Abstract Number: 002-0419

Title of the Paper: SUPPLY CHAIN DESIGN: THE MAKE-BUY DECISION PROCESS

IN THE AGE OF TEMPORARY ADVANTAGE.

Name of the Conference: Second World Conference on POM and 15th Annual POM

Conference, Cancun, Mexico, April 30 - May 3, 2004.

Name: Mauro Sampaio

Institution: EAESP/FGV - Operation and Logistics Department

Address: Av 9 de Julho 2029 10 andar, ZIPCode 01313-902, Brazil

E-mail: msampaio@fgvsp.br

Phone: (5511) 3281 7776

Fax: (5511) 3262 3682

Name: Luiz Carlos Di Serio Institution: EAESP/FGV - Operation and Logistics

Department

Address: Av 9 de Julho 2029 10 andar, ZIPCode 01313-902, Brazil

E-mail: ldiserio@fgvsp.br

Phone: (5511) 3281 7776

Fax: (5511) 3262 3682

1

SUPPLY CHAIN DESIGN: THE MAKE-BUY DECISION PROCESS IN THE AGE OF

TEMPORARY ADVANTAGE.

ABSTRACT

In the last years, we have noted cyclical movements in the supply chain architecture concerning

some production sectors. Once we have the sector integrated vertically, made up by large

dominant companies, once the same sector is disintegrated horizontally, made up by a crowd of

companies acting in market niches. In this highly competitive environment, the domain of

essential competences, with larger added value, is decisive for any organization survival. This

article intends to facilitate the understanding of the subject, analyzing the evolution of traditional

decision models – make-buy - and evaluating their adaptation to the economy sectors in high

evolutionary speed.

Key-Words

Supply Chain Design, Supply Chain Management, Make-Buy Decision Process, and Outsourcing

Strategy.

Introduction

In the last years, supply chain architecture has undergone important changes. Some

organizations are rethinking their borders, changing their competences and/or modifying the

relationship form with their suppliers and dealers, giving to such evolution the characteristic and

connotation of a true revolution.

The truck and bus manufacturing plant of Volkswagen in Resende-RJ is a classic

example. A true nonsense business – a Car Manufacturer that does not perform any assembly

activity. The suppliers perform the entire work that would be traditionally incumbent exclusively

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upon the car manufacturer. Volkswagen undertakes new competences, now being responsible for

the design, coordination, and quality control. The American car assembler, Ford Motor

Company, second larger world automobile company, will also transfer the production of vehicles

to its suppliers, in its future factory in Camaçari-BA. There is seemingly a tendency that the new

units work less and less with the production of their own automobiles. They see each other as

future marketing and sales organizations, developing new products and controlling the whole

supply chain.

This movement toward searching new competences does not occur in the local scope.

Large global companies are also trying to develop new competences, as for instance, we have:

“New Times reported the formation of a joint venture between a Toyota subsidiary and Texas

Instruments, in building a US$1.5-billion semiconductors’ factory, for producing memory chips

for electronic automotive components. The article described the first movements of Toyota

entering the telecommunications and software sector and used the word “intriguing” twice to

express its perplexity with relation to Toyota’s strategy” (Pollack, apud Fine, 1998:176)

What would be the reasons for this new strategic positioning? How to explain this frantic

search for new competences even being so distant to upstream or downstream from its traditional

business? What will be the impact concerning outsourcing decisions over supply chain?

Many studies treating this subject “what to make, what to buy”, as an example, Hamel and

Prahalad (1990, 1994), Quinn and Himer (1994, 1999), Venkatesan (1992) among others,

concentrate on evaluating advantages and obstacles regarding process outsourcing for a specific

entity. They are models that guide an organization to select and develop internally only

competences with higher value added to customers, thus aiming at conquering a sustainable

competitive advantage. Nevertheless, will these prescriptive models still be appropriate in a

highly competitive environment?

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Increasing competitiveness, competition has been ceasing to be among companies to take

place among supply chains (Vollmann and Cordon, 1996), as shows Figure 1. An isolated

company no longer survives, as it needs to be integrated with its customers and suppliers. It is

useless that a manufacturer adopts the best practices, if its suppliers are expensive and/or their

distribution channels are inefficient taking care of customers’ expectations.

