Int. J.

Production Economics 81-82 (2003) 185–194

Flows of goods or supply chains; lessons from the natural

rubber industry in Kerala, India
Job de Haana,*, Gerard de Grootb, Egon Looa, Mark Ypenburga
a
Department of Organisation and Strategy, Tilburg University, P.O. Box 90153, 5000 LE Tilburg, The Netherlands
b
Development Research Institute, Tilburg University, P.O. Box 90153, 5000 LE Tilburg, The Netherlands

Abstract

There is not ‘one best way’ of organizing the flow of goods from the producers of raw materials to final customers to
satisfy these customers. The relevance of the product for the buyers is an important contingency to determine which
type of organization, i.e. relationship between buyers and suppliers, is effective.
Kraljic presented a purchase portfolio and Patterson et al., introduced three types of relationships. From combining
these two approaches we conclude that, for non-critical items and leverage items a transactional relationship, governed
by the market, is adequate; for strategic items a transcendental relationship, governed by clan is optimal, whereas for
the bottleneck items a transitional relationship, governed by quasi-hierarchy would be appropriate.
When applying this scheme to the Keralite rubber industry we found that, differences between the provision with
footwear, a low end product for the domestic market, and dipped goods, high end products for the international
market, can be described and analysed. From the analysis we find differences and inconsistencies pointing at directions
to improve the provision of the markets with these products.
r 2002 Elsevier Science B.V. All rights reserved.

Keywords: Supply chain management; Purchase portfolio; Coordination mechanisms

1. Introduction relationships include that production planning of

Traditionally, the choice of coordination me-
chanisms is between markets and hierarchies
(Williamson, 1975). Hierarchy is only a valid
mechanism, in case market is not an efficient
protection against opportunism. Prices govern the
coordination between independent parties in the
(spot) market. But, over time more stable and
long-term market relations have developed. JIT-
*Corresponding author. Department of Business Adminis-
tration, Tilburg University, P.O. Box 90153, Tilburg 5000 LE,
The Netherlands. Tel.: +31-1346-62422x2315; fax: +31-1346-
62875.
E-mail address: j.a.c.dehaan@kub.nl (J. de Haan).
the customer also governs the production planning
of the supplier as well (Womack et al., 1990). On
the other hand, within vertically integrated firms
orders from management are no longer the
exclusive coordination mechanism. Mintzberg
(1983) referred already to a kind of internal
contracts in the form of standardized outputs.
Peters and Waterman (1982) showed that firms
should concentrate on core business and outsource
other business processes to improve their competi-
tiveness. So, internal and external division of
labour as well as internal and external coordina-
tion mechanisms have become more or less blurred
over time.

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186 J. de Haan et al. / Int. J. Production Economics 81-82 (2003) 185–194
In addition to this Ouchi (1980) has extended
the analysis of coordination mechanisms by
referring not only to opportunism but also to
trust as a human characteristic influencing rela-
tionships. From this fact he derived clan, with the
shared norms and values, as a viable coordination
mechanism.
In supply chain management the basic idea is
that independent firms can create additional added
value by cooperation beyond their own short-term
interest (Handfield and Nichols, 1999). This
cooperation would create synergy by optimising
the chain of processes from producing raw
materials to final consumption, rather than stick-
ing to sub-optimal firm optimisation. But the
question than is, how to coordinate the processes
of these cooperating firms as markets seem to be
inefficient and hierarchy is not valid? Could clans
be effective in the hostile world of economic
cooperation and competition? Would the same
type of coordination hold for every type of chain
of processes, keeping the contingency approach
(Mintzberg, 1983) in mind?
From these observations we come to address the
following question in this study: To what extent
can the flow of goods in the (Keralite) rubber
industry be characterised as an example of the
supply chain concept, and how are these chains, or
flows, coordinated?
To study this question we confront the theore-
tical observations with a case study. For at least
three reasons we have chosen the rubber industry
in Kerala, India as the case to study supply chains.
The first reason is that rubber is a global industry
in which production and consumption are dis-
persed around the world. The Asian countries
grow over 95% of all natural rubber, while the
export of rubber products is mainly carried out
from the developed countries (75%).
