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Part - II

Each component flows through a different set of market channels, and each of these component markets has a distinctive character. Some of the markets are monopolistic, oligopolistic or very brand-sensitive (think of "Intel Inside!"); in these cases, the suppliers have a great deal of leverage in relationships with their customers. Other markets are open-more commodity-oriented-with numerous highly competitive suppliers and low barriers to entry; here the leverage in a relationship rests more with the customer than the supplier.

Collaboration may be more or less desirable, depending on these market characteristics. We use the term market sophistication to describe all of the factors that influence how a component is bought and sold.

Turning our attention from the product supply market to the product supply chain, we see that some components are more complex than others. Just as the components in a personal computer may be positioned on a spectrum of market sophistication, they may also be positioned on a spectrum of operational complexity.

Operational complexity describes the intricacy of the supply chain of any particular component. Manufacturing cycle times, production capacity, length of the product life cycle, unit volume and the like all contribute to operational complexity. Screws, cables and the plastic housing of a personal computer can all be procured relatively easily and either stored inexpensively (because of their low unit cost) or delivered in just-in-time fashion by a local supplier. Memory and semiconductors, on the other hand, are typically produced in Asia and are often shipped to markets by air because of their short life cycles and higher costs.

Interaction

Using these basic notions of market sophistication and operational complexity, we have developed a framework for analyzing relationships. Market sophistication and operational complexity interact to shape four basic types of supply chain relationships.

Transactional. Transactional relationships occur when there are many suppliers of a similar component and one supplier is as good as another. Think, for example, of the nuts, bolts and plastic clips-all essentially commodities-in a computer. In these cases, cost is the main criterion for selecting a supplier. It is pointless to invest significant time or effort in forming a fully integrated collaborative relationship, especially when there are Internet-based commodity exchanges that make it easy to identify low-cost suppliers.

Unique. Unique relationships are something like marriages of convenience: They may be necessary, but they aren't deep. For example, almost all personal computer makers need a relationship with Microsoft because most end users demand Windows-compatible software. There's no doubt who dominates the relationship between Microsoft and a computer manufacturer. With the capability to "transport" software electronically, there are relatively fewer demands on Microsoft and computer manufacturers than on other suppliers.

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* Timothy Mould is a Boston-based senior manager in the Accenture Strategic Services practice. His work focuses on developing and implementing integrated value-chain strategies through eCommerce capabilities.
Edwin Starr, a partner in the Accenture Supply Chain Strategy practice, leads the firm's eProcurement and Strategic Sourcing practice. He is based in Chicago.