Supply chain

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Russian: Цепь поставок

Supply chain is a set of several independent companies that are involved in sourcing of materials, manufacturing, distributing and selling the product for ultimate customer. The term supply chain appeared along with the term “supply chain management”, however supply chains exist whenever they are managed or not. Unlike the definitions of supply chain management, the definitions of supply chain are rather homogeneous:

  • A supply chain is a set of firms that pass materials forward.[1]
  • A supply chain is the alignment of firms that bring products or services to market[2]
  • A supply chain consists of all stages involved, directly or indirectly, in fulfilling a customer request[3]
  • A supply chain is a set of three or more entities (organizations or individuals) directly involved in the upstream and downstream flows of products, materials and/or information from a source to a customer.[4]

It is important to note that these definitions of supply chain include the final consumer as part of it. Other authors see supply chain as a network of organizations, which is more closely to the reality:

  • A supply chain is a network of facilities and distribution options that performs the functions of procurement of materials into intermediate and finished products, and the distribution of these finished products to customers[5]
  • A supply chain is the network of organizations that are involved, through upstream and downstream linkages, in the different processes and activities that produce value in the form of products and services delivered to the ultimate consumer.[6]

It is also important to note that any one organization can be a part of numerous supply chains.


Types of channel relationships

The relationships between the actors (buyers and sellers) play a key role in supply chains. The supply chain type depends on what kind of relationships are between players. There are two classifications of relationship types (or strategies) below: one given by J. Mentzer et al. (2001)[4] and the other given by N. Campbell (2002).[7]

Types of relationships by J. Mentzer

According to Mentzer and his colleagues, there are three degrees of supply chain complexity: a "direct supply chain" an "extended supply chain" and an "ultimate supply chain" (see the figure).

  • A direct supply chain consists of a company, a supplier, and a customer involved in the upstream and/or downstream flows of products, services, finances, and/or information. This might be either very big vertically integrated corporation that doesn’t have important second tier suppliers or small one without resources or need to monitor second tier suppliers.
  • An extended supply chain includes suppliers of the immediate supplier and customers of the immediate customer, all involved in the upstream and/or downstream flows of products, services, finances, and/or information. This is traditional supply chain.
  • An ultimate supply chain includes all the organizations involved in all the upstream and downstream flows of products, services, finances, and information from the ultimate supplier to the ultimate customer.

Types of relationships by N. Campbell

N. Campbell described three types of relationship strategies:

  • Competitive – independent relationships; the price is determined by competitive market forces,
  • Cooperative – interdependent relationships; may create new value,
  • Command – dependent; one party has a dominant position.

Any of this strategies might be implemented by one of the sides: by buyer or by seller, depending on what bargaining power does it have, what are the plans of this player, etc. Some parameters are listed below:

  • Product
    • Frequency of purchase
    • Switching cost due to physical and human investments
    • Product complexity
    • Industry characteristics
  • Concentration
    • Number of alternative partners
    • Intensity of competition
    • Traditions and norms
  • Company characteristics
    • Relative size
    • Preferred infrastructure style
    • Relative brand awareness
    • Centralization of purchasing
  • Individual characteristics
    • Relative brand awareness
    • Preferred interaction style
    • Perceived importance of the purchase
    • Risk aversion
Relatioship strategies and recommendations
Buyer's strategy Seller'strategy Combination title Recommendation for buyer Recommendation for seller
Competitive Competitive Perfect market Play the market, Standardize requirements Take it or leave it, Try to obtain lower costs, Try to differentiate
Competitive Command Sellers’s market Accept gracefully, Buy jointly, Exchange information with other buyers, Complain, agitate, Encourage competitors Take it or leave it, Form a cartel, Legitimize, Standardize the product
Command Competitive Buyer’s market Put out trends; Play the market Competitive bidding; Try to obtain lower costs or differentiate r
Cooperative Cooperative Domesticated market Adapt, cooperate, work together Customize, specialize, differentiate, innovate
Cooperative Command Captive market Learn from the supplier Educate the buyer
Command Cooperative Subcontract market Educate the supplier Learn from the buyer


  1. La Londe and Masters (1994) Emerging Logistics Strategies: Blueprints for the Next Century, International Journal of Physical Distribution & Logistics Management
  2. Stock J., Lambert D. and Ellram L. (1998) Fundamentals of Logistics Management
  3. Chopra S. and Meindl P. (2003) Supply Chain Management: Strategy, Planning, and Operations
  4. 4.0 4.1 Mentzer J., DeWitt W., Keebler J., Soonhoong M., Nix N. Smith C., Zacharia Z. (2001) Defining supply chain management Journal of Business Logistics, Vol. 22 Issue 2, p1-25,
  5. Ganeshan R. and Harrison T.P. (1993) An introduction to supply chain management.
  6. Christopher M. (1992) Logistics and Supply Chain Management: Strategies for Reducing Costs and Improve Services. – London: Financial Times; Pitman. – 320 p.
  7. Campbell N. (2002) An international approach to organizational buying behavior. In: Ford D. (ed.). Understanding Business Marketing and Purchasing. 3rd ed. Thomson Learning: London; 389-401
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