A second reason is that there is a wide variety of
applications of the product, ranging from very
cheap footwear (e.g., Hawaii chappals in India) to
sophisticated products for demanding consumers,
such as condoms and gloves for medical use
produced mainly for export. Finally, India is
interesting because of its scale, it is not only
among the main growers, but also among the main
consumers. The Indian state of Kerala is the most
important area with respect to rubber, as it
produces rubber for the rich diversity of rubber
products mentioned above.
So, we can trace back different products
produced from the same raw material of which
we may expect that there will be differences in
processes, division of labour and coordination
mechanisms.
The organisation of this paper is as follows. In
Section 2, we summarise the relevant literature on
supply chain management introducing differences
in the types of products as the contingency to
differentiate between different patterns within
supply chains.
Section 3 is devoted to the flow of rubber from
the Keralite growers to the final consumers. Here
we pay attention to the players in the chains, their
relationships, and the extent to which they differ
for various applications.
In Section 4 we discuss the findings: What
lessons can be learned for both theory and
practice? Consequently, new questions are put on
the policy-oriented as well as on the theory-
oriented research agenda.
2. Supply chain management: Theoretical
observations
Supply chain management is concerned with the
effectiveness of dealing with final customer de-
mands by the collectivity of the parties engaged in
the provision of the product (Cooper et al., 1997).
Formal definitions can be marketing oriented
(Johnson et al., 1999) or have an operations
management orientation (Slack et al., 1995). In
the first category, the supply chain is dealt with as
an expansion of the marketing channel: a set of
interdependent organisations involved in the
process of making a product or service available
for use or consumption. In the second category,
the emphasis is on the transformation process,
setting an operation in the context of all the other
operations with which it interacts, both suppliers
and customers (the immediate supply network as
well as the total supply network). Here, firms have
to set internal conditions to enable external supply
chain management in an integrated way.
 J. de Haan et al. / Int. J. Production Economics 81-82 (2003) 185–194
In general, the following stages can be distin-
guished within a supply chain: production of raw
materials (mining, agriculture); parts production;
production of final products; wholesalers; and
retailers serving the final customer. One or more
firms can carry out each of these steps; alterna-
tively, one firm may carry out one or more steps.
Internally, the traditional, Fayolian, functional
division of labour is replaced by process-oriented
division of labour that have more ‘natural’
boundaries. In various new production concepts,
this is labelled differently: sociotechnology refers
to parallelization, segmentation, and work groups;
lean production and mini-companies address
internal supplier–client relationships (De Haan,
1997).
Externally, the ‘natural’ boundaries are sought
within the framework of the core business: stick to
the knitting (Peters and Waterman, 1982). This
leads to a complex process of disintegration (out
sourcing, management buy-out, etc.) as well as re-
integration (co-makership, joint ventures, etc.),
according to what is perceived as core business (De
Haan and Wang, 1999). Yet another way to
identify external relationships was presented by
Kraljic (1983) in his portfolio approach to
purchasing. He uses the information on risk (e.g.,
availability) and economic relevance (e.g., con-
tribution to added value) as the dimensions to
classify the products to be purchased. Each of the
four types of products in the portfolio requires a
specific strategy when purchasing them, as shown,
in Table 1.
One consequence of the changing pattern in the
division of labour and different external relations
is that the traditional coordination mechanisms,
markets and hierarchy, are no longer sufficient,
increasing the need for hybrid coordination
mechanisms. Williamson (1975) uses asset specifi-
city, uncertainty, and frequency of transactions as
criteria to decide which coordination mechanism is
adequate.
In traditional functional organisations, hierar-
chy is an adequate coordination mechanism. In
process-oriented organisations, other forms are
required. Slack et al. (1995) mention: integrated
and semi-hierarchy, Mintzberg’s direct supervision
and standardised work methods (1983) as well as
187
Table 1
Purchasing portfolio classification and related strategies
Profit Risk
impact
Low High
High Leverage items: Strategic items:
materials supply chain
management management
Low Non-critical items: Bottle neck items:
purchasing sourcing
management
Galbraith’s (1973) vertical information systems
and buffers refer to integrated hierarchy, whereas
their other forms (standardised in- or output or
mutual adjustment, lateral relations, and autono-
my) indicate a semi-hierarchy. In a semi-hierarchy,
workers have a say in their work: horizontally and/
or vertically. This is internally formalised in
specific procedures that enable ‘management at a
distance’, through internal contracts.