Figure 1: Competition Among Supply Chains

Manufacturers Dealers Retailers Consumers Suppliers

Source: Adapted from VOLLMANN and CORDON, 1996

In this new competitive context there is little understanding regarding outsourcing impact

over an outsourcing decision concerning supply chain and/or industry. This work intends to

contribute for the debate on this theme, filling out this literature gap.

Summarizing, the article will aim at answering the following research question: To what

extent are the classic decision models “What to Make, What to Buy” appropriate in a dynamic

and complex environment?

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To reach such goal, the article is structured in nine parts, including this introductory part.

The second part reviews classic outsourcing models. Some problems found are clarified in the

third part. The fourth reviews some models of organizational change. The fifth submits a

dynamic model. The sixth makes a critical analysis concerning submitted models. The seventh

classifies such models. The eighth submits final considerations. The last part reports limitations

regarding work and gaps.

Make-buy decision process Models.

Modeling the make-buy decision process is a great relevance theme between academics

and executives. A representative volume of work has dealt with the matter, such as publications

in: Harvard Business Review, Sloan Management Review, and European Journal of Purchasing

& Supply Management, among others.

According to Gutward (1995), available classic models regarding the make-buy decision

process can be classified in:

• Economical Analysis

• Transaction Cost Analysis

• Strategic Analysis

• Multidimensional Analysis.

The simplest way, and maybe, the oldest one to approach this subject, is the Economical

Analysis. The methodology consists of comparing production cost for a certain component with

purchase cost in the market. Textbooks on accounting submit such analysis in the context of

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relevant costing. However, the final decision cannot be that simple, it should include other

considerations besides product cost.

The economist Coase (1937) developed a fertile theory on vertical integration, the

Transaction Cost Theory, which takes into account several other important factors. The

transaction cost, improved later by Williamson (1991), studies how partners are risk-protected in

their trade relationships. Those risks refer to the possibility that the elements accorded between

the parties do not take place. Risk minimization implies reducing transaction costs, representing

an efficiency element in competition among companies.

In the decades of 80 and 90, authors as Porter (1985) Hamel and Prahalad (1990, 1994) Quinn

and Himer (1994, 1999) and Venkatesan (1992) proposed other models, considering Strategic

School principles. Porter (85) focuses the selection of strategic positions on the business seeking

the conquest of maintainable competitive advantages. Now, the authors Hamel and Prahalad

believe that competitive advantage derives from capacities deeply rooted that are behind the

products of a company (Mintzberg, Ahlstrand, and Lampel, 2000: 163). This approach consists of

focusing the efforts and investments of the organization on a small group of capacities, referred

to as essential competences. In order to identify it, we suggest classifying organization capacities

pursuant two criteria: strategic importance and relative competence in the market, according to

Figure 2. With respect to strategic importance, the company’s competence analysis is carried out,

asking if the activity will be able to or not to differentiate it with relation to competitors, in other

words, to increase its value noted by the customer. The analysis of relative competence is carried

out comparing the company’s capacity and the capacity of other competitors with regard to costs,

quality, and processes.

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Figure 2: Make or Buy Decision

The core competence concept is simple and intuitive: “A collective learning of the

organization... unique group of capacities that allows the company to create great products”

(Hamel and Prahalad 1990:82), but to select it is an arduous and controversial task. Quinn and

Himer (1994:45-47) suggest seven points for identifying core organization competences:

• Focus on knowledge and abilities, not in products or functions: Products are easily

copied or replaced. The traditional functions, as production, engineering, marketing or

finances are no more core competences as they were in the past. The competences need to

be abilities that cross these functions, involving activities as of service or product project,

technological creation, customer services or logistics, which are much more based on

knowledge.

• Develop long run competences: the challenge is to build and to dominate abilities in

areas that customers will value in the future.

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• Limit the number of competences: The company should develop two or three abilities

critical to its business. Each demands an intense investment of time and resources that

should not be diluted with the development of secondary capacities.

• Choose the best sources: effective strategies should choose the available spaces in the

market where there are imperfections and/or knowledge gaps, in which investments in

intellectual resources can be leveraged.

