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Journal of Operations Management 29 (2011) 194211

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Penyelidikan struktur dari jaringan pasokan : Pendekatan analisis jaringan


social.
Yusoon Kima,, Thomas Y. Choib, Tingting Yanb, Kevin Dooleyb
article

info

abstract

Article history:
Received 26 October 2009
Received in revised form 5 November 2010
Accepted 10 November 2010 Available
online 18 November 2010

Sebuah sistem pembeli saling berhubungan dan pemasok lebih baik


dimodelkan sebagai jaringan selain sebagai rantai linear . Dalam
tulisan ini kami menunjukkan bagaimana menggunakan analisis
jaringan sosial untuk mengetahui karakteristik struktural jaringan
pasokan . Kerangka teoretis berhubungan kunci metrik analisis
jaringan sosial untuk menyediakan jaringan konstruksi . Kami
menerapkan kerangka kerja ini untuk tiga jaringan pasokan
otomotif dilaporkan pada Choi dan Hong (2002 ) . Setiap jaringan
pasokan dianalisis dari segi aliran bahan dan hubungan kontrak .
Kami membandingkan hasil analisis jaringan sosial dengan
interpretasi berbasis kasus di Choi dan Hong (2002 ) dan
menyimpulkan bahwa kerangka kita bisa baik suplemen dan
melengkapi analisis kasus berbasis jaringan pasokan .

Keywords:
Supply networks
Supply chain management
Second-tier suppliers
Social network analysis
Network structure
Structural analysis
Network indices

2010 Elsevier B.V. All rights reserved.


a

Department of Management, Marketing, and Logistics, College of Business Administration, Georgia Southern University, Statesboro, GA 30460, United States b Department
of Supply Chain Management, W. P. Carey School of Business, Arizona State University, Tempe, AZ 85287, United States

1.
Pengenalan

Manajemen rantai pasokan telah difokuskan


pada hubungan linear dari pembeli dan pemasok
(Cox et al, 2006;.
Zhu dan Sarkis, 2004). Sementara perspektif
linear mungkin berguna untuk perencanaan
aspek mekanik tertentu transaksi antara
pembeli dan pemasok, gagal untuk menangkap
kompleksitas diperlukan untuk memahami
strategi perusahaan atau perilaku, baik sebagai
bergantung pada jaringan pasokan yang lebih
besar bahwa perusahaan tertanam di (Choi dan
Kim, 2008). Sebuah perusahaan "jaringan
pasokan" terdiri dari hubungan dengan pemasok
langsung dan pelanggan, dan hubungan antara
mereka dan pemasok langsung mereka dan
pelanggan, dan sebagainya (Cooper et al, 1997;.
Croxton et al., 2001). Dalam dekade terakhir
telah terjadi peningkatan diskusi tentang
manfaat dari mengadopsi perspektif jaringan
dalam penelitian manajemen rantai pasokan

(Choi et al, 2001;.. Lazzarini et al, 2001; Lee,


2004; Wilding, 1998).
Dari perspektif jaringan pasokan, posisi relatif
perusahaan individual terhadap satu sama lain
pengaruh baik strategi dan perilaku (Borgatti
dan Li, 2009). Dalam konteks ini, menjadi
penting untuk mempelajari peran masingmasing perusahaan dan pentingnya sebagai
berasal dari posisinya tertanam dalam struktur
hubungan yang lebih luas (Borgatti dan Li, 2009;
DiMaggio dan Louch, 1998). Misalnya, Burkhardt
dan Kuningan (1990) dan Ibarra (1993)
menyatakan bahwa kekuasaan dan pengaruh
berasal dari jabatan struktural perusahaan di
jaringan sekitarnya. Lain telah dikaitkan posisi
jaringan untuk masalah-masalah seperti
Corresponding author. Tel.: +1 912 478 2465; fax: +1 912 478 2553. E-mail
address: yusoonkim@georgiasouthern.edu (Y. Kim).
0272-6963/$ see front matter 2010 Elsevier B.V. All rights reserved.
doi:10.1016/j.jom.2010.11.001

Y. Kim et al. / Journal of Operations Management 29 (2011) 194211

innovation adoption (e.g., Burt, 1980; Ibarra, 1993), brokering (e.g.,


Pollock et al., 2004; Zaheer and Bell, 2005), and creating alliances (e.g.,
Gulati, 1999).
Todate,therehavebeenfewstudiesofreal-lifesupplynetworks, due to the
difficulties in obtaining data. The studies of real networks that have been
done have relied on qualitative methods to derive theoretical and practical
insights (e.g., Harland et al., 2001; Jarillo and Stevenson, 1991). While
qualitative interpretations have their merits, their validity is threatened by
a researchers bounded rationality, which includes the difficulty to
conceptualize complex phenomena such as networks. Thus in this paper
we propose to analyze the structural characteristics of supply networks
using a formal, quantitative modeling approachsocial network analysis
(Borgatti and Li, 2009; Grover and Malhotra, 2003; Harland et al., 1999).
We will show how social network analysis can both supplement and
compliment more traditional, qualitative interpretation methods when
analyzing cases involving supply networks.
Social network analysis (SNA) has recently gained acceptance among
scholars for its potential to integrate the operations and supply
management field with other branches of management science (Autry and
Griffis, 2008; Borgatti and Li, 2009; Carter et al., 2007). According to
Borgatti and Li (2009), SNA concepts are particularly suitable for
studying how patterns of inter-firm relationships in a supply network
translate
to
competitive
advantagesthroughmanagementofmaterialsmovementanddiffusionof
information.
To date, SNA has not been applied in an empirical study of real supply
networks; in fact there is a general paucity of SNA applications in operations
and supply management, with only a few exceptions (e.g., Carter et al., 2007;
Choi and Liker, 1995). This is largely because there is lack of conceptual
clarification
as
to
how
thekeySNAmetrics(e.g.centrality)canbetheoreticallyinterpreted in the context
of supply networks. Therefore in this study we link different SNA metrics at
the node- or firm-level to specific roles in a supply network. We consider
supply networks based on both materials flow and contractual relationships.
The
metrics
yield
six
supplynetworkrelatedconstructs:supplyload,demandload,operational
criticality, influential scope, informational independence, and relational
mediation. Different network-level SNA metrics are also linked to their
implications for supply network performance.
We apply our framework to real supply network data derived from
three published case studies of automotive supply networks
(ChoiandHong,2002).Inthatstudytheauthorscreatedempirically
three
complete network maps of the center console assembly for Honda
Accord, Acura CL/TL, and DaimlerChrysler Grand Cherokee. In the
present paper, we convert the network data from Choi and
Hong(2002)intomatrixformsandanalyzethemusingthesoftware UCINET 6
(Borgatti et al., 2002). These quantitative results are then interpreted
using our theoretical framework. Finally, we discuss our quantitative
SNA results comparing to the qualitative findings of Choi and Hong
(2002) and consider the implications.

2. Literature review
2.1. Supply networks
Supply networks consist of inter-connected firms that engage in
procurement, use, and transformation of raw materials to provide goods
and services (Lamming et al., 2000; Harland et al., 2001). The relatively
recent incorporation of the term network into supply chain
management research represents a pressing need to view supply chains as
a network for firms to gain improved performance, operational
efficiencies, and ultimately sustainable competitiveness (Corbett et al.,
1999; Dyer and Nobeoka, 2000; Kotabe et al., 2002). Therefore, it is
increasingly important to analyze the network structure of supply
relationships.