In classical microeconomics, fully competitive
markets are perfectly coordinated, but markets in
practice do not function that way. Thus, in
addition to short-term, spot market contracts,
co-contracting (e.g., joint ventures), coordinated
contracting (a prime contractor employs a set of
sub-contractors) and coordinated revenue links
(e.g., licensing and franchising), and/or medium/
long-term contracts, for example, blanket orders
(Slack et al., 1995) are needed.
Patterson et al. (1999) propose a theoretical
framework for inter-organizational relationships
which introduces not only Williamson’s market
and hierarchy but also Ouchi’s clan (1980) as
coordination mechanisms. The choice between the
three is based on the level of goal incongruence
and of performance ambiguity. In (spot) market
relationships, the incongruence is high but perfor-
mance is transparent. So, parties can rather easily
agree on the appropriate value-for-money as the
norm of reciprocity in the transaction. In the
opposite case, when parties share the same goal,
but performance is ambiguous, shared norms are
needed to satisfy both the parties involved. This
refers to the transcendental norms; delayed grat-
ifications are the norms of reciprocity that exist in
clans or in strategic networks. Quasi-hierarchy can
188 J. de Haan et al. / Int. J. Production Economics 81-82 (2003) 185–194
be used when both incongruence and ambiguity
are moderate. From a benign self-interest, the
parties can negotiate a contract that governs a
sequence of transactions where parties collaborate
in some governing body: a long-term contract,
rules set for the entire industry, etc., to which
relevant authority is transferred, as in strategic
alliances. Table 2 summarises the model.
To summarise the above, we can say that, to
organize buyer–supplier relationships in an effi-
cient way, we should distinguish the processes
within the chain of goods from the very origin
until the final customer. Each of these processes
should result in an identifiable product or service.
Central in these processes is that firms formulate
their goals in terms of the performance criteria,
time, costs, and quality. These goals reflect not
only the demands of their direct customers
(immediate supply network), but they are also
derived from the demands put forward by the final
customer (total supply network). Consequently,
the relevance of the contributions of different
parties may vary. This implies that a categoriza-
tion of items to be purchased, as proposed by
Kraljic (1983), is crucial in dealing with the
customers’ view. The relationship between buyer
and supplier has to be organized in a contingent
way.
Taking the coordination mechanism as a start-
ing point, three ways of organizing can be
distinguished:
* the market can be used for the leverage and the
non-routine items, as the parties can use their
negotiating power because of the availability of
Table 2
Coordination mechanisms in buyer–supplier relationships
Mechanisms Aspects
Goal incongruence
Market, arm’s length High
Quasi-hierarchy, strategic Moderate
alliance
Clan, strategic network Low
the products. By following a materials manage-
ment or purchasing management strategy, firms
can maximize their own outcome in these
transactional relationships;
* the bureaucracy is used for bottleneck items
where quasi-integration is to be achieved
because of the limited availability of the
products despite limited economic relevance.
By following a sourcing strategy, the partners
can built up the required transitional relation-
ships; and
* the clan is used for strategic items where firms
have to cooperate to maximize the relationship
outcomes because of the limited availability and
the high economic relevance. The performance
ambiguity requires shared norms as in the
transcendental relationships and is reflected in
supply chain management.
Table 3 summarises the three ways of organizing
buyer–supplier relationships.
Thus, we can conclude that, in some cases, when
availability (as a proxy for risk) is not an issue, it
can be sufficient to deal only with the immediate
supply network. On the other hand, when avail-
ability as well as economic relevance are an issue,
we should concentrate on the total supply net-
work.
