literature review I have read no. of articles and books from online libraries,
and some books from the course work. To understand the big picture of the
supply chain I presented the theories of the supply chain, then enlighten the
mind with the evolution of supply chain, finally answered the question why I
selected the topic for the research.
2.1 Supply Chain Management Theories In Organizations
There are six theories about the
supply chain management. These theories considered as pillars of foundation in
supply chain. (Ketchen Jr. and Giunipero, 2004 and Ketchen and Hult, 2006).
These theories will help to understand the traditional view point of Supply Chain
Management and how it has developed over time.
Resource-based View (RBV) is reflected as most leading
dimension in supply chain management. These resources are the scars, valuable
and difficult to procure. Such resources deliver positive impact over the
performance of the organization as compared to the competing organizations who
lack in such resources (Barney, 1991). Appropriate placement of resources
results in improved organizational performance.
Knowledge-based Theory offers awareness in terms of synchronization
of supply chains. A traditional organization mainly depends upon the grading
for synchronization. Normal viewpoint of supply chain lacks in official
hierarchy. They greatly depend upon knowledge to
facilitate for intensive actions. Generally, most of the supply chains in official
mechanisms are for storing information in an organization (Grant, 1996).
Agency theory proposes that the firm can be observed as
loosely defined between resource frames. An agency relation arises when
multiple individuals hire other agents to perform some organizational tasks and
allow them with administrative decision-making. Both the parties get very diverse
targets, normally the agent holds higher target than that of the major
organization (Eisenhardt, 1989). Agency expenditures are incurred to appoint
agents in order to sustain an operative
Institutional theory be governed by the exterior pressures
or forces for modeling of organizational selections. Its main stress is upon certain
supply chain practices to some firms. It leads managers and employees to diagnose
success of other organizations and apply suitable actions in own organization (DiMaggio
and Powell, 1983).
This theory offers a
standard method to determine the limits within which a firm should operate proficiently
(Williamson, 1975, 1985, 1996). Transaction Cost Analysis can be used to
provide a motivation for the firms to enter into partnership with other
organizations. By using this theory, we can determine which functions are to be
performed within the organization and which functions are to be subcontracted.
Whenever an organization subcontracts a function, the firm to which it has subcontracted
becomes the partner of the main organization. Thus the transaction costs also
depend upon the behaviour of the partner when it determines
some opportunity. To reduce these risks due to unpredictable behaviour of the
partner firm it is advised to enter in long term contracts with the partner,
having clauses of penalty and making combined investments. This
theory is usually used in making the critical decision e.g. is it suitable to manufacture
a product or to subcontract its manufacturing (Maltz, 1993; Andersson, 1997;
Halldorsson, 2002). Thus essentially Transaction Cost Analysis helps in
deciding whether a particular operation should be performed within the
organizational limits or to be subcontracted.
In today’s competitive period, the
performance of a firm does not depend only on its primary partners and
secondary partners. Hence, the way in which an organization interacts with the other
organizations becomes much important in this era. This way of interaction of
one organization with the other one decides the development of a new resource.
Hence the two organizations join together to develop synergies and to learn
from each other’s strengths. The network theory states the importance of association
between two organizations, whether it is build-up of confidence
or long term relationships. The association
between two organizations in a network is improved by two types of methods
i.e. the exchange method, and the adaptation method. In exchange method the two
organizations exchange goods, information, services etc. while in adaptation
method the two organizations learn and acquire to each other’s processes such
as logistics, legal, administrative etc. (Johanson and Mattsson, 1987).