Supply Chain Coordination and Cooperation Mechanisms: An Attribute-Based Approach AUTHORS

Coordination within a supply chain is a strategic response to the problems that arise from interorganizational dependencies within the chain. A coordination mechanism is a set of methods used to manage interdependence between organizations. Given the increasing importance of high-performance supply, and the advantages to be gained through supply chain coordination, the challenge to an organization is how to select the appropriate coordination mechanism to manage organizational interdependencies. This paper develops and illustrates an attribute-based, systematic process for selecting coordination mechanisms in a supply chain. INTRODUCTION A supply chain consists of many organizations acting together, with each organization dependent on the performance of other organizations in the chain. Coordination within a supply chain is a strategic response to the challenges that arise from these dependencies. A coordination mechanism is a set of methods used to manage interdependence between organizations. By definition, there are a number of different people, entities, and processes that interact in order to execute supply chain objectives. Coordination mechanisms, then, provide tools for effectively managing these interactions. The importance of coordination cannot be overemphasized. Indeed, supply chain management (SCM) is commonly defined based on coordination: ‘‘SCM is the planning and coordination of activities, from procurement to production, through . . . distribution’’ (Arunachalam, Sadeh, Eriksson, Finne and Janson 2003). As time-based competition increases, in part due to e-commerce, the Internet, and improved information systems, there are greater pressures for organizations to improve response times. Arunachalam et al. (2003) also observes the importance of corporations forming alliances in order to best exploit market conditions and improve competitiveness. Given the increasing importance of high-performance (rapid response, high quality) supply, and the advantages to be gained through supply chain coordination, the challenge to an organization is how to select the appropriate coordination mechanism. Coordination mechanisms may be differentiated on the bases of four attributes: resource sharing structure, decision style, level of control, and risk/reward sharing. Given that the selection of a coordination mechanism is often based on minimizing relative costs, transaction cost theory (TCT) can be used to classify the three types of costs associated with coordination: coordination cost, operational risk cost, and opportunistic risk cost. This facilitates relating each coordination mechanism attribute to a type of cost. Finally, organizations do not operate in a vacuum. The environment in which an organization operates will SUMMARY