, low partnership and low supply on time delivery rate. IT investments are being made to achieve more relational governance through expenditure on e-procurement and greater integration with their suppliers using ERP.