Supply‐Chain Management: The Industrial Organisation Perspective

While supply chain management concepts are receiving increasing attention in literature and practice, the supply chain management philosophy is supported by a limited theoretical base. The industrial organisation literature related to the advantages, disadvantages and applications of vertical integration and obligational contracts is explored. The industrial organisation literature regarding vertical integration and obligational contracts is related to supply chain management. The advantages and disadvantages which supply chain management shares with vertical integration and obligational contracts are discussed. It is concluded that supply chain management is a way of combining many of the advantages of vertical integration and obligational contracts, while overcoming some of their disadvantages. Using the industrial organisation literature and findings from two case studies, prerequisites are developed for supply chain management, and three competitive situations are described. Supply chain management holds promise as a competitive form, provided that certain hazards are avoided, and that a competitive advantage results.