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Introduction to governance structures

To coordinate the flow of pigs and meat and the accompanying information, arrangements need to exist between all actors in the supply chain. These arrangements can vary from long-term agreements or contracts between closely collaborating actors to contracts that may vary from one transaction to another between actors that are more or less free to choose the parties from whom they source or to whom they deliver. This last form of arrangement is called a market-type of governance, while the first form is an example of a more integrated governance structure. Contracts may be written or may be verbal. They may also be formal or informal, based on long-term relationships.

In the figure below governance relationships have been put on a continuum, ranging from market to hierarchical governance forms. Governance forms characterise the way coordination between actors in exchanging goods is organised.

In market coordination, the decision rights about what to produce, how much and when (as well as other aspects of the production process), is made by independent chain actors. Market types of governance forms rely mainly on price and competition for coordination of the exchange of goods. In hierarchical coordination, the decision rights lie with a single chain actor. Hierarchical types of coordination rely mainly on administrative control for the coordination.


Range of governance forms


The three example pork supply chains, VION Food Group, the Eichenhof chain, and Ham of Bayonne, show different arrangements of governance structures. The information conveys properties of relationships between actors in different stages of the supply chain.