Dynamics of Alliances in Highly Integrated Supply Chain Networks

Partnerships and alliances are both tools to increase integration in supply chains and effects of increased integration. As a result of alliance, integration in supply chain networks effectiveness and efficiency increase. To develop highly integrated supply chain networks involves investing time, resources and much effort. Therefore, firms often continue and grow within the existing supply chain network rather than choose other alternatives. On the other hand, this also means that the establishment of new alliances is hindered. The gradual changes normally also apply to the dissolution of alliances. Even though the firm seems to leave a specific individual alliance, it might stay on in the same supply chain or still be a part of the firm network in another supply chain. Few radical changes take place. If they do, acquisitions, technological change or strategic alliances between networks are mostly the triggers causing effects on several individual alliances. Over time, as integration increases, supply chain networks become leaner and more tightly connected, and complexity, risk and conflicts rise in the formation and dissolution of alliances. This spiral effect is enhanced by the tendency to imitate the successful supply chains' increasing homogeneity of chains and stronger competition. Thereby the total industry network will be increasingly integrated, which means fewer opportunities to switch and lower flexibility. Most firms are already tied up and the effects more difficult to foresee. To change alliances will be increasingly problematic and costly when both the supply chain and the total industry network are highly integrated. Acquisitions would rise since this might be the only way to break into these integrated supply chains. As a result the number of alternatives decreases and the dynamics of alliances reduced, which in the end forces new waves of radical changes due to "domino" effects.