Internet Induced Risks for global Supply Chains

In retrospect forecasts of the future often seem dull or at least miss important aspects of the actual realization. In 2000 the Ritchie and Brindley analyzed effects of the uprising Internet on supply chain management and especially newly emerging risks associated with them for small and medium sized enterprises. I wrote this review from the view of 2000 as well so you can decide yourself to what degree you see their hypothesis already fulfilled.

Internet and the Supply chain

The developments in computing technologies leads to an easier information exchange and reduces the entry barriers for new competitors. This creates new opportunities as well as threats. For SME this may lead to a more leveled playing field with larger companies. The authors furthermore predict that supply chain the supply chain model will change from a linear understanding towards a more “amorphous” relationship model (figures 1 and 2).

Figure 1: Traditional, linear Supply Chain (click to enlarge; Ritchie and Brindley, 2000)

Figure 2: Nonlinear, amorphic Supply Chain Model (click to enlarge; Ritchie and Brindley, 2000)

Relationships and Risk

Building on this hypothesis the authors develop a supply chain risks model (figure 3) which has a strong focus on the relationship component of supply chain management.

Figure 3: Model of Supply Chain Risk (Ritchie and Brindley, 2000)

Empirical Results

The model is evaluated using three studies involving SMEs and their use of the internet. The synoptic of the studies shows differing adoption rates of the internet (as low as 20 percent in 1999). Most companies are using the internet for self presentation, only a single company used the internet for information gathering (in a non-systematic way). Further analysis shows that the internet is used only to a small percentage for supply chain related activities.

Conclusion

Can we now, in 2011, confirm their hypothesis and findings? The internet nowadays is for most companies an essential tool which supports their supply chain activities. On the other hand some companies are still struggling to implement a relationship view of the supply chain. Also I am unsure about the degree to which companies are including this knowledge into their risk management activities. The market entry of Dell could be a good example how the internet leveled the playing field for the competition. Did the former leaders in PC manufacturing like IBM and HP realize this threat beforehand?