Figure 2-2 Structure of a typical supply chain. Source: Adapted from Lambert et al., 1998.

The contracts/partnerships that create this "virtual corporation" last for the duration of the job. New, ad hoc teams are formed and disbanded, as needed, for each new job or product. Similar examples can be found in the defense industry, where prime contractors create ad hoc teams, bringing together only the skills required to win and execute a specific contract. Subcontractors, in turn, have their own suppliers, who are also part of the chain.

The ad hoc supply chain structure has limited value. It tends to work best in industries in which (1) jobs or business opportunities are episodic and somewhat unpredictable, rather than continuous, (2) the required capability or skill mix varies from job to job, and (3) the costs of retaining a full spectrum of skills cannot be justified. For most industries, however, building long-term relationships based on trust and a high level of integration yields greater benefits. Developing trust within a supply chain takes time and effort. Even in the defense and construction industries, benefits can often be maximized through the nurturing of long-term relationships (within the letter of the law), even if the skill set is only used on a contract-by-contract basis.



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