Introduction lecture supply chain networks 26-10-2021
Supply chains & value chains
- Value chain: every firm is a collection of activities that are performed to design,
product, market, deliver, and support its product. All these activities can be
represented using a value chain
o There are primary activities and support activities that together form a value
chain
- Value chain and value system:
o Value system → Porter described that every actor has its own value chain
consisting of these activities and they are part of a system with other actors
who also have such activities in themselves. The figure shows that there
might be some similarities to what we call supply chains
- Supply chain: 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 in the hands of the ultimate consumer
▪ Food example about pork: a very simple description about how the
product is produced until you can buy it at the retailer shelf
o The upstream and downstream linkages have in common that they are
involved in different processes and activities that are ment to produce a
certain value to a product or service that is finally handed over to a final
consumer. Important is that those different types of activities are coordinated
, in a as seamless way as possible which will make the supply chain as efficient
as possible to transport the final product through all these linkages to the
final consumer.
o For a long time the state of the art view: the very vertical and lineair
description above. You have a vertical connection of different type of actors,
producing or processing a product and adding value to it in every step.
- Pork supply chain:
o The vertical and linear view on supply chain neglects:
o 1. The interaction with other actors on the same stage
o 2. The interaction with related services
o 3. The interaction with other stakeholders
▪ On the top it starts with the big production, on the left it starts with
the feed production. There are now 3 boxes for the pig production →
pigs are not one production step. First you start with the breeding,
then you have the farrowing (piglets’ production), and then the pigs
are fattened on the same farm or on another specialized farm. In
every stage there might me multiple actors doing the same (multiple
farms). Then you have two boxes of slaughtering and processing →
can happen in one company or several companies. Then you have
customer channels which could be supermarkets or different stores.
Finally, you have the consumption at the consumer stage
▪ You see that the previous very vertical and linear view on a supply
chain is not reflecting the reality.
1. On the same supply chain stage there might be several actors that
are somehow interconnected to each other. There might be several
farmers in the production of piglets, and they might know each other,
and they might share knowledge with each other. The farmers are not
, independent actors and the very generic view on the supply chain
doesn’t reflect that.
2. You also have interactions with related services. That is here in the
figure under inputs. For instance, some advisory services or
governmental offices that are supporting the farmers with new
subsidies. Those are not considered in the generic view
3. The interaction with other stakeholders → in the figure here there
is a box, but the box is not connected to the other actors. The
stakeholders are important to the farmers in reality → can be
supportive. Governance can make policies and legislation to support
farmers to being more innovative or sustainable. There can also be
activist groups which affect farmers negatively → they were breaking
into the farmers and destroying stuff. Even with those stakeholders
there is at least communication, but here it is not defined how it is
contributing to the business relationships.
Supply chain management in netchains (networks) (Lazzarini, 2001) 1:00
How did science try to solve this issue that vertical and linear view don’t fit the realities in
food supply chains? They have tried to incorporate concepts → a combination of the typical
supply chain view with the netchain chain analysis view. Concluding that there are not only
vertical ties between the different layers of the supply chain, but there are also horizontal
ties involved on the same level of the supply chain. Farmers are interconnected to each
other, informally or formally. For example, a plant producer providing feed for the animal
producer, so they are not independent from each other.
- Different types of relationships (interdependencies) that Lazzarini identifies:
o Sequential relationship: associated with the
vertical relationships between the supplier and
the manufacturer. It means that one actor is
dependent for its input on the output of the
other actor. The supplier’s output is the input of
the manufacturer so there is some kind of
resources dependency involved. The resources
dependency is going one direction
o Reciprocal relationship: you have the resource
dependency in both directions. The supplier is,
for example, dependent on the output of the
other supplier and vice versa. A farmer producing
pork, is dependent on the feed that other farmers
are supplying and on the other hand the plant producer is dependent on the
manure that comes from the pig production.
o Pooled interdependencies (interrelation): there is only a few resources
interdependency between the actors, so they are not exchanging any inputs
and outputs with each other. But they are potentially sharing knowledge and
information with each other. Self-organized interest groups by farmers that
are for a larger reason → the members might meet frequently to exchange
their experiences on different events but not all of them are interconnected
in terms of resources.
