Summary
As an answer to increasing competition and individualized customer demands, efficient supply chain management is becoming a crucial challenge for companies. In this context, the integration of production and logistics along the chain is required to reduce cycle time and costs. To avoid the “bullwhip effect”, it is necessary to provide substantial information on customer demands and production processes in the entire supply chain. This creates significant challenges on supply chain coordination. The literature on supply chain coordination offers numerous organisational recommendations based on mere heuristic reasoning without thorough theoretical foundations. In this paper, supply chain coordination is examined with the help of transaction cost analysis. Building on the discussion of the essential transaction elements specificity, uncertainty, and frequency, the optimal coordination and organisational design of supply chains shall be revealed. The practical application of this process is characterised by highly specific investments and high information asymmetry. Under these conditions, transaction cost theory regards a vertical integration as a fruitful solution to the resulting information problems. However, this recommendation hinders flexibility, resulting in competitive disadvantages. Finally, it is being discussed to which extent information technologies are helpful to cope with these kinds of problems.