In the operations and supply management field, a complex system


perspective has been used as a theoretical lens for describing supply
networks. Wilding (1998) studied dynamic events in supply networks
through what he referred to as supply chain complexity
triangle(p.599).Choietal.(2001)conceptualizedsupplynetworks as a
complex adaptive system (CAS). Surana et al. (2005) proposed how
various complex systems concepts can be harnessed to model supply
networks. Pathak et al. (2007) discussed the usefulness of CAS principles
in identifying complex phenomena in supply networks. Others have
examined supply networks from a strategic management perspective.
Greve (2009), using supply networks in the maritime shipping industry,
studied whether technology adoption is more rapid in centrally located
network positions. Mills et al. (2004) suggested different strategic
approaches to managing supply networks depending on whether a firm is
facing upstream or downstream and whether it is seeking its long-term or
short-term position in the supply network.
Methodologically, simulation models have been used to study
hypothetical supply networks (Kim, 2009; North and Macal, 2007;
Pathak et al., 2007). Others have studied real-world supply networks
using the case study approach (Jarillo and Stevenson, 1991; Nishiguchi,
1994; Choi and Hong, 2002). Scholars in the industrial marketing have
developed descriptive models of supply networks (Ford, 1990;
Hkansson, 1982, 1987; Hkansson and Snehota, 1995). Descriptive case
studies in this genre illustrate how companies such as Benetton, Toyota,
or Nissan attained competitive advantage through their supply networks
(Jarillo and Stevenson, 1991; Nishiguchi, 1994). Other studies focused on
developing taxonomies of supply networks (Harland et al., 2001;
Lamming et al., 2000; Samaddar et al., 2006).
More recently, Borgatti and Li (2009) have highlighted the salience of
SNA to study supply networks. In fact, there have been a few studies in the
operations and supply management field that used or promoted the use of
SNA. Choi and Liker (1995) used SNA to investigate the implementation of
continuous improvement activities in automotive supplier firms. Carter et al.
(2007) provided an example of the application of SNA in a logistics context.
Autry and Griffis (2008) applied the concept of social capital, framed as part
of social network theory, to supply chain context. However, still lacking in
such studies is a theoretical framework that relates social network theory to
supply network dynamics and the comprehensive application of SNA to
studying supply networks. In the following section, we provide a brief
overview of SNA, focusing on the key metrics useful for investigating and
explaining phenomena within supply networks.
2.2. Social network analysis (SNA)
Anetworkismadeupofnodesandtiesthatconnectthesenodes. In a social
network, the nodes (i.e., persons or firms) have agency in that they have an
ability to make choices. With its computational foundation in graph theory
(Cook et al., 1998; Kircherr, 1992; Li and Vitnyi, 1991), SNA analyzes the
patterns of ties in a network. Naturally, SNA has been used to study
community or friendship structure (Kumar et al., 2006; Wallman, 1984) and
communication
patterns(Koehlyetal.,2003;ZackandMcKenney,1995).Ithasbeen adopted to
explore the spreading of
diseases (e.g.,
Klovdahl, 1985)
anddiffusionofinnovation(e.g.,AbrahamsonandRosenkopf,1997;
Valente,
1996). In organization studies and strategic management, scholars have used
it to investigate corporate interlocking directorships (Robins and Alexander,
2004; Scott, 1986) and network effects on individual firms performance
(e.g., Ahuja et al., 2009; Burkhardt and Brass, 1990; Gulati, 1999; Jensen,
2003; Rowley et al., 2005; Stam and Elfring, 2008; Uzzi, 1997).
Operations and supply management scholars have also noted the
methodological potential of SNA. For instance, Choi et al. (2001) stated that
one could approach the study of supply networks from the social network
perspective. Ellram et al. (2006) acknowledged social network theory as a
useful tool to study influence in supply chains. Carter et al. (2007) identified
SNA as a key research method to advance the fields of logistics and supply
chain management. More recently, Borgatti and Li (2009) and Ketchen and
Hult (2007) echoed such sentiments. They have also recognized the difficulty

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Y. Kim et al. / Journal of Operations Management 29 (2011) 194211

of collecting network-level data in supply networks but argued its


imperativeness for operations and supply management to be integrated with
other management disciplines.
According to Borgatti and Li (2009), a more systematic adoption of SNA
will be instrumental in exploring behavioral mechanisms of entire supply
networks. A SNA approach allows us to better understand the operations of
supply networks, both at the individual firm level and network levelhow
important the individual firms are, given their positions in the network and
how the network structure affects the individual firms and performance of
the
whole
network.
Socialnetworkscholars(EverettandBorgatti,1999;Freeman,1977,
1979;
Krackhardt, 1990; Marsden, 2002) have developed a range of network
metrics at the node- or network-level to characterize the dynamics inside a
social network.
2.3. Key network metrics
Network metrics can be calculated at two levelsthe node level and
network level. Node-level metrics measure how an individual node is
embedded in a network from that individual nodes perspective. In this study,
we focus on three types of node-level metricsdegree, closeness, and
betweenness centrality. Networklevel metrics compute how the overall
network ties are organized from the perspective of an observer that has the
birds eye view of the network. The network-level metrics we consider are
network density, centralization, and complexity.
2.3.1. Node-level metrics
Identifying the key actors in a social network is one of the primary uses
of SNA (Tichy et al., 1979; Wasserman and Faust, 1994). The concept of
centrality is fundamental to node-level network metrics (Borgatti and
Everett, 2006; Borgatti and Li, 2009). Centrality reflects the relative
importance of individual nodes in a network. A nodes central position in a
social network has a significant impact on its and others behaviors and wellbeings (Mizruchi, 1994). Centrality has been associated with social status
(Bonacich, 1972; Freeman, 1979), power (Coleman, 1973), and prestige
(Burt, 1982).
There are different types of centrality metrics and they identify nodes that
are important, in different aspects. Most prominent are degree centrality,
closeness centrality, and betweenness centrality (Everett and Borgatti, 1999;
Krackhardt, 1990; Marsden, 2002). Of these, the most straightforward is
degree centrality. This concept builds on an observation that the more links a
node has the more central it iswhen a node is connected to a large number
of other nodes, the node has high degree centrality. Due to its greater
connectedness with other nodes, a node with high degree centrality would
necessarily be more visible in the network (Freeman, 1979; Marsden, 2002).
Another centrality concept is closeness centrality. As the term suggests,
this metric focuses on how close a node is to all the other nodes in the
network beyond ones that it is directly connected to. A node is central if it
can quickly reach all the others, and that is why closeness centrality includes
indirect ties. This centrality is usually associated with nodes autonomy or
independence
in
social
networks(Freeman,1979;Marsden,2002)
anodewithhighcloseness centrality has more freedom from others influence
and higher capacity for independent actions. Such nodes become less reliant
on other nodes.
Betweenness centrality measures how often a node lies on the shortest
path between all combinations of pairs of other nodes. The more a given
node connects nodes that would otherwise be disconnected, the more central
that node isother nodes are dependent on this node to reach out to the rest
of the network. This metric focuses on the role of a node as an intermediary
and posits that this dependence of others makes the node central in the
network. As such, the betweenness centrality usually denotes a nodes
potential control or influence in the network (Marsden, 2002). A node with
high betweenness centrality has a great capacity to facilitate or constrain
interactions between other nodes (Freeman, 1979).

2.3.2. Network-level metrics


SNA also yields metrics concerning the structure of the overall network,
such as network density, network centralization, and network complexity.
Network density refers to the number of total ties in a network relative to the
number of potential ties. It is a measure of the overall connectedness of a
network (Scott, 2000)a network in which all nodes are connected with all
other nodes would give us a network density of one.
Network centralization captures the extent to which the overall
connectedness is organized around particular nodes in a network (Provan and
Milward, 1995). Conceptually, network centralization can be viewed as an
extension of the node-level centrality (Freeman, 1979)if a network had
such a highly centralized structure that all connections go through few
central nodes, then that network would be high on network centralization.
The network with highest possible centralization is one with a star structure,
wherein a single node at the center is connected to all other nodes
andtheseothernodesarenotconnectedtoeachother.Likewise,the
lowest
centralization occurs when all nodes have the same number of connections to
others.
Network centralization and network density are complementary.
Whereas centralization is concerned with the distribution of
powerorcontrolacrossthenetwork,densityreflectsnetworkcohesiveness. A
network that has every node connected with everyone else would have a
highest possible density (i.e., density of one). This network would be a
highly cohesive network but would have a diffuse and distributed control
structure.
Network complexity is defined as the number of dependency
relations within a network (Frenken, 2000, p. 260) and thus would
depend on both the number of nodes in the network and the degree to
which they are interlinked (Frenken, 2000; Kauffman, 1993). In the
context of a supply network, complexity relates to the collective
operational burden born by the members in the network (Choi and
Krause, 2006). For instance, a large number of units in a system is likely
to entail high coordination cost (Kim et al., 2006; Provan, 1983). Further,
if these units are highly interdependent, then the collective operational
burden would be high and thus more complex at the system level.
Network complexity is related to network density and network
centralization. First, more complex networks require higher operational
burden (Lokam, 2003; Pudlk and Rdl, 1992, 1994). Second, network
density is conceptually linked with network complexity because a denser
network requires more effort to build and maintain (Marczyk, 2006).
Finally, network centralization is associated with network complexity
because the highest coordination costs require when every node is
connected to all other nodes (i.e., a network with the least centralization)
(Pudlk et al., 1988).
3. Conceptual framework for analyzing supply networks
3.1. Two types of supply network
There are a number of different ways in which ties can be established
between firms in the supply network. For example, a tie might be
established between two firms if they were collaborating on a new
product development or if they had overlapping board membership or
belonged to the same trade organization. In this paper we focus on two
types of ties that Choi and Hong (2002) collected data for in their study.
Firms can be linked because of the delivery and receipt of materials,
or they can be linked through a contractual relationship (Choi and Hong,
2002). In a tree-like structure of materials flow (Berry et al., 1994;
Chopra and Sodhi, 2004; Hwarng et al., 2005), the network describes
which supplier delivers to which customer. The other type of network is
based on contractual relationships. Often, when a buying company wants
to control the bill of materials, it engages in directed sourcing, wherein it
establishes a contract with a second- or third-tier supplier and directs the
top-tier supplier to receive materials from them (Choi and Krause, 2006;
Chopra and Sodhi, 2004; Park and Hartley, 2002). In this context,
materials flow occurs between two firms who do not have a contract and
vice versa. These two types of supply networks, although based on the

196

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Y. Kim et al. / Journal of Operations Management 29 (2011) 194211

same set of nodes, can have different network structures and, therefore,
different logics and implications (Borgatti and Li, 2009).