3. The flow of natural rubber in Kerala, India
The rubber industry in Kerala, India, is used as
a case study to provide insight into both the supply
chain concept and to improve knowledge of the
Performance Buyer–supplier relationship
ambiguity
Low Transactional; distrust, negotiations, and
maximised own firm’s outcome
Moderate Transitional; contractual, mutual benefits, and
quasi integration
High Transcendental; interdependent, committed,
norms, consensus, and maximised relationship
outcomes
 J. de Haan et al. / Int. J. Production Economics 81-82 (2003) 185–194
Table 3
Organizing buyer–supplier relationships
Relationship Transactional
Items Leverage, non-critical
Purchasing strategy Materials and purchasing management, respectively
Performance measurement Operational
Governance structure Market
Negotiating Spot market contract
functioning of the industry. Based upon the above
model, questionnaires were developed to conduct
semi-structured interviews. In the first six months
of 1999, 55 partners in the natural rubber industry
in Kerala were interviewed. The interviews were
semi-structured as we used a checklist following
the theoretical observations described in Section 2,
adapted to the position of the interviewee in the
chain of production. The case study was therefore
theory-driven.
However, the case study was also explorative as
we tried to cover the complete chain of produc-
tion. Until now, most research in the Keralite
rubber industry concentrated on only one stage at
a time, whereas we studied the industry as a whole.
Therefore, little is known about the way the
various stages are coordinated and how the
industry functions. Productwise, the industry is
very diversified. We identified tyres (and camel
backs), footwear (both parts for shoes and Hawaii
chappals), belts and hoses (for industrial pur-
poses), and dipped goods (condoms and gloves for
medical purposes). Within the framework of this
study, we concentrated on the analysis of the two
extremes in the products: footwear and dipped
goods. Footwear, in particular, the so-called
Hawaii chappal, the cheap common footwear in
India, as an example of low-end products for the
domestic market, is produced from ungraded and
scrap rubber. Dipped goods, as examples of high-
end products for the international market, how-
ever, require rubber of the highest quality. The
idea in this exploratory study is that two extremes
will be more revealing than the product that is
produced most, i.e., tyres.
For a long time, the Indian government
followed a policy of self-sufficiency in various
fields of the economy. It used a planned economy
189
Transitional Transcendental
Bottleneck Strategic
Sourcing Supply chain management
Strategic Strategic
Quasi hierarchy Clan
Strategic alliances Strategic network
model for the development of the country, which
was very centralised. 1991 is seen as the turning-
point and the start of the liberalization of the
economy. This is also reflected in the rubber
industry. Traditionally, foreign as well as internal
trade were highly regulated. High tariffs prevailed
and imports were only used to compensate for a
shortfall in domestic production. Increased pro-
duction was promoted through a set of institu-
tions. The Rubber Board and the Rubber
Research Institute are the basic institutions, which
support this effort. The Board propagated the
adaptation of new planting material and sup-
ported small farmers to invest in rubber trees. One
of the important consequences of this policy was a
more or less guaranteed income for the farmers.
However, after the liberalization, international
competition affects the margin negatively nowa-
days (Tharian George, 1999).
Growing the trees, the first stage of the industry,
is done on small farms and on estates. Each of the,
over 900,000, small farmers grows only a limited
number of trees. Nevertheless, in total, they
produce 86% of the rubber on 91% of the land
used for rubber. 97% of these farmers have less
than 2 ha and use rubber as a cash crop to earn an
additional income. However, as tapping requires
skilled labour, they have to hire such workers. As
the prices are decreasing and wages, especially in
Kerala, are increasing, their margins are going
down. The Keralite Rubber Board has encouraged
the small-scale farmers to organise co-operatives
(co-ops) at a district level and societies (RPS) at a
local level as supporting agencies to improve
marketing, etc.
The estates are remainders of colonial times.
Historically, it were not only the products of the
plantation agriculture that were exported to feed
190 J. de Haan et al. / Int. J. Production Economics 81-82 (2003) 185–194
the industries in Europe, but also a major portion
of the surplus generated in the colonies (Mohana-
kumar and Tharian George, 1999). The size of the
estates ranges from 20 to about 800 ha: These
estates may have facilities to add value (e.g.,
centrifuging) and they produce higher quality
rubber. The quality of the rubber is determined
by a system through which the material can be
graded in several ‘RSS’ levels.
The next stage is trading to bridge the gaps of
time, information, and place, on which different
types of traders are active. First, there are the
village dealers who buy from the small holdings as
long as the price is satisfactory. Normally the
farmer will sell every time to the same trader.
There the rubber is brought, weighed, and graded.
The village dealers pay the farmers according to
weight and graded quality. Then the rubber is kept
in stock till a wholesaler collects it. The stock of
the low-quality rubber depends on the financial
and storage capacity of the dealer. In essence, the
village dealer fills the time gap. So, up till now the
flow of rubber is in a ‘push-way’.
