Development of an organization from a single unit having internal management, through a group of units where interaction is external to the units but internal to the group, to a federation of units having no overall management, reflects today’s reality. The significance of this is that there is no single point of authority and control in a federation. Instead of exercising authority by command and control, these communities coordinate their roles and communicate their needs to achieve mutual goals. The definition of a supply chain as “a network of autonomous or semi-autonomous business entities collectively responsible for procurement, manufacturing, and distribution activities associated with one or more families of related products” captures this essence.
Not only are value networks typically between organizations, but they are often transient. A virtual enterprise is a temporary consortium or alliance of units formed to achieve a specific purpose. It shares costs, skills and global market access to provide timely and competitive products and services, which could not be achieved by any one of its individual members. Large and complex business systems can be implemented by networks of collaborating units, rather than by a centralized command authority.