• Dominate the knowledge area: A company only gets to increase its profitability in areas

of activities where its performance is more effective than any other competitor does.

• Focus on customer's needs: At least one core competence should be directly related to

customer care and customer service. Through the regressive analysis of its value chain, a

company can identify the activities capable of providing at the customer, larger

effectiveness, and lesser cost.

• To align organizational systems: The maintenance of competences cannot depend on

some gifted “stars”, whose absence in the company may generate serious problems and

even destroy its success. When a strategy depends strongly on creativity, dedication,

initiative, and excellent professionals' attraction, the core competences should be aligned

with the company’s systems, which include their values, organizational structure, and

management system. There are cases where this people development system becomes the

core organization competence.

Other authors (Londasle, 1999; Anderson, Probert and Jones, Gregory mentioned by

Gutwald, 1995) elaborated another category for outsourcing models referred to as

multidimensional that considers other factors as: Allocating expenses, innovation skill, human

factors, employees' experiences, technological maturity, costs, among others.

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That brief bibliographical revision demonstrates that a lot has been written on the theme, from

financial models, to even complex multidimensional models. These are different models that try

to persuade the organization to develop some few competences. However, one can also associate

critics to each of the submitted perspectives, according to Table 1, generating the following

questions: To what extent those classic models appropriate in different productive sectors are?

Would many companies that apply those methodologies be taking the risk of losing essential

capacities for their future?

Table 1: The classic Make-Buy models and their main critics

Models Economical Analysis

Transaction Cost

Analysis

Strategic Analysis

Multidimensional Analysis

Origin Finances Economy Administration Transdisciplinary Focus Cost Transaction Strategy Plural

Specific Critics

Ignores the existence of hidden costs, such as transaction cost. He/she ignores the presence of Opportunist Suppliers

Disregards intangible and strategic assets in economic equations Considers that supply chains are built for cost reduction.

Does not preserve the knowledge of an outsourcing activity Assumes that current competences will be the same as future competences.

The presuppositions are the same as those of the previous models. The critics are diluted, but they remain.

General Critics

STATIC MARKET VISION They consider that the companies look for eternal sustainable competitive advantages (an exclusive and valuable market position)

Source: elaborated by the authors

Submitted Problems

Following the classic models, several business administration consultants recommended,

during the last decade, the exhausting and indiscriminate outsourcing practice. Starting by

outlying activities and migrating gradually to capacities close to the core organization

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competence. Meeting request, business leaders distributed production and engineering activities,

among others, to external contracted parties, in an implacable effort to reduce their costs.

Elapsing some years, several failure cases appeared in the business literature. Some

companies almost lost the essential capacities for its business future. As example, we have the

classic IBM case study that practically gave the leashes of computer industry to Microsoft and

Intel (Chesbrough and Teece, 1996).

English studies on the subject “outsourcing strategy” (PA Consulting Group, 1996)

indicated that only 5% of the interviewed administrators were satisfied with the accomplished

results, most of them considered the financial return simply mediocre. Venkatesan (1992)

reported in his academic research that he did not understand why American companies dedicated

their scarce resources to develop and produce commodities that do not add value to the end

customer.

In short, some organizations end up adopting structures integrated vertically when they

could build much more efficient modular supply networks, and others look for developing

suppliers in competences that should never be abandoned. This denotes that executives do

manage to clearly distinguish essential competences from outlying competences. In addition, the

classic models, especially developed with such goal, seem to drive to mistaken decisions.

Understanding the organizational change

To help the discussion it is interesting firstly to understand the process of Organizational

Transformation itself, both in the organizational dimension and in the supply chain dimension, in

other words, to understand: (a) why do organizations change and how do organizations change

(b) why do supply chains change and how do supply chains change.

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In early years, when we did not speak about large mergers and scope of uncertainties was

more controllable one believed that the change followed a prescriptive process of seismic

variation: you unfreeze, change, and freeze again. In the new competitive context, so complex

and dynamic, the organizations seem more in punctuated balance, a slightly manageable chaotic

state.

