The process and consequences of supply chain virtualization

The recent rapid commercialization and adoption of Internet technologies has driven a process of supply chain virtualization, transforming conventional work practices across organizations. In an effort to provide a better understanding of this emerging phenomenon, this paper presents three key elements of supply chain virtualization, including: the formation of virtual trading communities; the emergence of virtual knowledge communities; and the relocation and integration of inter‐organizational business processes in the cyberspace. The transformations and consequences of virtualization are illustrated in the context of the Hong Kong textile and clothing industry. The experience of Hong Kong suggests that supply chain virtualization has propelled a structural change in buyers‐intermediaries‐sellers relationships, called for a novel approach to knowledge management, and accelerated internationalization of small‐ and medium‐sized enterprises. Managers and policy makers are advised to adopt new mindsets and practices in the face of these challenges.