3.2. Supply network constructs


3.2.1. Firm-level constructs
We now consider the key node-level SNA metrics and discuss how they
can be used to interpret different roles in supply net-

Y. Kim et al. / Journal of Operations Management 29 (2011) 194211

198

Table 1
Node-level centrality metrics and their implications for supply networks.
Materials flow

Contractual
relationship

Network type

Indegree
centrality

Supply load

The degree of difficulty faced by a


firm in managing incoming material
flows from the upstream firms

Integrator

Outdegree
centrality

Demand load

The degree of difficulty faced by a


firm in dealing with demands from the
downstream firms

Allocator

Betweenness
centrality

Operational
criticality

The extent to which a firm impacts the


final assemblers operational
performance in terms of product
quality, coordination cost and overall
lead-time.

Pivot

Degree
centrality

Influential scope

The extent to which a firm has an


impact on operational decisions or
strategic behavior of other firms in the
supply network

Coordinator To reconcile differences of network


members and align their opinions
greater supply network goals

Closeness
centrality

Informational
independence

Betweenness
centrality

Relational
mediation

The extent to which a firm has


Navigator
To explore, access, and collect
various information with greater
freedom from the controlling actions
autonomy in the supply network
of others in terms of accessing
information in the
supply network
The extent to which a firm can
Broker
To mediate dealings between
intervene or has control over
network members and turn them
interactions among other firms in the
into its own advantage
supply network
Conceptual definitions
Implication for central nodes metrics

Centrality
constructs

Supply network

To put together or transform


different parts into a value-added
product and ensure it functions
well
To distribute limited resources
across multiple customers,
focusing on scale economies

Rolea
a

System integration
Design/development
Architectural
innovation
Process/manufacturing
Quality management
Component innovation
Out-bound logistics
To facilitate or control the flows of
Risk management
supply across the whole network
In- and out-bound
logistics
Cross-functional integ.

Description

Network role given high centrality.

works. Table 1 offers an overview of key centrality


metrics, the corresponding supply network
constructs, and their implications for network roles
in the context of modeling supply networks. We
propose this new framework for the interpretation of
the SNA metrics in the supply network context.
To illustrate these constructs, we first discuss the
calculation of key SNA metrics and the essential
properties of each. Then, we integrate each key
SNA metric separately with the two types of supply
networks (i.e., materials flow and contractual
relation). We should note that the supply network
based on materials flow is directional, whereas the
supply network based on contractual relationship is
non-directional as legal obligations are mutually
agreed and enacted.

CD

For comparison purposes, in this study, we


convert normalized degree centrality to a 0100
scale by multiplying by 100.
A high degree centrality points to where the
action is in a network (Wasserman and Faust, 1994,
p. 179). Freeman (1979) describes it as reflecting
the amount of relational activities, and such
activities make the nodes with high degree more
visible. For instance, in a non-directional contractual
relationship network, the degree centrality refers to
the extent to which the firm influences other firms
on their operations or decisions as the firm has more
direct contacts with others (Cachon, 2003; Cachon
and Lariviere, 2005; Ferguson et al., 2005). In
contrast, nodes with low degree centrality are
considered peripheral in the same network. If a node
is completely isolated (i.e., zero degree), then
removing this node from the network has virtually

3.2.1.1. Degree centrality in supply network. Degree


centrality is measured by the number of direct ties to
a node. Degree centrality CD(ni) for node i(ni) in a
non-directional network is defined as:
CD
xji
j
j

where xij is the binary variable equal to 1 if there is a


link between ni and nj but equal to 0 otherwise
(Freeman, 1979; Glanzer and Glaser, 1959;
Nieminen, 1973; Proctor and Loomis, 1951; Shaw,
1954). To account for the impact of network size g,
degree centrality is normalized as the proportion of
nodes directly adjacent to ni:
CD(ni)

g 1.

no effect on the network. Therefore, a firm who has


more contractual ties in the network garners a broad
range of influence on others, and at the same time
such a firm would often be required to reconcile
conflicting schedules or interests between others.
For the final assembler, for instance, it would make
sense to align with suppliers with high degree
centrality.
In a directional network of materials flow, the focus
is either on the flow initiated (out-degree) or flow
received (in-degree). For instance, out-degree centrality
of a node is defined as:
x
i
+

Contract management
SRM/CRM with the

Information acquisition
Strategic alignment
with OEM

Information processing
Strategic alignment
with OEM

Key capabilities

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Y. Kim et al. / Journal of Operations Management 29 (2011) 194211

1
In-degree centrality and out-degree centrality
indicate the size of the adjacent upstream tier and
downstream tier, respectively. A high in-degree or outdegree can capture transactional intensity or related
risks for a firm (Powell et al., 1996). In a materials flow
network, in-degree centrality for a firm can reflect the
degree of difficulty faced by the firm when managing
the incoming material flows. In other words, this metric
measures the firms operational load coming from the
upstream suppliers. A firm with high indegree centrality
may serve the role of an integrator, as they are tasked
with organizing and incorporating a range of parts from
various suppliers to maintain the overall integrity of the
product or service (Parker and Anderson, 2002; Violino
and Caldwell, 1998). Such members in a supply
network are instrumental and vital in carrying out the
architectural or technical changes in the current product
(Henderson and Clark, 1990; Iansiti, 2000).
Out-degree centrality relates to the firms level of
difficulty in managing the needs of customers. The
more direct customers there are in downstream, the
more challenging it is for the firm to ensure on-time
delivery, cost-effective
inventory, and
order
management for their customers. The number of direct
customers is thus positively associated with the
operational
load
relatedtodemandintegrationandresourceallocation(Frohli
chand Westbrook, 2002). In a materials flow supply
network, a firm with high out-degree centrality tends to
be a common supplier to multiple downstream firms.
Such supplier can economize and capitalize on its own
internal resources as it aggregates demands from a
range of customers (Nobeoka, 1996). Further, this firm
is more likely than others to gain access to proprietary
assets or information of its customer firms. This firm is
in the best position to allocate or channel production or
technical information to others in the network
(Cassiman and Veugelers, 2002).

where
(ni,nj) is the total distance between n i and
all other nodes. At a maximum, the index equals (g
1)1, which happens when the node is adjacent to all
other nodes. When all the other nodes are not reachable
from the node in question, the index reaches its
minimum value of zero. The index can be normalized
by multiplying CC(ni) by g 1. The value then ranges
between 0 and 1 regardless of network size
(Beauchamp, 1965). In this study, the normalized index
is converted to a 0100 scale.
Nodes with high closeness need not much rely on
others for relaying information or initiating
communications (Bavelas, 1950; Beauchamp, 1965;
Leavitt, 1951). This metric, in a supply network
context, thus can represent the extent to which a firm
can act autonomously and navigate freely across the
network
to
access
resourcesinatimelymanner.Suchafirmhascomparativelys
horter supply chains, both upstream and downstream.
Shorter chains translate into less distortion of
information and better ability to access reliable
information (e.g., demand forecasts, supply disruption)
in a timelier manner (Lee et al., 1997; Chen et al.,
2000). Such accessibility to high-quality information
increases the firms capability to match supply and
demand (Cachon and Fisher, 2000), resulting in less
inventory and lower operational costs (Lee et al., 2000).
3.2.1.3. Betweenness centrality in supply network.
Betweenness centrality appears under both types of
networks. A firm can lie between a pair of non-adjacent
firms either along their materials flow or contractual
relationship. The intermediary will have different
effects on the firms it links, whether directionally or
non-directionally. Measuring betweenness centrality
begins with an assumption that a connection between
two nodes, nj and nk, follows their geodesics. Therefore,
betweenness centrality can be expressed as (Freeman,
1977):
g
j
k

(
n
i

)
CB(ni) =
g

3.2.1.2. Closeness centrality in supply network. The


calculation of closeness centrality is based on geodesic
distance d(ni, nj) the minimal length of a path
between two nodes ni and nj (Hakimi, 1965; Sabidussi,
1966). In this study, closeness centrality is considered
only in contractual relationship networks, as shown in
Table 1. In a directed network (e.g., materials flow), the
geodesic(s) from ni to nj may not be the same as the
one(s) from nj to ni, or there can be two geodesics
between two non-adjacent nodes. In the case of supply
networks, this does not make
physical sense. Therefore, typical
node closeness is defined as: 1

j
k
j
<
k

where gjk is the total number of geodesics linking the


two nodes, and gjk(ni) is the number of those geodesics
that contain ni. The nis betweenness is then simply the
sum of the probabilities that the node lies between other
nodes. The betweenness reaches the maximum when ni
falls on all geodesics and has a minimum of zero when
ni falls on no geodesics. We normalize it to a value
between 0 and 100:

CB (ni) =
(CB(gni) 2)/2] 100.