“A satisfactory metaphor to understand the change process is the simple fall of a drop of water

in a lake; when the entire surface spreads a wide movement of circular waves. We only have the

control of the process to the moment of the drop, later it is non-lineal pure physics. In that

context, the key is to understand the studied phenomenon: To be drop is to promote the change,

to be a wave is to be changed. All the phenomena like to think that they are drops, but this is not

always possible” (Caldas in Caldas and Wood: 1999).

The “Make-Buy Decision Process” can be understood as a water drop pertaining to the

organizational transformation process. The executives control the process to the moment the

decision is made up, later a complex dependence occurs and is spread in time.

“The decisions on the provisioning determine, partly, the location of the seed and its subsequent

growth – if the competence will develop into a full competence. When the seed begins to

germinate, the company that planted it is not always capable to control its development” Fine:

1998:163).

Why do organizations change and how do organizations change?

Among the academics that study organizational transformation, the authors Tushman and

Romanelli (1985) are one of the major references. They propose that the organization lives a long

period of stability, referred to as convergence, which is punctuated by short periods of radical

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changes, referred to as reorientation. The types of change vary according to the period or context

in which the organization is found (Figure 3).

Convergence is a long period characterized by incremental changes and adaptations. The

effective concern is with efficiency (make the things right) and alignment with strategic

guidance. In this period, executives want the continuous improvement of already developed

competences.

s

)

Reorientation

power, structures, an

and a new strategic

and to focus in maki

Some recent

in reorientation peri

Source: Adapted from Tushman and Romanelly (1985

Figure 3: Punctuated Balance Thesi

is a short period characterized by radical strategic changes, redistribution of

d systems. The effective concern is the effectiveness (make the right things)

alignment. In this period, the executives want to develop new competences

ng different things.

news published in the business media exemplify such organizational changes

ods:

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“The Brazilian Xerox, traditional manufacturer of copying machines, after almost two decades of

fierce Japanese competition, is reorienting its business. It wants to unlink its image from the

copying machines and to be recognized as a solution provider in the area of corporate services.

The goal is to transform Xerox into a digital company in the next years. This is not a simple

change, it means mass dismissals and closing up branches. To enter the digital world, Xerox tries

to reinvent itself. (Maira da Costa: Exame 05/05/1999)

“Dupont, an American multinational company, was born in 1802 starting from a gunpowder

factory in the state of Delaware, in the United States. Along the century, it was responsible for

some achievements of the world petrochemical industry. In 1926, it introduced the impermeable

cellophane, in 1931 it created the rubber neoprene, in 1938, the Teflon, and in the sixties, the

Lycra. However, in the last years it left chemistry aside chemistry and started to invest heavily in

biology and biotechnology, looking for the focus on meeting the great world lacks, concerning

both nutrition and health. The company decided to change when it was at the peak of success; it

decided to invest exclusively in the so-called “Life Sciences” (Luís Nassif: Estado de São Paulo

05/01/2000).

Why do supply chains change and how do supply chains change?

In Clockspeed, Charles Fine (1998) is based on a decade of research in Sloan School

Management to introduce the concept of evolutionary speed, essential for understanding the

dynamics of a supply chain. According to the author, each productive sector has its own

evolutionary life cycle (clockspeed) measured by the speed in which new products processes and

organizational structures (table 2) are being introduced. The computer microprocessor industry

has a high evolutionary speed when compared with the automobile industry or with the

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manufacturers of commercial aircrafts. A personal computer has less than six-month service life,

while an automobile has a service life of four to six years.

Table 2: Mensuration of evolutionary speed – sector sample

Evolutionary speed

Sector Product technology

Product technology

Organization

Computers < 6 months 2-4 years 2-4 years Toys < 1 year 5-15 years 5-15 years

High Semiconductor 1-2 years 3-10 years 2-3 years

Bicycle 4-6 years 20-25 years 5-10 years Automobiles 4-6 years 10-15 years 4-6 years

Medium

Pharmaceutical Products 7-15 years 5-10 years 10-20 years Commercial aircrafts 10-20 years 20-30 years 5-30 years Petrochemical 10-20 years 20-40 years 20-40 years

Low

Electricity 100 years 50-75 years 20-30 years Source: Fine (1998: 238)

The main verification consequence of this phenomenon is keeping apart the concept of

competitive sustainable advantage, proposed by Michael Porter (1996). The faster the sector’s

evolutionary speed becomes, the more temporary the competitive advantage becomes. According

to Fine (1998), the company needs to learn to concentrate directly in two groups of priorities: 1)

explore the current capacities and competitive advantages and 2) build new capacities in a

conscious and deliberate way for the unavoidable moment in which the old ones no longer

constitute a competitive advantage source. The organization needs to have the ability to develop a

series of temporary competences.