,The pork example:
- On every stage there might be related
services involved → they might all be
affected, and they are influencing the
relationship but also the performances
of the actors on the firm by consultancy
activities to encourage the farmers to
found machinery unions, so they could
foster collaboration or pooled
interrelationships. They could also foster
the other types of relationship to bring in
contact partners together or help to
bring farmers together that could be
good trading partners to each other
- The supplier stage is not necessarily only
one layer, but it could also be 3 different
layers. If the different activities are not
done in the same company, it could be that on every layer
there are different actors having sequential relationships with
the next layer. And on each layer, there are different reciprocal
and pooled relationships between the actors. The number of
actors on each stage might not be equal. The slaughtering
stage is most likely to be more concentrated than the earlier
stages. Also, breeding facilities are much fewer than the
farmers in the middle. Some kind of indication of the supply chain funnel that exists
in the EU. Having higher concentrations in the middle of the supply chain where the
processing and retailing takes place, but at the same time you also have the smaller
structures on the production stages. Potentially more layers with more relationships
Food supply networks (netchains) 01:08
- How do the supply chains fit in there? → A supply
chain is part of the supply chain network, but it is
not only one supply chain that is part of a supply
chain network. There are several supply chains
that are part of the supply chain network. Here
there is only one supply chain highlighted in red.
But there are also other possible supply chains
(the black paths). It might be that the actor on the
top has multiple channels to forward the product
and this means that the supply chain network
does not have only the horizontal and vertical
view but also has different vertical layers and
different horizontal layers. That depends on the
supply chain itself, how many those are and what
type of relationships exist there.
,- At the moment, we were just talking about one product and one supply chain
network. In reality, every food supply chain network consists of many of these
networks.
- The graph shows the coexistence but also the interconnection of supply chain
networks in different type of production systems. We only distinguish between plant
production, bio-energy production, and animal production here. Some of the farmers
might be very specialized → supplying different type of plant products and crops, to
different marketing channels along the chain but it could also be that farmers are
also supplying into the other channels. For example, a plant producer who is
producing weed, but also maize which is used for energy production (bio-energy
production). So, you might have relationships into the other sector networks.
- It could also happen that animal production and bio-energy production happen in
combination. This has to do with the bio-energy politics, one actor on the bio-energy
production is the same actor in the animal production, so an interconnection
between the networks because you have the same actor in both networks. This could
also happen at the manufacturing stage, for example a sugar company which has
sugar production from sugar beets and at the same time they have a profit section
for bioethanol production. So, here you also have an actor that is acting in both
supply chain networks at the same time.
- There also might be non-sequential relationships → it could be the pooled and the
reciprocal relationships appear between the different networks. In reality, a food
supply chain network is a combination of quite a number of networks in the different
sectors
, - In this lecture we assume that the related services relationships are pooled
- All these actors in the different netchains might have relationships to different
related services or similar related services.
- One major issue of today is complexity. All different actors might have different
relationships to each other and might need a different management and organization
of these relationship. Imagine a farmer having so many relationships, and he has to
optimize it every day somehow
Supply chain networks (01:14)
The next issue is specialty → at the moment we are looking at the supply chain networks as
if there would be no geographical distance between them. In reality, they are facing
different specialties. There might be short supply chains: not many actors, happening in a
very narrow geographical scope. At the same time, there also highly internationalized and
even globalized supply chain networks → with actors on different continents, increasing the
number of intermediaries, like traders in between, export companies in between, transport
and logistic companies in between. This becomes a challenge as well → supply chain crisis:
container space is highly scarce so transport can become a real issue
- Cluster (spatial networks): geographic concentrations of inter-connected companies,
specialized suppliers, service providers, firms in related industries, and associated
institutions (universities, standards agencies, trade associations) in a particular field
that compute but also cooperate
o Can emerge industry-driven but can also be politically induced. Nowadays, a
lot of governments have realized that
concentration can lead to greater innovation and
to greater efficiency. Governments have tried to
induce production clusters because of this.
o Here we see a livestock production cluster → an
indication from a map showing the number of sols
that are in this region and as an indicator that it is
a cluster that has a lot of pig production. A large
part of this networks of network in one region
concentrated, but this doesn’t mean that this
concentrated region is independent from the rest