[(g

1)

Y. Kim et al. / Journal of Operations Management 29 (2011) 194211

The betweenness can be viewed as indicating

postulates that a buyer can enjoy the increased

how much gatekeeping ni does for the other nodes


(Borgatti and Everett, 2006; Freeman, 1980;
Spencer, 2003). Gatekeeping occurs because a node
on geodesic can control the flows of materials or
communication (Marsden, 2002). When applying to
materials flow networks, firms with high

sourcing leverage when it lies between two


disconnected, competiting suppliers (Choi and Wu,
2009; Wu and Choi, 2005). For instance, the buyer
can play two rival suppliers off each other to drive
down the purchasing price.

200

Table 2
Network-level metrics and their implications for supply networks.
Network type

Network-level
metrics

Conceptual definition in supply


networks

Implication of overall network structurea


Characteristics

Materials flow

Contractual
relationship

Centralization

The extent to which particular focal


firms control and manage the
movement of materials in a supply
network

Operational authority (e.g., power to make


decisions on materials flow) concentrated in
few central firms
Centralized decision implementation process

Complexity

The amount of collective


operational burden born by the
member firms in a supply network

More firms engaged in the delivering and receiving


of materials
More steps required to move the materials along

Centralization

The extent to which particular


focal firms exercise bargaining
power or relationship
management control over other
firms in a supply network

Lack of interactions between central and


peripheral firms in a supply network Decoupled
relationships between firms at different tiers

The amount of load on the supply


network as a whole that requires
relationship coordination

More firms involved in transferring information


Active interactions at a local level Slow
relaying communications from
downstream to the final assembler

Complexity

betweenness act as a hub or pivot that transmits


materials along the supply chains, and betweenness
centrality
relates
to
theextenttowhichafirmpotentiallyaffectsthedownstre
amfirms daily operations (e.g., lead time) and
eventually the performance (e.g., final product
quality) of the whole network. For instance, if a firm
with high betweenness transmits materials to a
wrong place or does not respond to changes in
demand in a timely manner, it can easily lead to
supply disruptions (Chopra and Sodhi, 2004).
Similarly, the effects of poor-quality outputs from
these firms can easily infect the broader supply
network, interfering with normal product flows
(Kleindorfer and Saad, 2005). Therefore, operational
hiccups caused by such firms can surely hamper the
functioning of the entire supply network (Hendricks
and Singhal, 2005). Considering the significance of
negative impacts such members can have, it would
be prudent of the final assembler to ensure high or,
at least, consistent operational performance of these
firms (Hendricks and Singhal, 2003).
In a contractual relationship network, the metric
can denote the extent to which a firm can affect the
interactions among others in the same supply
network. A firm with high betweenness centrality
mediates many pathways and thus can either
facilitate or interfere with the network
communications. The social network literature
suggests that a node linking dense regions of
relationships enjoys the benefits of non-redundant
information to increase its control over others (Burt,
1992, 1998). Supply network research also

High level of controllability in product


design, product quality, and/or cost
management
Low level of responsiveness to or more time
for resolution on issues occurring at a local
level

3.2.2. Network-level constructs


We now discuss the key network-level metrics.
Table 2 summarizes the theoretical interpretation of
the metrics and their implications for network
performance in the context of supply networks.
3.2.2.1. Supply network centralization. Recall that
CD(ni) is nodelevel degree centrality, and CD(ni ) is
its maximum value in the network. Then, a general
definition for network centralization is (Freeman,
1979):

CD

.
Given g nodes in the network, the denominator
reduces
to
(g
1)(g
2).ThevalueofCD
reachesthemaximumvalueof1when one node is
connected with all other g 1 nodes, and the others
interact only with this node. Its minimum value of 0
occurs when all degree centrality values are equal.
In supply networks, centralization can refer to how
much power or control the core firms exercise over
other network members (Choi and Hong, 2002). In
this study, besides centralization based on degree,
two other centralization
a

Performance implications
High level of controllability in production
planning
Low level of operational effectiveness at the
network-level (i.e., more time taken to reach
a decision and take actions on issues at a
local level)
Low level of operational efficiency at the
network level (i.e., longer lead time from the
most upstream to the final assembler or more
parts for the same product function)

Implications given high metric score.

indices are also usedones based on closeness and


betweenness centrality.
Further, there are other proxy measures of
centralization used in this study. They are multiple
indices of density that involve the core and

Low level of robustness or high degree of


vulnerability to supply disruptions (i.e., more
time to channel information and a higher
likelihood of information distortion across a
supply network)

201

Y. Kim et al. / Journal of Operations Management 29 (2011) 194211

periphery sub-groups in a network (see Table 6).


When a network is partitioned into two clusters, a
core cluster appears among nodes that are densely
connected together and a periphery is formed among
nodes that are more connected to core members than
to each other (Borgatti and Everett, 2000; Luce and
Perry, 1949). For instance, in Fig. 1, there are 19
firms in the core group (see Table 6) around Honda
and CVT who appear at the center. The rest appears
in the periphery.

3.2.2.2. Supply network complexity. Supply


network complexity refers to the load on the
network as a whole that requires coordination (Choi
and Hong, 2002). While the general state of the
literature regarding the property of complexity at the
network level is still emerging (Butts, 2001a,b;
Everett, 1985; Freeman, 1983), we adopt the idea
put forth by Kauffman (1993) and Frenken (2000).
They propose that network complexity can be
indicated by the number of nodes and degree of
interdependency among nodes in a given network.
Therefore, we use two types of SNA output metrics
sizetype and density-typeto represent the
number
of
supply
network
membersandthelevelofconnectednessamongthem,res
pectively.
The size-type outputs are shown in network size
and core size, and the density-types include network
density, core density, periphery density, core-toperiphery (CTP) density, and peripheryto-core
(PTC) density. Network size relates to the average
path length among nodes in the network (Ebel et al.,
2002). More firms in a network translate into more
steps and more time needed to complete the same
task, whereby creating a higher likelihood of the
supply being interrupted en route and higher
collective burden born at the system level (Frenken,
2000). Likewise, between the two networks of
identical size, more links imply a higher probability
that the functioning of the individual nodes in the
network is likely to be impeded by others, leading to
a greater coordination load on the whole network
(Choi and Krause, 2006). For instance, if an OEM
has two top-tier suppliers, the firm would
necessarily incur a greater amount of coordination
load, compared to a situation where there is only
one top-tier firm. Therefore, a complex supply
networks would be associated with large network
size, large core size, high network density, high core
density, high periphery density, high CTP density,
and high PTC density. Note that in the contractual
relation supply networks, the PTC and CTP
densities are identical, since every link in the
network is non-directional and the adjacency matrix
representing this network is symmetric.
4. Research methodology
4.1. Data source
Choi and Hong (2002) (hereafter, denoted as C&H)
reported three supply networks from raw materials
suppliers to a final assembler involved in the production
of an automobile center console assembly. The three
product lines represented were Honda Accord, Acura

CL/TL, and DaimlerChrysler (DCX) Grand Cherokee.


Using an inductive case study approach, the authors
derived propositions regarding the behavioral
characteristics of supply networks. Table 3 provides a
review of this particular work.
In our analysis, we include all the firms in the
supply network as identified in C&Hthey are direct
suppliers and parts brokers, stretching from raw
materials suppliers to the final assembler. As indicated
before, each supply network contains two different
types of network informationone pertaining to
materials
flow
andanotherbasedoncontractualrelationships.Thesetwodif
ferent types of network data yield a total of six supply
networksthree based on directional materials flow
and three based on nondirectional contractual
relationships.

Y. Kim et al. / Journal of Operations Management 29 (2011) 194211

4.2. Data analysis

5.1. Node-level results

The network information from C&H is converted


into a binary adjacency matrix (Wasserman and Faust,
1994) that has firms representing both the rows and

Tables 4 and 5 list key firms in the two types of


supply networks. We identify key firms based on their
centrality values. Tables 4 and 5 build on Table 1. The

Fig. 1. Materials flow network for Accord.

columns of the matrix. For instance, cell (i,j) would


equal 1 if the firms i and j were linked either by
materials flow or contractual relationship, and would be
0 otherwise. Supply networks may yield adjacency
matrices that are symmetric (i.e., non-directional) or
asymmetric (i.e., directional), depending on the nature
of the linkages. As noted earlier, a materials flow
network is directional and thus asymmetric, while a
contractual relationship network is non-directional and
thus symmetric. Once generated, the adjacency
matrices
are
imported
into
UCINET6andareusedasinputsfornetworkanalysis(Borga
ttietal., 2002).
UCINET is a comprehensive software package for
the analysis of social network data. It has been one of
the most widely accepted SNA tools for conducting the
structural analysis of interorganizational networks (e.g.,
Gulati, 1995, 1999; Human and Provan, 1997; Rowley
et al., 2005; Ahuja et al., 2009). The program contains
dozens of network analytic methods such as centrality
measures, subgroup identification, role analysis,
elementary graph analysis, and permutation-based
statistical analysis. While performing SNA, UCINET
can create network visualizations. A visualization of
each of the six supply networks, also known as a
sociogram, is shown in Figs. 16.
5. Results

supply network constructs shown on the top row come


from Table 1, and centrality computations are
conducted on the corresponding centrality metrics
shown in Table 1.
As indicated below each table, there is a cut-off
point for each supply network construct (e.g., 10 for indegree, 6 for out-degree). The cut-off point is
determined based on one rule: when there is a
noticeable drop-off in the score, the previous score
constitutes the threshold. In all cases except one, there
are multiple key firms. The exception is out-degree
centrality for the materials flow type of DCXs supply
network. Every node in the network, except for the
OEM, has only one customer, showing the same value
on outdegree centrality; consequently, there was no
threshold value. In Tables 4 and 5, the number shown in
parenthesis next to a firm name represents the centrality
score.
5.2. Network-level results
Tables 68 show SNA results at the network
level. Tables 6 and 7 focus on centralization metrics,
respectively, for directional materials flow and nondirectional contractual relationships. Table 8
summarizes all complexity metrics for both types of
networks.
In Table 6, various network-level indicators are
shown across three different supply networks.