The wholesale dealers buy regionally and, as
such, they bridge the gap of place. A wholesale
dealer may also act as an agency dealer who pulls
the product on behalf of producers. The agency
dealers normally work for large manufacturers
such as those in the tyre industry. This industry
consumes about 60% of the total Keralite
production. Normally, a broker will act as an
intermediary between the wholesale dealer and the
agency dealer. This person has information that
allows him to match supply and demand (gap of
information) in an efficient way and he sees to it
that the parties fulfill the contract.
Next the rubber products are produced. Before
actual production, there may be some processing
to prepare the rubber for the production process of
final products. Most of the rubber products are
produced outside of Kerala, especially tyres and
high value adding products like the dipped goods.
The simpler products are produced locally in small
production units, using low quality rubber.
Finally, the products are distributed to the final
customers through the wholesalers and retailers.
The price of the rubber used to depend mainly
on the floor-price set by the government, but
nowadays world market prices are dominant. The
farmers used to get about 90% of the price paid by
the manufacturers. The remainder (10%) was the
value added by the traders. A new balance,
acceptable to all parties, still has to be found.
3.1. Footwear
The rubber used to produce footwear, in
particular the Hawaii chappals, is produced
mainly at small holdings. The farmers finance the
crop themselves, although they may have support
from the Rubber Board. Not too many of the
small holdings are members of a cooperative or of
a production society, despite the efforts of
governmental institutions to stimulate their co-
operation. The village dealer depends largely on
trading the rubber (over 80% of their income) as
he has hardly any additional sources of income.
He also has to pay the right price to the farmers to
make sure that they will not go to other village
dealers, especially those in larger villages. The
wholesale dealers also depend largely on rubber
for their income. However, they are somewhat
more diversified than the village dealers as they
also may act as farmers, as well as village dealers.
The wholesale dealers are well aware of where
rubber is available, so it is readily available to
them. In the study, agency dealers were not found
in this chain. Because of the low quality of the
rubber that is required for chappal production, no
processing needs to be done to meet the demands
of the manufacturers. The manufacturers have
small production facilities. Almost the entire
production (95%) is sold outside of Kerala. The
manufacturing stage suffers from over-capacity.
Wholesalers collect the chappals from the small
manufacturers and distribute them to retailers all
over India. The retailer sells footwear as one of the
many products in his shop and cheap footwear is
abundantly available. There are no fixed relation-
ships between the parties in the chain, and each of
them tries to serve his own self-interest in the short
run.
With respect to the performance criteria, it can
be observed that they only play a role in the day-
to-day activities of actual selling. Time is not
important as the product is available whenever
 J. de Haan et al. / Int. J. Production Economics 81-82 (2003) 185–194
Table 4
The supply chain of footwear (Hawaii-chappals)
Participant Characteristics
Purchasing classification
Village dealer Strategic item
Wholesale dealer Leverage item
Agency dealer Not present in the chain
Co-op/RPS No info available
Processor Not present in chain
Manufacturer Leverage item
Wholesaler No info available
Retailer Non-critical item
needed because it is harvested every day and
traders fill the gaps of time and place. The costs are
more or less set as a result of open competition
among the players in the various stages of the flow.
The quality of the rubber is poor as it is ‘ungraded’
material, and the dealer evaluates it himself when
the rubber is presented to him. The supply chain of
footwear is summarised, in terms of Table 3, in
Table 4.
For the village dealer, the item is strategic
because he is completely dependent on the income
from trading the rubber that is presented to him.
Consequently, he has to balance price to reach an
acceptable income and availability of rubber. For
the wholesale dealers and the manufacturer, it is a
leverage item because availability is not a problem
for them. For the retailer, it is only one of the
many products and readily available because of
the overcapacity among the manufacturers. The
relationship is transactional in all cases because
just spot-market relationships exist. The transac-
tions are done on their own, but not within some
kind of a commercial framework.
3.2. Dipped goods
The rubber for dipped goods is produced and
processed mainly at the estates. Only a small
portion of rubber is produced by small holdings.
Tapping and processing are key determinants of
cenex quality. Latex has to be kept in drums
prepared with chemicals and then centrifuged.
