Bundling resources across supply chain dyads : The role of modularity and coordination capabilities

Purpose – The purpose of this paper is to analyze how firms are redesigning the organizational architecture of supply chains, bundling and unbundling resources, sharing information and coordinating flows in order to facilitate capability partitioning. It aims to analyze how process interdependencies are managed either through modularity or coordination mechanisms. The paper is anchored in the emergent theory of modularity, a transaction cost‐based perspective of modular systems. Design/methodology/approach – This paper adopts the case study methodology. It uses an in‐depth case study of Logoplaste, a global supplier of plastic packaging, in particular investigating how the firm organizes supply chain activities around an integration mode designated as “hole‐in‐the‐wall.” Findings – In a context of high process interdependence the firm has developed a coordination capability, an ability to manage the interfaces at minimum cost either by modularizing the process or defining appropriate coordination mechanisms. This capability becomes a core competence of the firm that enables it to further appropriate rents that lie at process interfaces. Research limitations/implications – The case study method limits the generalization of the findings, but allows more depth in the analysis of the proposed framework. Practical implications – As the complexity of sourced components increases firms will need to complement their modular approach to supply chain design with new organizational‐coordination skills and an ability to externalize knowledge. The case study provides several examples of the type of coordination required. Originality/value – This research adds to the literature on organizational modularity in two distinct ways. First, it focuses on the development of a coordination capability to manage process interdependences rather than the partitioning of technical capabilities across the supply chain. Second, it brings to the discussion of modularity recent developments in transaction cost economics that go beyond the engineering perspective. A coordination capability represents the organization's ability to organize transactions in order to appropriate rents, rather than merely minimize transaction costs.