Inliterature 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 thesupply chain I presented the theories of the supply chain, then enlighten themind with the evolution of supply chain, finally answered the question why Iselected the topic for the research. 2.1 Supply Chain Management Theories In OrganizationsThere are six theories about thesupply chain management. These theories considered as pillars of foundation insupply chain.
(Ketchen Jr. and Giunipero, 2004 and Ketchen and Hult, 2006).These theories will help to understand the traditional view point of Supply ChainManagement and how it has developed over time. 2.1.1 Resource-BasedView Resource-based View (RBV) is reflected as most leadingdimension in supply chain management. These resources are the scars, valuableand difficult to procure. Such resources deliver positive impact over theperformance of the organization as compared to the competing organizations wholack in such resources (Barney, 1991).
Appropriate placement of resourcesresults in improved organizational performance. 2.1.
2 Knowledge-BasedTheory Knowledge-based Theory offers awareness in terms of synchronizationof supply chains. A traditional organization mainly depends upon the gradingfor synchronization. Normal viewpoint of supply chain lacks in officialhierarchy. They greatly depend upon knowledge tofacilitate for intensive actions. Generally, most of the supply chains in officialmechanisms are for storing information in an organization (Grant, 1996).
2.1.3 AgencyTheory Agency theory proposes that the firm can be observed asloosely defined between resource frames. An agency relation arises whenmultiple individuals hire other agents to perform some organizational tasks andallow them with administrative decision-making. Both the parties get very diversetargets, normally the agent holds higher target than that of the majororganization (Eisenhardt, 1989).
Agency expenditures are incurred to appointagents in order to sustain an operativeagency association.2.1.4 InstitutionalTheory Institutional theory be governed by the exterior pressuresor forces for modeling of organizational selections. Its main stress is upon certainsupply chain practices to some firms. It leads managers and employees to diagnosesuccess of other organizations and apply suitable actions in own organization (DiMaggioand Powell, 1983).
2.1.5 TransactionCost Analysis This theory offers astandard method to determine the limits within which a firm should operate proficiently(Williamson, 1975, 1985, 1996). Transaction Cost Analysis can be used toprovide a motivation for the firms to enter into partnership with otherorganizations. By using this theory, we can determine which functions are to beperformed within the organization and which functions are to be subcontracted.
Whenever an organization subcontracts a function, the firm to which it has subcontractedbecomes the partner of the main organization. Thus the transaction costs alsodepend upon the behaviour of the partner when it determinessome opportunity. To reduce these risks due to unpredictable behaviour of thepartner firm it is advised to enter in long term contracts with the partner,having clauses of penalty and making combined investments. Thistheory is usually used in making the critical decision e.
g. is it suitable to manufacturea product or to subcontract its manufacturing (Maltz, 1993; Andersson, 1997;Halldorsson, 2002). Thus essentially Transaction Cost Analysis helps indeciding whether a particular operation should be performed within theorganizational limits or to be subcontracted.
2.1.6 TheNetwork TheoryIn today’s competitive period, theperformance of a firm does not depend only on its primary partners andsecondary partners. Hence, the way in which an organization interacts with the otherorganizations becomes much important in this era. This way of interaction ofone organization with the other one decides the development of a new resource.Hence the two organizations join together to develop synergies and to learnfrom each other’s strengths.
The network theory states the importance of associationbetween two organizations, whether it is build-up of confidenceor long term relationships. The associationbetween two organizations in a network is improved by two types of methodsi.e. the exchange method, and the adaptation method. In exchange method the twoorganizations exchange goods, information, services etc. while in adaptationmethod the two organizations learn and acquire to each other’s processes suchas logistics, legal, administrative etc. (Johanson and Mattsson, 1987).