Analysis of strategic supply management: A switching cost view

Strategic supply management, characterized by limited number of suppliers with long-term relationship and improved inter-firm communications, has become an important strategy for manufacturers nowadays. Studies on transaction cost analysis try to reduce supply chain costs, whereas those on resource dependence theory try to obtain and control more critical resources through strategic supply coordination and collaboration. In general, an extra cost will be incurred if a firm is switched out of the current supply chain network, which can also be defined as a switching cost. In this paper, we analyze the effectiveness of strategic supply chain from a switching cost perspective. We find that switching cost can be used as a yardstick to evaluate strategic supply management, with respect to strategic partnership and collaboration. The case of Ford Motor Company is used as an example to illustrate practical applications.