Through examining historical evolution, mutation, survival, and extinction of entities in

different markets, Fine presents the double helix sectorial model, an infinite double cycle, which

explains changes in supply chains. This model consists of a cyclical movement between

vertically integrated sectors, made up of horizontally disintegrated gigantic companies and

sectors, made up by a crowd of innovators, each looking for an own niche, in the wide space

resulting from the previous extinction of giants (Fine, 1998).

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According to the author, when the sectors’ structure is vertical and the product

architecture is full, as is the case of IBM in the eighties, the forces that act toward the horizontal

and modular configuration are:

• The implacable entrance of niche competitors, that hope to conquer different sectorial

segments.

• The challenge to maintain the position ahead of the competition in the several dimensions of

technology and markets.

• The bureaucratic and organizational inflexibility that are usually settled in large and suitable

companies.

On the other hand, when the sector has a horizontal structure, as it is the case of the

entertainment market in the year 2000, another group of forces impels it toward vertical

integration and integrated product architecture. Such forces include:

• The technical progresses in a subsystem, capable of transforming it in scarce goods of the

chain and that grant market power to its holder.

• The market power in a subsystem, which encourages bundling1 with other subsystems, in

such a way to increase control and to add more value.

• The market power in a subsystem, which stimulates the integration of engineering with other

subsystems, in such way to develop integrated patented solutions.

Figure 4 illustrates the double helix model, an important tool for business diagnosis.

Before designing its supply chain, the company should identify the future business tendency and

try to anticipate abrupt market movements. The business secret consists of always choosing the

right core competence.

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Figura 4: Double Helix Model

Source: Fine (1998: 58)

Systemic vision of change

The submitted models, concerning the punctuated balance of Tushuman and Romanelli

and Double Helix of Charles Fine, have different analysis perspectives. The first approaches the

process of changes in isolated organizations, identifying long convergence periods punctuated by

short reorientation periods. The second model approaches the dynamics of supply network, which

moves among vertically integrated sectors and horizontally disintegrated sectors.

However, this article presupposes that both models, each one under its respective

perspective, illustrates the same phenomenon - “the competence development process dynamics”,

according to Figure 5. The convergence and reorientation periods arise from supply chain

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dynamics itself. Reorientation periods correspond to the inversion times of the Double Helix

curve, which are:

• Moments when it is necessary to abandon known and dominated traditional competences, and

to develop new abilities, the whole sector is probably dissolving or;

• Times when it is necessary to increase the number of competences, maintaining the already

developed previous ones, the whole sector is being disintegrated vertically.

Convergence periods correspond to the development of already settled competences

Figura 5: Double Helix Model and Punctuated Balance model

Source: Adapted by the authors from Tushman / Romanelli and Fine.

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Continuous Evolution Market

In dynamic markets the best strategy for a company does not necessarily consist of

making an effort for a condition of stability, as the positioning strategy proposed by Porter

(1996), but in learning to move with fluency and safety in turbulent times, even having to assign

to an external supplier a considered competence until such essential date.

Instead of pursuing the essential capacities as something unchangeable, it is necessary to

face its duration consequently arising from the sector’s evolutionary speed or the relevant

technology. Fine (1998) submits two important tools to aid in the Make-Buy Process decision

making in continuous evolution markets:

Model based on engineering concepts: The outsourcing process can occur in different phases of

a development and manufacturing process (Figure 6). When competent suppliers do exist, the

importance of designing and/or producing such subsystems internally is diluted. Even so, Fine

(1998) recommends preserving knowledge architecture: technical memory of outsourcing

capacity and permanent control of its performance. Toyota is a reference in such development

process and capacity use, although it has several outsourcing capacities, the company preserves

the technological leadership of all capacities that it considers critical in its supply chain.

