BUS606: Operations and Supply Chain Management

This section of the article will provide a review of literature on Network analysis theory, information technology resources, collaborative communication, network governance and relationship longevity.

Network analysis theory

The network concept, which can be traced by its roots from anthropology and sociology, has recently become a standard technique for studying the structure of social networks. In the business arena, network analysis is methodologically becoming an increasingly popular tool that is used to understand complex patterns of interaction. By definition, network analysis examines actors that are connected directly or indirectly by one or more different relationships, whilst a network refers to any bounded set of connected social units. In a network analysis four issues are important to note:

• Networks have boundaries and some criteria exist that determine membership in the network.
• Networks are also presumed to be embedded in larger social systems, therefore it is sometimes difficult to distinguish between a network and its broader social context.
• Relational properties focus on the content of the relationship between network members and on the form of these relationships. According to Choi and Kim, transaction content and the nature of relationships – the two aspects of relational properties – seek to understand why a network exists and try to ascertain the functions performed by the relations among the members. Whilst transaction content denotes what flows or what is exchanged in networks (e.g., resources, information, influence and social support), the nature of relationships refers to the qualities inherent in the relationship between members of the network.
• Structural properties describe the way in which members fit together to form social networks as individual members, subgroups and total networks. Measures of individual members describe the differences among their connections to other members of the network, whilst measures of subgroups as the unit of analysis represent the structural characteristics of clusters within the total network. According to Chen and Paulraj, the advances in computer technology have made it possible to design network studies and conduct complex network analyses, which were impossible just a decade ago.

By relating Network analysis theory to the current study, this research accordingly submits that IT is an important resource that characterises both the nature of relationships and structure of supply chain networks. As such, it can be used as a tool to understand the nature of supply chain network structures and the depth and content of communication in supply chains. Eventually, the depth of communication and the strength of network structure influences the longevity of business relationships in supply chains and hence business performance.

Supplier information technology use

Information technology is referred to as the knowledge process and its application of methods, processing, transferring and making information improvement. IT includes gathering, organising, storing, publishing and using the information in the form of sound, picture graphics, text and number by using a computer and telecommunication tools. According to Ali and Kumar, IT provides several advantages for industry: increasing the rate of operation speed; providing the stability and compatibility in order to create data; promoting efficiency for the organisation; improving productivity; and controlling internal processes. As a business resource, IT can reduce transactional costs by electronic data transaction and shared databases and removes intermediaries in organisational processes. Accordingly, the ability of a company to exploit the benefits emanating from IT resource utilisation will equip it with a competitive advantage over its competitors. Therefore, using information technology represents a business's capability in recognising and adapting to emerging technologies. In today's business world, it has become imperative for supply chain members to invest more in IT and foster a commitment to the application of new technology within their supply chains. In this study, IT use is defined as the presence and utilisation of electronic transactions and communication in various forms between the supply chain partners.

Supplier collaborative communication

The importance of communication and information sharing has been heavily emphasised for effective inter-organisational relationships in the developed countries such as the United States of America. According to Prahinski and Benton, collaborative communication can be regarded as the glue that holds together a channel of distribution or supply chains and it is a necessity for successful supplier relationship. Communication theory indicates that communication can be viewed as a transmission process through a channel (mode) and that collaborative communication has four important facets characterised in terms of frequency of communication, the direction (whether bi-directional or unidirectional), content (whether direct or indirect) and modality (whether formal or informal). In supply chain management, collaborative communication can be expected to be frequent, genuine and involving personal contacts between buying and selling personnel. Hitherto, SCM literature has found that many supplier product problems have been due to poor communication. In the current study, supplier communication is collaborative and refers to a communication effort that emphasises indirect influence strategy, formality and feedback in unison.

Supplier network governance

In SCM, networks constitute an immediate form of governance characterised by task, authority and co-ordination mechanisms across distinct businesses that enhance supply chain performance. Roseira et al. asserted that the structure of a business's network and the location of each business and its contacts within the structure define the business's chances of obtaining benefits from the network. Such reasoning has been supported in the extant literature by Holmen and Pedersen and Lorentz and Ghauri, who submitted that if a supply network structure provides many opportunities for businesses to benefit, then they are more likely to accept that they can all gain and to be motivated to co-operate rather than compete with each other. Thus, network structures establish some of the conditions that potentially affect the motivation of businesses to co-operate with each other. When networks are well developed, a kind of governance structure emerges. However, according to Chen and Paulraj, the lower the levels of vertical integration, the stronger the linkages between the supply chain partners. Thus, effective supply network structures are personified by suppliers' interdependence. In line with existing research, supply network structure development is characterised by non-power based relationships and inter-business co-ordination as well as the informal social systems that are linked through a network of relations.

Supplier relationship longevity

Relationship longevity is often defined as both the actual length of the relationship as well as the expectation of continuing or a desire to continue the relationship. Supplier contracts have increasingly become long-term; more and more suppliers must provide customers with information regarding their processes, quality performance and even cost structure. Perhaps the reason for that, as indicated in the management literature, is that long-lasting relationships are profitable and beneficial. It is posited in the literature that the longer the business relationship is, the more co-operative, trusting and committed the companies will be through the adaptations they make. Krause and Ellram found that maintenance of relationships over a longer period of time induces supply chain partners to be more willing to share risks and rewards, whilst Carr and Pearson  suggested that companies would gain benefits by placing a larger volume of business with fewer suppliers using long-term contracts. Further buttressing the notion of Carr and Pearson, Kotabe et al. discovered that strategically managed long-term relationships with key suppliers have a positive impact on business's supplier performance. Their argument was that through a long-term relationship, the supplier will become part of a well-managed chain and will have a lasting effect on the competitiveness of the entire supply chain. Following the suggestions of existing research, the theoretical construct is operationalised to involve the initiatives taken by the buying business to encourage long-term relationships with their suppliers.