202

203

Y. Kim et al. / Journal of Operations Management 29 (2011) 194211

Beginning with network size and density, individual


node-level centrality scores are averaged for each
supply network. Then, the three network
centralization scores are listed. Up to this point, all
values reflect network-level attributes. Below the
network-level values, Table 6 lists values at the
group level. It first shows the size of core group and
its density (see Section 3.2.2.1 on supply network
centralization for a discussion on core and peripheral
groups). It then moves on to listing other group-level
measures.
Table 3
Network
measures

Centralization

Complexity

Addressing contractual relationship supply


networks, Table 7 is constructed much the same
way. Since this supply network type is nondirectional, network measures shown on the left-side
column are slightly different from those of Table 6,
as discussed under Table 1. Also note that most of
the network-level metrics are in normalized form,
which allows us to compare them across the three
different supply networks.

Product type
Honda Accord

Acura CL/TL

DaimlerChrysler (DCX) Grand Cherokee

Two firms, CVT and JFC, are top-tier suppliers to


Honda

One top-tier supplier, Intek, a complete integrator of


this supply network

Textron as the sole top-tier supplier that integrates


parts and subassemblies

Several second- or third-tier suppliers (e.g., Emhart,


Garden State, and Miliken) directly selected by Honda
Some third-tier suppliers directly selected by
CVT, based on Hondas core supplier list Hondas
penchant for centralized control when it comes to
the product design and supplier selection

Honda engaging in directed sourcing at the second,


third, and even fourth tiers
Intek likewise engages in directed sourcing by
selecting its own suppliers and even their suppliers
suppliers, based on Hondas core supplier list
Directed sourcing generally for high-priced or strategic
items
Hondas centralized control of the product design
activities

Textron-Farmington and Leon Plastics appear as


two key second-tier suppliers
Textron assumes the leading role in designing
console
Directed sourcing occurs only on a limited basis

All together, 50 network entities: 2 first-tier,


21 second-tier, 18 third-tier, 7 fourth-tier, and
2 fifth-tier suppliers
Majority of the suppliers at the second-tier level
Four different nature of businesses in the network
manufacturing companies, raw materials suppliers
(e.g., GE Plastics), distribution centers (e.g., Iwata
Bolt), and trading houses (e.g., Honda Trading)
Reciprocal relationship between CVT and JFC, two
top-tier suppliers, contributing to either reduction or
increase of network complexity depending on the
relational nature

76 entities in the network: 1 first-tier, 20 second-tier,


28 third-tier, 17 fourth-tier, 9 fifth-tier, and 1 sixth-tier
suppliers
The coupling between Honda and Intek based on
their shared history may reduce the level of
complexity
The decoupling between Intek and JFC, a secondtier supplier of the critical subassembly, may
further the complexity Hondas effort to centralize
second-tier suppliers may increase complexity of
the network as a whole

41 entities: 2 first-tier, 10 second-tier, 22 third-tier,


and 7 fourth-tier suppliers At the top-tier level,
Textron is engaged in assembly work and also acts
as a conduit for a part from Leon as it ships the
front console mat directly to the DCX plant with
Textrons label No reciprocal relations among
suppliers
As per DCXs recommendation, Textron has
consolidated the second-tier suppliers, leading to
reduced number of second-tier suppliers and
subsequently reduced complexity

Summary of case data from Choi and Hong (2002).

Y. Kim et al. / Journal of Operations Management 29 (2011) 194211

Fig. 2. Materials flow network for Acura.

204

205

Y. Kim et al. / Journal of Operations Management 29 (2011) 194211

Fig. 3. Materials flow network for Grand Cherokee.

Fig. 4. Contractual relationship network for Accord.

Y. Kim et al. / Journal of Operations Management 29 (2011) 194211

Fig. 5. Contractual relationship network for Acura.

Fig. 6. Contractual relationship network for Grand Cherokee.

206

207

Y. Kim et al. / Journal of Operations Management 29 (2011) 194211

Table 4
List of key firms based on materials flow network.
Supply load1

Demand loadb

Operational criticalityc

AccordCVT (59 ), JFC (15), HFI (11)

CVT (15), C&C (7.4), JFC (7.4), GE (7.4), Yamamoru (7.4),


Industry Products (7.4)

CVT (13), Emhart (2), Yamamoru (1.7), Fitzerald (1.7),


JFC (1.3)

Acura

Intek (58), Arkay (21), Select Ind. (12)

Intek (3), Arkay (1.7)

DCX

Textron (65), Leon Plastics (31)

Iwata Bolt (9.1), Tobutsu (6.1), Arkay (6.1), Twist (6.1),


Milliken (6.1), Garden State (6.1), Select Ind. (6.1)
Non
e

Textron (3.8), Leon Plastics (2.5)

a
Firms with in-degree>10. b
Firms with out-degree>6. c Firms
d
with
betweenness>1.0.
Centrality score.

Table 5
List of key firms based on contractual relationship network.
Influential scopea

Informational independenceb

Relational mediationc

Accord

CVT (52), Honda (30),


Yamamoru (15)

CVT (57), Honda (53), Yamamoru (40)

CVT (79), Honda (64), Emhart (21) Yamamoru


(15), Fitzerald (14)

Acura

Intek (45), Honda (36), Arkay


(18), Select Ind. (15)
Textron (62), Leon Plastics (35)

Intek (62), Honda (56), Arkay (44), Select Ind.


(43), Tobutsu (41), HFI (40)
Textron (72), Leon Plastics (58) Daimler (46)

Intek (77), Honda (63), Select Ind. (14), Iwata


Bolt (12), Arkay (10)
Textron (88), Leon Plastics (53) Daimler (15)

DCX
a

Fi
r
m
s
w
it
h
d
e
gr
ee
>
1
5.

Centralization (in-degree)

0.567

0.556

Centralization (out-degree)

0.106

0.056

Centralization (betweenness)

0.128

0.029

Core group size (firms)

Fi
r
m
s
w
it
h
cl
os
e
n
es
s
>
4
0.
c
Firms with betweenness>10.

19

23

Core density

0.067

0.059

Core to periphery (CTP) density

0.006

0.000

Periphery to core (PTC) density

0.064

0.043

Periphery density

0.000

0.000

3
4
0.
6
4
1
0.
0
0
1
0.
0
3
8
4
0.
2
5
0
0.
0
0
0
0.
2
5
0
0.
0
0
0

Represented by asymmetric matrix.

Table 6
Network-level results for materials flowa supply networks.
Network measures

Network size (firms)


Network density

Average in-degree

Average out-degree

Table 8 re-organizes some information from


Tables 6 and 7. It lists values for the select indicators
Product type of network complexitythey represent the degree of
interdependency
among firms. Network size is listed
Accord
Acura
DCX
as the first indicator. Network density is then listed in
28
34
both materials flow and contractual relationships
0.046
networks. Then, group-level indicators are listed in
both types of supply networks.
4.630

4.630

Table 7
Network-level
networks.

results

for

contractual

relationship a supply

Network measures

Product type
Accord

Average betweenness

1 Represented by symmetric matrix.

0.809

Network size (firms)

28

Acura
34

DCX
27

Y. Kim et al. / Journal of Operations Management 29 (2011) 194211


Network density

0.074

Average degree

7.407

Average closeness

35.716

Average betweenness

7.407

Centralization (degree)

0.479

Centralization (closeness)

0.459

Centralization (betweenness)

0.748

Core group size (firms)

17

Core density

0.125

208

0.066who

appear more central than JFC. This is because


most suppliers supplying to JFC also serve CVT
but not the other way around
6.595(see Fig. 1).
Intek,thetoptiersupplierforAcura,appearsmostcentralunder
37.747both supply load and operational criticality. The
bulk of network resources flow into and through
5.375
this firm. However, unlike CVT in Accord
network, Intek does not appear central under
demand load. This is because the firm primarily
0.413
receives materials (see Fig. 2). In fact, Iwata Bolt,
a second-tier supplier for Acura, comes first under
demand load. This simply means that this firm
0.513
delivers
to
a
relativelylargenumberofbuyingfirms,whichimplies
thatthissupplier has leverage in allocating its
0.738
internal resources across multiple customers.
Another noteworthy finding is that Arkay, a
second-tier supplier, is the only firm that ranks
6
high on all the three centrality metrics. Without
0.467
conducting SNA, Arkays central role in the Acura

