Third-party governance in supply chains

Abstract

This paper discusses the feasibility of third party governance on the buyer, manufacturer and supplier triad, through a literature review and an in-depth discussion. We argue that comparing between manufacturer and third party governance, third party governance can function well only if the supply chain is characterized by a low intensity of interaction and the knowledge exchanged is mainly low-tech and transactional. On the contrary, manufacturer governance would be more appropriate if intensive interaction exists among chain members and there are high-tech contents in the knowledge sharing. Furthermore, the leverage and monitoring ability of the chain governor over chain members are critical for its governance effectiveness.