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Figure 6: Framewor for “Make-Buy” Decision Process based on engineering concepts

Source: Fine (1996)

Matrix for: “Make-Buy” decision analysis: It illustrates the way in which the product’s

architecture and the outsourcing strategies interact (Figure 7). When a product has a modular

architecture, in other words, it has interchangeable components, it is usually possible to unfold it

in outsourcing subsystems and modules. However, that is not always the best strategic

alternative. See the case of IBM, in the beginning of the decade of 80, it outsourced the main

components of its personal computer: Operating system for Microsoft and microprocessor for

Intel, triggering a drastic power change in that market segment. The whole sector moved from a

vertical integrated structure to a horizontal modular structure. When the product’s architecture is

integrated, that is, when one same component executes more than one function, the outsourcing

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challenge is higher, because it is necessary to maintain an intense communication and interaction

process among the several subsystems’ development teams.

s

Source: Fine (1

Such matrix makes it possi

according to the degree of

evolutionary speed of their re

Critical Analysis of Make-B

The classic Make-Buy

Business leaders are encou

activities, engineering and e

bureaucracy is bad and flex

Figura 7: Matrix for: “ Make-Buy” decision analysi

998:173)

ble to classify all subsystem components of a certain product,

strategic importance and outsourcing possibility, considering the

spective components.

uy Decision Process Models

decision process models are frequently used in different markets.

raged to subcontract everything possible, from manufacturing

ven administrative activities, under the presupposition that the

ibility is good (Chesbrough and Teece, 1996). However, such

20

arbitrary practice may be disastrous, taking the organization to lose capacities that are essential

for its future.

The own alternatives suggested: to make, to develop internally or to buy, to develop

externally, do not take into account the complexity of relationships noted in practice and

disrespect the natural dynamics of supply networks.

The concept of integrated versus modular supply chains proposed by Fine (1998) seems to

provide a much more fertile and profitable referential for the subjects regarding the supply chain

project. This is not a simple semantic change, old paradigms and administrative practices can be

insufficient to work with that new configuration,

“”It is impossible to judge ideas of a new paradigm analyzing under the

prism of an old paradigm” (Csillag, J. M. quoted by Corbett, 1997: p.3).

This article suggests that the classic models are inadequate in high evolutionary speed

markets, for not considering the dynamics of supply chains itself. Nevertheless, the problem can

be still even wider: (a) the evolutionary speed of many sectors should increase progressively in

the next years; (b) In a close future, network strategies should be feasible; (c) competition

increasingly fierce. A lot of management policies and practices now effective lose sense in this

new hyper-competitive environment. This question is maybe only the tip of a true iceberg.

Classifying Make-Buy Decision Process Models

The authors Van de Ven and Poole (1989) consider that interaction among different

perspectives takes to a better understanding of organizational life, any individual perspective

invariably will entail in a partial vision for the studied phenomenon.

Make-Buy Decision Process models can also follow such principle, the use of a single

model can take to erroneous and visionary decision making. A classification proposed for Make-

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Buy Decision Process models described in this article can be accomplished considering two

fundamental dimensions (Figure 8):

• Evolutionary speed of market: Considers the evolutionary cycle of a certain sector, which

can be measured by the speed with which it introduces new products, processes, and

organizational structures. Evolutionary speed affects decision process and supply chain

architecture, varying from low to high-speed.

• Involved Criteria: The models can approach or not strategic business aspects. Some models

emphasize the exclusive reduction of costs, others consider that the organization should

develop competences for higher added value, regardless of the investments required to

achieve it.

Figure 8: Classification of Make-Buy Models

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According to the classification of Make-buy decision process models, only the model of

Fine (1998) would be recommended for evolutionary high-speed sectors such as personal

computers, semiconductors, toys, shoes and cosmetics, because it considers market’s dynamics.

The models based on economic and financial concepts would be suitable for low evolutionary

speed sectors, as some agricultural and mineral extraction sectors that compete in costs. Strategic

models may be used by evolutionary low-speed and competitive sectors in differentiation. The

combination of different perspectives could be used in average evolutionary speed sectors. That

classification of make-buy decision process models also brings an alert to entrepreneurs: It is

dangerous to think exclusively of costs in high evolutionary speed sectors.