Table 8
Key indicators for network complexity.
CTP or PTC density

Network size
( firms)

Periphery density

0.048
0.179
Materials flow network
Network
0.036
density

Core size
0.000

Core
density

Contractual relationship network


CTP density PTC density Network
density

Accord 28 0.046 19 0.067 0.006 0.064 0.074 17 0.125 0.036 0.048 Acura 34 0.037 23 0.059 0.000 0.043 0.066 6 0.467 0.000 0.179
DCX
27
0.037
4
0.250
0.000
0.250
0.074

6. Interpretation of results
In this section, we recapitulate the SNA results
shown in Tables 48 with reference to the supply
network constructs developed in this study (see
Tables 1 and 2). We provide network dynamics
implications of the node-level results first and then
those of the network-level results. A summary of
the SNA results at the node- and network-level is
shown, respectively, in Tables 9 and 10.
6.1. Node-level implications
6.1.1. Key firms in the materials flow supply
networks
Table 4 compares groups of firms across
supply load, demand load, and operational
criticality (see Table 1 for definitions). CVT, a
first-tier supplier in Accord supply network,
appears highly central, showing the highest scores
on all three columns. In other words, CVT
assumes the most operational burden on both the
supply side and demand side. This firm is tasked
with integrating multiple parts into a product,
which also means the firm can make the most of
its resources by pooling customer demands and
the related risks. CVT is also the pivotal player in
the movement of materials. Without this firm, the
entire supply chain would be disrupted. In
contrast, we observe that another top-tier supplier
of Accord, JFC, is not as central. Its centrality
scores are markedly lower than those of CVT, and
there are other second- (i.e., C&C, Emhart, and
Yamamoru) and third-tier suppliers (i.e., Fitzerald)

Core size

supply network may very well be overlooked.


There are a comparatively less number of central
firms in DCXs supply network. The implication is
that the structure of the DCX network is simpler (see
Fig. 3) than those of Honda and Acura. For one, there
are no firms listed under demand load. This is
because every supplier in this network has only one
customer, including Textron and Leon, a top-tier and
a
key
second-tier
supplier,
respectively.Thesetwosuppliersappearunderbothsuppl
yloadandoperational criticality. Both firms engage in
value-adding activities by integrating parts and
facilitating their flows. The supply streams in this
supply network take place primarily through Textron
or Leon.
6.1.2. Key firms in contractual relationship supply
networks
In Table 5, CVT is again prominent on all
centrality metrics in Accord supply network. This
firm appears as most influential on the operation
of the contractual relationship supply network,
just as it does in the materials flow network.
Nonetheless, there are a few notable differences.
First, Honda does not appear at all in Table 4, but
in this network based on contractual relationships,
Honda emerges quite visibly (second to CVT) on
all three columns. This is because Honda
maintains a contractual relationship with many of
its second- and third-tier suppliers (see Fig. 4).
Second, JFC, a top-tier supplier who appears in all
three centrality metrics in Table 4, is gone in
Table 5. In other words, when it comes to
managing contracts, Honda emerges as central
and
JFC
disappears.

Core
density
0.667

Periphery
density
0.000

PTC density

0.333

209

Y. Kim et al. / Journal of Operations Management 29 (2011) 194211

Clearly,JFCismoreisolatedinthecontractualrelation
shipnetwork.
For Acura supply network, Intek appears yet
again as most central, while Honda emerges as
central also. Thus, Intek looks like most
influential in the contractual relation network and
none could bypass Intek to connect with Honda.
The network position allows Intek to take control
of information and communication flows. One
supplier for Acura that appears in Table 5 but did
not in Table 4 is HFI. HFI is a lone third-tier
supplier that SNA picked up as being a key firm
under Informational Independence. This is largely
because
T
a
b
l
e

Accord

Acura

(see Fig. 6). Daimler thus has leverage over the


relationships between these two suppliers and
Textron, the top-tier supplier.
6.2. Network-level implications
We now turn to discussing the dynamics at the
network level. Characterization we make below
pertains to the whole supply networks based on
Tables 6 and 7.
6.2.1. Characteristics of the materials flow supply
networks
In Table 6, Accords supply network shows a
comparatively high density compared to the other two
networks of Acura and DCX. Accords supply

Materials flow network

Contractual relationship network

CVT, a 1st-tier suppliers, is most central, and assumes the most operational burden on
both supply and demand sides

CVT is most central under all three measuresoperational flexibility, managerial


independence, and relational control

JFC, another 1st-tier supplier, is not as much central as CVT

Honda emerges as the close second to CVT on all centrality metrics

Honda appears not central in this network

JFC is extinct and becomes isolated in this network

HFI and C&C, two 2nd-tier suppliers, need to handle high degrees of supply load and
demand load, respectively
Two 2nd-tier suppliers (Emhart and Yamamoru), and one 3rd-tier (Fitzerald) are also
central as a go-between along the materials flow

Yamamoru, a 2nd-tier suppliers, emerges as central under managerial independence

Intek, the sole 1st-tier supplier, is most central under both supply load and operational
criticality

Intek is again most central on all three centrality

Arkay, a 2nd-tier supplier, is central on every centrality metric

Honda is the close second to Intek on every centrality metric

Iwata Bolt, a 2nd-tier supplier, is most central under demand load

HFI, a 3rd-tier supplier, emerges as key under managerial independence due to its ties with
other key suppliers
Two 2nd-tier suppliers, Arkay and Select Industries, rank consistently high on all three
centrality metrics

Honda is virtually out of sight in this network


DCX

Emhart, a 2nd-tier supplier, is central under relational control

Textron, the sole 1st-tier supplier, and Leon, a 2nd-tier supplier, are most central under
both supply load and operational criticality

Little change from materials flow network

No central firm under demand load

Textron and Leon are two most central on every centrality metrics

Daimler is rather central only under supply load

Daimler comes next but by a large margin on all three metrics


No other firms, than the three firms, appear as central in this network

9
N
o
d
e
l
e
v
e
l
o
v
e
r
v
i
e
w
.

HFI does business with other central firms such as


Intek and Arkay, and this is how it stays in the loop
(see Fig. 5).
Unlike Accord and Acura, the list of firms that
appear in Table 5 for DCX shows little change. There
were two firms (Textron and Leon) in Table 4 and the
same firms appear again in Table 5. The
onlyexceptionisDaimler.Comparedtothematerialsflow
network,
theOEMismoreprominentinthecontractualrelationship
network (Table 5), and this is due to its direct links
with two third-tier suppliers, Irwin and E.R. Wagner

network also features relatively high average scores


on the key centrality metrics. Particularly, on average
betweenness, Accords lead is substantial. It implies
that firms in this supply network are more engaged in
both delivering and receiving materials than firms in
other supply networks. It also means that there are
more steps required to move the materials along.
From an operational standpoint, it might indicate that
this network provides less efficiency (e.g., longer lead
time, more parts used for the same function) as it
imposes more managerial attention on the firms in a
central position. Looking at centralization scores for
Accord, indegree score stands out, suggesting the
inflow of materials is concentrated in a small group of
firms in the supply network. We also note a rather
large discrepancy in the scores

Y. Kim et al. / Journal of Operations Management 29 (2011) 194211


Table 10
Network-level overview.
Materials flow network
Accor
d

Acura

DCX

Contractual relationship network

Comparatively high overall density

Relatively high overall density

Highest average score on all three centrality metrics

Highest average betweenness but lowest average on closeness

Relatively high centralization across all three types, and substantial lead on average
betweenness score
Much higher indegree centralization than the other two types

Largest core group with low density

No connectivity among peripheral firms

Comparatively low PTC density

Little reciprocity between the core and peripheral firms (much higher PTC density than
CTP density)
Peripheral firms engage solely in supplying to core firms

There are more interactions overall among more members

Comparatively large overall membership but with low density

Largest overall membership but with lowest overall density

Relatively low average scores on all the three centrality metrics

Lowest average betweenness score

Comparatively low centralization indices

More tightly coupled core group

Very large core group with very low density

No interactions among peripheral firms

Virtually no materials flows among peripheral firms

Network activities mostly concentrated around the core group

No reciprocity between the core and the periphery firms

Relatively high PTC density

Network activities concentrated around the core group

Comparatively more centralized around the smaller core group

Comparatively less complex at the network level

Comparatively less complex at the network level

Smallest membership with relatively low density

Highest average scores on closeness centrality

Comparatively high indegree centralization, but quite low outdegree centralization

