an approach for supply chain coordination mechanism

Eighth AIMS International Conference on Management January 1-4, 2011 1 An approach for supply chain coordination mechanism Pradeep Kumar Behera [email protected] Department of Management Studies Indian School of Mines, Dhanbad Kampan Mukherjee [email protected] Department of Management Studies Indian School of Mines, Dhanbad 1. Introduction In today’s uncertain environment, it’s no longer competition between the companies, but between the supply chains (SC). The SC consists of numerous activities, different functions: logistics, inventory, forecasting, and production planning, different interfaces: procurement-production, production-inventory, production- distribution, intra- & inter organizational relationships and performance. The SC members can’t compete independently by handling different activities, functions and interfaces. So, a coordination system is necessary for achieving better efficiency and effectiveness in the whole SC. It seems to be very difficult to define coordination precisely. But the most commonly accepted definition is “the act of managing dependencies between entities and the joint effort of entities working together towards mutually defined goals”(Malone & crowston, 1994).According to Ballou et al. (2000), coordination is the central lever of SCM. SC coordination as a vehicle to redesign decision rights, workflow, and resources between SC members for b etter performance (Lee, 2000). SC coordination is a strategic response to the challenges that arise from the dependencies of SC members (Xu and Beamon, 2006). The concept of coordination may guide SC members to work coherently to identify inter-dependencies between each other, to mutually define goals and to fairly share risks & rewards (Arshinder et al., 2006). In this paper, we are offering a review on different SC coordination classification in section 2. An n attempt has been made to identify different Coordination mechanism and also propose a classification on SC coordination mechanisms in section 3.In section 4, we propose a structure for describing coordination mechanisms and finally, in section 5, we present some scope of future research work and concluding remarks. 2. Literature review According to Olson & Walker (1995), types of Coordination are structured or unstructured and formal or informal, depending on the extent to which firms use formal design of roles and mechanisms to synchronize activities and flows within SC (Lusch and Brown 1996; poppo and Zenger 2002). But Thompson (1967) focuses on standardization of tasks and mutual adjustment between SC members to attain coordination. He emphasizes on the norms which define and identify each SC member’s task, including inputs, outputs, processes, and skills, and indicates the need for mutual adjustments. Mainly there are three types of coordination mechanism: Standardization, plan, and mutual adjustment based on the type of interdependence (Thompson, 1967). Later on, Ven de Ven, Delbecg and Koeing (1976) Extends Thompson’s framework by adding “team arrangement” as fourth type of interdependency. Whang (1995) proposes there are three organizational perspectives of coordination: single-person, team-based, and nexus-of-contract. The single-person perspective assumes that a system is managed by a single-decision- maker, who has access to all the information and makes system optimal decisions. Applicability of this approach in industry is questionable (Whang, 1995). On the other hand, team-based approach is a cooperative effort among SC members, who have limited information and therefore work together, communicate, and coordinate their activities to achieve system optimization. This approach is more practical a pproac h for industries. The third approach, nexus-of-contract (based on agency theory from Jensen and Meckling, 1976), focuses on eliminating the sub-optimization tendency of self-interested SC members by aligning their incentives with those of the system with contract. Whang (1995) also discussed functional, cross-functional, and inter-organizational coordination as illustrating different levels of coordination. Classifying coordination mechanisms as tools requires understanding the specific coordination problem and its proposed solution. Due to unique nature of each problem, classifying the various coordination mechanisms is a complex and difficult task. To make progress in this area of classification, Durglas J. Thomas et al. (1996) define three categories of operational coordination: buyer-vendor coordination, production-distribution coordination, and inventory-distribution coordination.

an approach for supply chain coordination mechanism

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