Cenex for gloves is centrifuged only once, whereas
that for condom is centrifuged even twice, because
191
Type of relationship Performance measurement
Transactional Operational level, RSS ungraded/lot
Transactional Operational level, RSS ungraded/lot
Not present in the chain Not present in the chain
No info available No info available
Not present in chain Not present in chain
Transactional Operational level, RSS ungraded/lot
No info available No info available
Transactional Operational level
of the higher quality level needed. The large estates
have their own centrifuging facilities, whereas the
small holdings and producer cooperate with
processors. Village dealers are not present in this
segment because they cannot meet the quality
requirements set by the manufacturers. The small
holdings sell directly to other parties in the chain:
co-operatives, and/or other processors to have the
latex produced.
These products are mainly produced for export.
Medical gloves are not traded by retailers, but are
sold mainly to hospitals and other institutions in
the health-care sector. For most of the partners,
the rubber is very important both because of the
risk involved (it can easily be spoiled) and because
of the price and quality. The high quality required
also makes the rubber, or cenex after centrifuging,
scarce. The only exception is the agency dealer
who just tries to find the necessary cenex from any
available source.
With respect to performance criteria, we found
that there was enormous pressure for high quality
and timely processing. This holds mainly for the
processors and the manufacturers who have
implemented systems to ensure the required
quality and other relevant production conditions.
The other parties involved do not have such
sophisticated systems and work on a day-to-day
basis. The supply chain for dipped goods is
summarised, in terms of Table 3, in Table 5.
For most of the partners the product is a
strategic item because of the risk (availability and
technical quality) and the high margins that go
along with this product. An exception is the
192 J. de Haan et al. / Int. J. Production Economics 81-82 (2003) 185–194
Table 5
Supply chain of dipped goods
Participant Characteristics
Purchasing classification
Village dealer Not present in chain
Wholesale dealer Strategic item
Agency dealer Leverage item
Co-op/RPS Strategic item
Processor Strategic item
Manufacturer Strategic item
Wholesaler No info available
Retailer No info available
agency dealer for whom the risk is limited as he
only buys and sells without having the product in
stock. As far as formal contracts and rules exist it
is with respect to the processors and the manu-
facturers. The other parties have the same attitude
towards control as in the footwear chain. The
relationship is transitional because of the market
type of relationship but in addition to that the
common goal of high and consistent quality.
4. Discussion
The central question of this paper was: To what
extent can the flow of goods in the (Keralite) rubber
industry be characterised as an example of the
supply chain concept, and how are these chains, or
flows, coordinated?
First of all we can say that the model we used
enables us to describe the organization of the
provision with both footwear and dipped goods in
a systematic way, as is shown Tables 4 and 5,
taking the model summarised in Table 3 as a
starting point.
By confronting the results in Tables 4 and 5 with
the expectations from Table 3 we can analyse the
way the provision with the footwear and the
dipped goods has been organised.
From Table 4 we learn that the footwear for all
participants but the village dealers the product is a
leverage or a non-critical item. So, we would
expect from Table 3 that there would a transac-
tional relationship and operational performance
measurement, which is also found in Table 4. With
Type of relationship Performance measurement
Not present in chain Not present in chain
Transitional Operational level, high quality
Transitional Operational level, high quality
Transitional Operational level, high quality
Transitional Structural evaluation, high quality
Transitional Structural evaluation, high quality
No info available No info available
No info available No info available
exception of the village dealers the expectations
and the results are congruent. This is why, we
should concentrate on the role of the village dealer
when discussing the efficiency of this chain. Two
possible directions can be mentioned: (a) they
should act as chain directors as for them the
rubber is a strategic item and (b) in the chain there
is no room for village dealers, as they are ‘outliers’.
In this chain, or rather flow, all parties are
linked by simple market contacts, so what extra
could the village dealer have to offer and in
particular to the growers? Until now prices were
attractive to the growers as we saw before, whereas
the margins were moderate for the traders.
However, because of changing prices and interna-
tional trade regulations prices decrease, but the
village dealer with his small margin is not in a
position to compensate the grower for that.