Highest centralization indices

Smallest and tightly knit core group

Smallest core group with very high density

No materials flows among peripheral firms

No interactions among peripheral firms

Largest discrepancy between PTC and CPT density among three SNs

By far higher PTC density

Peripheral firms engage exclusively in supplying to the core firms

Majority of network activities centers around the core group

Relatively more centralized and least complex at the network level

Peripheral firms engage only in supplying to the core firms


Most centralized and least complex at the network level

of CTP density and PTC density, which signifies little


reciprocity between the core and peripheral firms.
Further, the far-off firms do not interact at all, as
demonstrated in the periphery density of 0, and this is
true for all product types. In other words, the
peripheral firms engage solely in supplying to the
core firms.
Acuras supply network has comparatively large
membership but low overall density. The three
average centrality scores are relatively low. Acuras
supply network, compared to Accords, has less
number of links and the overall steps required to get
things done are not as many, which may indicate
higher operational efficiency. Further, based on
centralization scores, Acuras supply network appears
as less centralized than Accords. At the local level,
the core group has very large membership but with
relatively low density. Since there are more firms in
the core group, it suggests that the power in the
network is more spread out; the more flat structure of
operational authority again may be an indication that
this network works more efficiently (e.g., less time
expended to make a decision on issues at a local
level).
DCXs supply network has the smallest
membership, and the overall density is also relatively
low. The centralization index based on in-degree is
comparatively high, as is the case with Accord and
Acura.However,notabledifferenceoccurswithoutdegreecentralization. It is quite low, indicating that
most of the materials flow out to few common
dominant firms, and this observation is also supported
by the small size of the core group. There is also a
huge discrepancy between CTP density and PTC
density, which simply means that the majority of
materials flow links in the network is

Relatively high periphery density

Rather complex at the network level


Relatively less centralized

concentratedonasmallnumberoffirms.Asexpected,thes
efirmsin the core group are tightly knit, as evidenced
by a high core density. Such simple structure can
provide high operational efficiency at the networklevel (e.g., shorter lead time from upstream suppliers
to the final assembler); however, if multiple issues
were to happen simultaneously they could overwhelm
the few central players and could require much more
time for resolution.
6.2.2. Characteristics of contractual relationship
supply networks
The density for Accord is much higher in Table 7
than it was in Table 6. This is because contracts can
jump across several tiers. As expected, the same thing
happens for Acura and DCX as well. In terms of
centrality metrics, Accords supply network shows
relatively low average closeness but high average
betweenness scores. Such a structure may be less
responsive or more susceptible to supply disruptions.
It would possibly take more time channeling
information and there is a higher chance that
information becomes distorted on its way along the
chains as more firms get involved in transferring it.
Therefore, such structure is likely to be less robust or
less effective when it comes to coping with supply
disruptions. By the same token, the structure would
provide greater complexity at the network level for
Accord, as also evidenced by Accords relatively
large core group size (see Table 7). Further, it has
relatively high periphery density, which further
indicates that the network is complex because there
are more interactions going on even among peripheral
members. Still, more contacts among members at the
local level might facilitate identifying, if any, supply
issues occurring locally.

210

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Y. Kim et al. / Journal of Operations Management 29 (2011) 194211

Acuras supply network shows relatively low


overall density but with large membership, which
correspond with less number of contractual links
overall. Regarding average betweenness, this
supply network shows the lowest score, indicating
that this network needs a smaller number of
channels to get things done. Comparatively,
therefore, this supply network appears as more
efficient, for instance, in managing such issues as
supply disruptions because communications at the
network level can be comparatively faster and
more organized than those of Accords, which is
also supported by Acuras comparatively more
tightly knit core group and zero periphery density.
Interestingly, DCXs supply network shows the
highest average closeness score. In other words,
the firms in the DCXs network are more readily
reachable from each other, indicating that
information can travel faster across the network.
To put it differently, the network structure is more
conducive to the centralized control by dominant
actors. As might be expected, this supply network
features the highest centralization indices among
all
three
supply
networks.ThereisadditionalevidenceforDCXshigh
centralization at the network levelthe majority
of the activities in the supply network seem to
center around a very small group of firms (i.e.,
three core firms) that are highly interwoven
together (i.e., the highest core density of 0.667).
Further, the firms in the periphery, with no
interactions among them, focus on catering to the
core firms needs, evidenced by high PTC density.
Because network information tends to spread
relatively fast and converge at a small group of
dominant actors, the network as a whole would be
comparatively more effective and robust when it
comes to dealing with supply disruptions.
Particularly, active interactions between core and
periphery firms would further enhance such
capability of the supply network.

7. Discussion
7.1. Comparisons between SNA results and C&H
study
7.1.1. Overlapping and divergent results
One of the main findings of C&H was the
three OEMs varying degrees of centralized
control over their supply networks. The SNA
results confirm this. In particular, the final
assemblers practice of directed sourcing is
captured in the contractual relationship network
structure. For instance, the high values in Hondas
various centralities and overall density in the
contractual relationship network, compared to
those in the materials flow network, is clearly
attributable to the added links that represent
Hondas directed sourcing practice involving its
second- and third-tier suppliers. Another finding
shared by both studies is the relational salience of
those tertiary-level suppliers in the network that
are sourced directly by OEMs. All of such
suppliers (e.g., Emhart for Accord and Iwata Bolt

for Acura) emerge as visible in the contractual


relationship network, through their exhibiting
high scores on the various centrality metrics or
becoming a member of the core group in their
respective supply networks.
Divergent results between the two studies
relate largely to network-level properties such as
network centralization and complexity. First,
C&H describe Hondas two supply networks as
more centralized than DCXs. However, SNA
suggests the opposite (see Tables 6 and 7). In
evaluating network centralization, C&H actually
take the perspective of the final assemblers (i.e.,
Honda and DCX). They present the argument that
Honda is more centralized compared to DCX
because it has more direct ties with its suppliers
(i.e., top-tier as well as second- and third-tier
suppliers)Honda has more centralized control
of its supply networks. However, SNA, in
contrast, looks at how central all firms are in the
supply network, not just the final assembler. SNA
evaluates the relative node-level centrality scores
of all the network members to arrive at the
indicators of network centralization. The two
studies also diverge when considering which
supply network is most complex. C&H suggest
that Acuras network is most complex. This
judgment is based on the network-level physical
attributes (e.g., total number of entities, average
geographical distance between companies) and
qualitative evidence regarding the lack of shared
history and the perceived level of decoupling
among members. Contrarily, SNA points to
Accords network as being most complex. This is
because SNA focuses on how individual firms and
their relationships are connected to one another at
the network level. For instance, SNA considers
various aspects of interdependence among
members in the network, such as network density,
core density, periphery density, and PTC density.
The two studies, as such, draw different
conclusions on some aspects of supply network
properties. Nonetheless, we want to caution that
this does not mean one is more accurate; rather,
we want to say that they just focus on different
aspects of the same phenomenonthe case
approach focuses on contextual information,
whereas SNA operates on numerical breakdown
of data on relative positions of members.
7.1.2. What C&H offer but SNA does not
C&Hs qualitative approach offers a contextually
rich picture of network dynamics. For instance, they
make statements about the network structure by
drawing on such observations as Hondas strong
penchant toward centralized policy with respect to
supplier selection and product design and DCXs
practice of delegating authority to the first-tier
supplier as to who will be second-tier suppliers and
how to design the console. Further, the case method
can provide more detailed accounts of how the supply
networks operate and behave. For instance, in the
Hondas supply networks, the second-tier suppliers
selected directly by Honda tend to be less cooperative
with the top-tier supplier, which contributes to
furthering complexity at the network level; in the
DCXs network, Daimler commissions the top-tier

Y. Kim et al. / Journal of Operations Management 29 (2011) 194211

supplier to consolidate the second-tier suppliers to


reduce operational complexity. Such findings are
context-specific and would be very difficult for SNA
to capture.
Also, C&H offer some propositions representing
the overarching principles of the supply networks,
derived from the qualitative data. For instance, the
study observes, Formalized rules, norms, and
policies lead to the varying degrees of centralization
in the supply network ... (p. 488); The cost
consideration represents the most salient force that
shapes the emergence of the supplynetwork structure
(p.488); and A centralized approach to supply
network involves a common list of core suppliers and
the design activities are tightly controlled by the final
assembler (p. 489). Only from case-based qualitative
studies could such propositions be compiled. SNA
would be unable to capture such contextually rich
information.
7.1.3. What SNA offers but C&H do not
Simply, SNA offers many quantitative metrics that
qualitative approaches cannot. By analyzing the
structural characteristics of supply networks, SNA
brings us new intriguing results that would likely be
overlooked by qualitative methods. First, by
producing various network metrics, from node- to
group- and to networklevel, SNA facilitated a
comprehensive analysis of supply networks. For
instance, SNA evaluated differing roles of the
individual nodes and their relative importance with
respect to others in the same network (see Tables 4
and 5).
Second, SNA allowed for a comparative analysis
of two different network structuresmaterials flow
and contractual relationship. Between the two
different network structures, we have observed some
divergent results even on the same network metrics
(e.g., density, betweenness centrality). Those
discrepancies, as noted earlier, come from the fact
that the two structures are constructed based on
different types of relational connection. Thus, it is not
proper to say that one type of link is a more accurate
depiction of a given network than the other; but rather
the two different types of network information should
be
considered
jointly
to
fully
understandasupplynetwork.Further,SNAenabledagrou
p-levelanalysis by partitioning each supply network
into two structurally distinct clusterscore and
periphery sub-groups. The core-periphery analysis in
fact facilitated assessing network-level properties
across
differentsupplynetworks(i.e.,networkcentralizationan
dnetwork complexity).
7.2. Academic contributions
Our goal in this paper has been to introduce SNA
as a means to analyze the structure of supply
networks and draw theoretical conclusions from such
analysis. Our framework translates key SNA metrics
into the context of supply networks, and discusses
how roles of individual supply network members vary
depending on their relative structural position in the
network. Subsequently, we suggested a guideline as
to how to identify central nodes and evaluate them

