Channel Network Structure and the Product Assortment Function

Although business networks provide value for many of their participants, the ability of network systems to perform product assortment functions is unclear. After raising several related research questions about network structure and product matching, this paper reviews some conceptual foundations of the network approach. In particular, the paper reviews and develops the distinction between network positions and distribution functions. It then assesses the functions performed within channel network structures in several published case studies. Some of these network structures exhibit low densities and closely resemble rather conventional vertical supply systems. It appears, though, that such more vertical networks perform a speculative matching function for product assortments when supply and demand are heterogeneous and volatile. Under more rigid and stable conditions, vertical networks may engage in product customisation to postpone product form. Horizontal networks (when they exist), may facilitate product standardisation and thus may contribute to beneficial diversities in supply.