Supply Chain

Governance in the Supply Chain

Supply chain analysis facilitates the mapping of the world division of labor. It was elaborated and popularized by, among others, Gary Gereffi and his colleagues in the sixteenth Political Economy of the World System conference. According to them, the chain consists of sets of interorganizational networks clustered around one commodity or product, linking households, enterprises, and states to one another within the world economy. Their concept contains four important elements: First, they emphasized the fact that chains frequently involve cross-border coordination of the activities of independent firms. Second, they emphasized the issue of governance, drawing attention to the fact that large retail and brand-name companies create interfirm networks characterized by a high degree of coordination. Third, they highlighted the increasing role played by international buyers, [Page 416]retailers, and brand-name companies in the trade of labor-intensive manufactured products such as garments. Finally, in recognition of these elements, they initially postulated two types of commodity chain: buyer driven and producer driven.

In a buyer-driven commodity or supply chain, large retailers, marketers, or brand-name companies play a pivotal role in establishing and driving geographically dispersed production and distribution systems without necessarily owning any themselves. The United Kingdom-Africa horticulture value chain, for example, exhibits several characteristics of a buyer-driven supply chain, in which powerful lead farms (supermarkets) govern supply networks that cross several African countries, defining not only what is to be produced but also how and under what conditions it is to be produced. These supermarkets increasingly determine the production imperatives of horticultural farms upstream in the chain and, indirectly, the employment strategies they adopt. Producer-driven chains are typical of capital- and technology-intensive industries in which transnational manufacturing firms drive the chain, controlling the core technologies and the production facilities, often through vertical integration.

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