differently. Central firms require possessing a


particular set of capabilities corresponding to the
roles they assume in the network (see Table 1). For
instance,
firms
with
high
in-degree
centralityshouldfocusondevelopingacapabilityinsyste
mintegration or product architectural innovation
(Parker and Anderson, 2002; Violino and Caldwell,
1998);
firms
with
high
betweenness
centralitymaybeinabetterpositiontoengageinsupplyris
kmanagement. Thus, it would be prudent for a buying
company (e.g., OEMs), when selecting or developing
a supplier, to consider these issues. We hope that the
theoretical framework of this study would be
instrumental in facilitating future supply network
research adopting SNA approach.
The papers methodological contribution is twofold. First, this study demonstrates the value of SNA
in studying supply networks. SNA considers all
member firms in a given supply network to determine
which firms are most important, in what aspect, to the
operation of the whole network. Capitalizing on
computating power, SNA can generate various
analytic outputs reflecting either individual- or grouplevel
behavioral
dynamics,
which
in
factfacilitategainingamorecomprehensiveandsystemat
icviewof network dynamics. Second, applying the
widely accepted networklevel analytical concepts
(i.e., network density, centralization, and coreperiphery), SNA can complement qualitative methods
in capturing the structural intricacy of the whole
network in a more objective way. As has been
demonstrated, SNA has considerable potential for
enhancing our studies of supply networks (Borgatti
and Li, 2009; Carter et al., 2007) and can effectively
complement qualitative methods.
7.3. Managerial contributions
Based on C&Hs data, our study brings to the fore
the salience of two types of supply networks
materials flow and contractual relationship. We
propose that managers consider these two types for
any given supply network, as we have demonstrated
how the two networks organize and behave
differently. For instance, in Acuras supply networks,
the size of the core group becomes much larger
whenbasedonmaterialsflowthanthecontractualrelation
ship(see Tables 6 and 7 for comparison). Also,
managers should note that there can be different sets
of key firms between the two types of supply network
(see Tables 4 and 5). One firm that does not appear as
central in one type (e.g., HFI in the Acura network)
may be a key player in another. Depending on which
type of link to focus on, individual suppliers position
of importance and the strategic roles will vary. For
instance, the key firms in a materials flow network
can have a considerable effect on the operational
quality of overall supply network, affecting lead time,
product quality, OEMs inventory level, or stockout
costs (Bourland et al., 1996). Key suppliers in a
contractual relation network could facilitate the
timely indentification or resolution of those systemlevel operational problems and other supply
disruption risks (Lee, 2002).
Further, it may be prudent for a manufacturing
firm to identify central second- or third-tier suppliers

212

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Y. Kim et al. / Journal of Operations Management 29 (2011) 194211

using SNA. Some of these suppliers become a key


player by being linked to more visible other key firms
in the supply network. In other words, some
tertiarylevel suppliers emerge as important because
they are vital to other more prominent suppliers in
supply networks. We anticipate these second- and
third-tier suppliers that previously went unnoticed
will play a more significant role in future. As the
issue of supply chain scalability takes the center stage
for safety and sustainability, large final assemblers are
moving toward identifying and managing key
tertiary-level suppliers. Collecting complete supply
network data and applying SNA, as we have done in
this paper, may serve as a useful approach.
In general, having a pictorial rendition of a supply
network will be useful to managers. SNA can help
generate network sociograms (see Figs. 16). As a
visual embodiment of relationship patterns in
supplynetworks,thesesociogramscanbeinstrumentalin
attaining a realistic picture of networking patterns and
the dynamics. Just as all graphs, network drawings
can help save search efforts, facilitate recognition,
and provide interesting new perspectives and insights
into supply networks. Also, SNA provides a
methodological frame for collecting and organizing
data, which will be useful for planning and
monitoring changes in the operation of supply
networks. The position of a node in the network
affects the opportunities and constraints of that node
and of others (Gulati et al., 2000; Rowley, 1997).
7.4. Limitations and future directions
Our study represents a very first step in
theorizing and empirically investigating supply
networks using SNA concepts. We acknowledge
that our study is limited in ways that suggest
opportunities for future research. First, our
analysis is confined to a specific automobile
module (i.e., center console assembly). Any one
supplier in the supply network might be involved
in several overlapping supply networks across
different
product
lines.
A
suppliers
rolebasedononesupplynetworkwilllookquitediffere
ntfromthat derived by considering the multiple
supply networks together it is a member of.
Therefore, the central roles a supplier plays in our
analysis should be qualified to the single product
line. It would not be reasonable to consider the
results of our analysis as a general statement
regarding that supplier.
In a similar vein, supply networks are
considered
basically
egocentriccentered
around a focal actor (Hkansson and Ford, 2002;
Mizruchi and Marquis, 2006). The three supply
networks studied here were also mapped based on
information obtained from the final assemblers.
Therefore, any possible effect each suppliers
extended network can have on the firms strategic
importance to the OEM could not be captured in
our analysis. For instance, one second tier supplier
to Honda may have a tie to other OEMs. If such
extended ties were also counted, certain centrality
metrics (e.g., betweenness) for the supplier might
have shown different scores from those based on
the egocentric network, whereby placing the

supplier in a different strategic position with


respect to Honda. Such egocentric network
approach, albeit considered a reliable substitute
for complete (sociocentric) network data
(Marsden, 2002), may not be enough to provide a
full understanding or potential of a given supplier,
embedded within the larger social network
(Mizruchi and Marquis, 2006).
Third, in quantifying the inter-firm ties, we did
not consider the variances in strength. All the links
considered in our analysis were treated as having
the same weight, while the link an OEM has with
the first-tier suppliers should involve more
intensive information exchanges (i.e., kanban
system) or a greater amount of materials (i.e.,
larger contract size) than those with the secondtier firms, for instance. Also, we viewed supply
networks based on the materials flow and contract
connections. However, certainly there are many
other relational connection types that can be
considered in supply networks, such as ownership,
technology dependence, intellectual property, and
risk
sharing.
Network
ties
could
be
representedbythenumberofjointprogramsorofshare
dpatents,level of trust, or perceived transactional
risks. Future studies therefore can incorporate the
relative strength of supply ties using SNA as the
method can effectively illustrate networks with
weighted links (Borgatti and Li, 2009; Battini et
al., 2007). Exchange ties involving a multi-level
interface will have differential impact compared to
other comparable supply ties based only on a
single type of transaction.
We note that most supply networks are
considered a scalefree network, whose degree
distribution closely follows a power law (Albert
and Barabsi, 2002; Pathak et al., 2007). That is,
most nodes have very few links and only a small
number of nodes (e.g., core firms) have many
connections. Future studies may apply the scalefree network metrics to studying supply networks,
such as clustering coefficient and characteristic
path length. Clustering coefficient measures the
degree to which nodes in a network tend to cluster
together around a given node (Barabsi et al.,
2002), and it can inform us of how suppliers
behave with respect to the final assembler at both
the local and the global level. For instance, it can
tell us how suppliers would come together for
better coordination, based on some governance
mechanism involving an OEM. Indicating the
system-level closeness, characteristic path
length can assist in evaluating whether a given
supply
network
is
optimallydesigned(BrahaandBarYam,2004;LovejoyandLoch,2003). Given a supply
network, it can be of considerable interest to know
how the path length compares to the best or
worst possible configuration for networks with
the same number of nodes and lines. This can
provide implications for how effectively the
network is designed and how robust it can be to
possible supply disruptions.
Finally, SNA could be applied to advancing
existing theories regarding the structure or
topology of supply networks. A range of SNA

Y. Kim et al. / Journal of Operations Management 29 (2011) 194211

metrics can serve as a useful means in this effort.


Such
networkvariablesasdensityandvariouscentralitiesc
ouldbeapplicable to characterizing typological
archetypes of supply network structures,
eventually leading to the development of a
portfolio of contingent approaches to supply
management. In conclusion, we hope that this
paper can serve as a call to other operations and
supply management researchers regarding the
importance of framing supply chains as networks
and continuing to develop useful supply network
indices. We hope to see more researchers taking
advantage of the usefulness of SNA for untangling
and understanding the complex phenomena
embedded in supply networks.
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