Final Considerations

This article /aimed at answering the following research question: To what extent are the

classic decision models “What to Make, What to Buy” appropriate in a dynamic and complex

environment?

For answering such question, the article analyzed the classical Make-Buy Decision

Process models: Economical analysis, transaction cost analysis, strategic analysis, and

multidimensional analysis. Such models seemingly consist of multifaceted perspectives arising

from different schools of knowledge: Financial management, economy, business strategy, among

others; however, they neither seem to illustrate all complexity regarding the studied phenomenon,

nor the approach seems to be broad enough for systemic inferences.

To enrich the discussion under different perspectives, the article tried to understand the

process of organizational transformation itself, both the organizational dimension and the supply

chain dimension. It briefly reviewed the Punctuated Balance Model of Tushuman shortly &

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Romanelli and the Double Helix Model of Charles Fine. The dimension and analysis points of

view were compared and analyzed. The article presupposes that the submitted models approach

the same phenomenon according to different perspectives. The first one studies organizational

transformation under the organization’s optics, identifying convergence and reorientation periods.

The second studies the dynamics for supply networks under the optics of the sector’s historical

evolution, identifying the cyclical formation of integrated vertical structures and horizontal

modular structures.

As no classical model considered the possibility for a supply network dynamics in the

temporary dimension, the article submits a new perspective describing the dynamic model

proposed by Fine (1998).

As contribution, the article classifies the Make-Buy Decision Process models submitted in

two dimensions: Evolutionary speed of sector and involved criteria. In short, the article’s main

conclusions can be synthesized, as follows:

1. The classical Make-Buy decision process models are inadequate in continuous evolution

markets.

2. The Make-Buy dichotomy itself seems inadequate when competition stops being among

companies to take place among productive chains. The concept of integrated versus modular

supply chains proposed by Fine (1998) seems to provide a much more fertile and profitable

referential for the subjects regarding supply chain project.

3. The maintainable competitive advantage is a concept arising from low evolutionary speed

markets. The temporary advantage is the predominant concept in high evolutionary speed

markets. The faster is the evolutionary speed of a sector, the less the competitive advantage

lasts. The business secret consists of always choosing the right core competence.

4. It is dangerous to think exclusively of costs in the high evolutionary speed markets.

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Limitations and Directions for Future Researches

This article was based on personal observation and academic speculation; it aimed at

integrating the knowledge concerning the following knowledge areas: Supply Network

Management and Organizational Transformation. The main work’s limitation is the lack of an

exploratory or quantitative study on the studied phenomenon.

Even so, many research - guidelines are open from this academic article, involving both

theoretical and empiric aspects. If the supply chain project is the most important competence of

an organization, as this article defended, it seems obvious that a deeper and more compressive

investigation regarding the subject becomes necessary.

Just like genetic scientists that study the fruit flies for achieving new “insights” on the

evolutionary trail of animals and human beings (Fine, 1998), studying the dynamics of high-

speed sectors, such as Internet, personal computers and entertainment sectors can provide new

perceptions on how options in the supply chain project may affect the organization’s

performance. The study may also provide true lessons for the other sectors, such as automobile,

and commercial aviation, among others.

To such an extent, the recommended future research could be:

1. Elaborate a more comprehensive model for supply chain project. This model may consist

of two parts: First part to determine solid criteria for the Make-Buy Decision Process. The

second part, to set up the more appropriate relationship type between supply network

components.

2. Elaborate a more comprehensive model for specifying the core competences of an

organization, even temporarily, considering factors, such as: Supply network dynamics,

competitiveness model, customer requirements, and inducers of evolutionary speed for

products, processes, and organization.

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3. Empiric study to discover, in different sectors, how Brazilian companies decide which

competences are core and which are outlying, both for product and infrastructure.

4. Studying the evolutionary life cycle (CLOCKSPEED) of industry sectors, seeking to

validate the Double Helix model in a developing country like Brazil.

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CHESBROUGH, H.W.; TEECE D.J.. “When is virtual virtuous? Organizing for innovation”.

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NOTES

1. Bundling, in the original. According to Michael Porter definition, “bundling” is to sell

products or services, just as a package or “bale” (Fine, 1998: 59).

28