Neither could the dealer guarantee long-term fixed
prices, as he himself also depends upon world
market prices. Non-price extras will be difficult as
well as the dealer would have to compete with the
Rubber board on that. This institution has
abundant know how on all aspects of rubber
growing and trading, whereas the dealer only has
some local trading knowledge. So, it is difficult to
see what extras a dealer could offer to become a
chain director. On the other hand reducing prices
put pressure on the role of all parties in the chain
and some of them are more vulnerable than others.
The dealer seems to be the most vulnerable one of
them all as he depends mainly on rubber.
Individual growers cannot trade their rubber
without a middleman, like the village dealer. But
 J. de Haan et al. / Int. J. Production Economics 81-82 (2003) 185–194
the market has to cope with quite some institutions
already and this can be expanded even further. The
Rubber board could encourage the Rubber
Production Societies to expand their services and
include trading. So, the societies might perform the
collection and bridging the time gap functions of
the dealers on behalf of their members. Than the
growers would have a better price as the margin of
the dealer would remain with them.
From Table 5 we learn that the dipped goods
are strategic items for all participants but the
agency dealers. From Table 3 we would now
expect a transcendental relationship, however, we
find a transitional relationship. In addition to this
we would expect strategic evaluation in perfor-
mance measurement. However, we find opera-
tional performance measurement in the first,
collecting, part of the chain but strategic perfor-
mance measurement in the second, production,
and, third, distributive, part of the chain. So, all in
all we find a rather confusing picture for the chain
of the dipped goods.
Two possible directions can be mentioned to
improve the consistency in the chain: (a) improve
the relationships between the partners and up-
grade them to transcendental and (b) align
the performance measurement in all stages of the
chain and adapt the type of relationships to the
performance measurement.
In this chain much value is added to the rubber,
by only a limited number of parties, compared to
the footwear chain. So, on an average all parties
do have an attractive margin on their products and
consequently costs are not too important. How-
ever, quality is the key factor to pay attention to
and parties should do so to meet the desired level
of zero defects. For this reason the producers of
the dipped goods interfere with the processes in the
preceding stages of the chain. This interference is
in essence of a technological nature, as norms and
procedures are prescribed and as is monitored to
what extend the parties live up to these. So, this
type of, in Patterson et al.’s terms, bureaucracy
exists for technological reasons, although it
reduces the amount of value added that exists for
the parties. An important issue is, how the
producers proceed when they make sure that the
other parties live up to the norms and procedures.
193
Do they so in a ‘‘western’’ way by giving penalties
in case of mistakes, or do they follow a more
supportive way by collaborating in the learning
processes of the other parties? When they take the
‘‘western’’ way, the cooperation takes a more
bureaucratic form, in a transitional relationship, as
the partners will try to avoid the penalties. When
they take the supportive way, the partners learn to
understand why the procedures are important and
how to deal with them. For the partners in the
chain moving into the zero defects is a dramatic
change in attitude. Rubber is a natural product
and so by definition it is never the same. However,
the dipped goods have to have a homogeneous and
high quality. These two extremes have to be
brought together and reconciled. If the parties
can develop an attitude devoted to the homo-
geneous, high quality as their own norm, than the
producer could change the way performance of
partners is monitored. Than monitoring and
coordination could become more like the trans-
cendental relationship we know from clans. An
additional advantage would be that transaction
costs are reduced. However, we should realize that
the technical norms and procedures always will be
necessary and as such, bureaucratic aspects will
always remain in the relationships between the
parties in the chain. So, what will emerge here is a
hybrid between two of the coordination mechan-
isms as proposed by Patterson et al., i.e. bureau-
cracy and clan.
From the analyses of the two chains we can
learn that we come up with new policy-oriented
questions such as: Could Rubber production
Societies indeed play the role of a village dealer
and if so, under what circumstances? And: How
deal the producers of dipped goods with their
monitoring role as chain directors and what
consequences does that have for coordination
forms in use?
But not only policy-oriented questions come up,
also theoretical questions can be asked, such as:
What hybrid forms of coordination mechanisms
will emerge and how effective will they be under
different combinations of goal congruence and
performance ambiguity as mentioned in Table 3?
As such the framework for analysis as presented
in Table 3 is a promising tool to improve supply
194 J. de Haan et al. / Int. J. Production Economics 81-82 (2003) 185–194
chain management as well as the research in this
field.
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