Supply Chain Strategies And PracticesPresentation Transcript
Supply Chain Strategies and Practices: A contingency model Ph.D Candidate: Qi, Yinan Dept. Of Decision Sciences & Managerial Economics March 8th, 2005
Literature review & hypotheses
Significant challenges in today’s market
Individual businesses no longer compete as solely autonomous entities, but rather supply chains (Lambert and Cooper 2000)
How to effectively manage the flow of materials from supply resources to the customer (Mabert and Venkataramanan, 1998)
We need appropriate strategy to manage the operations of supply chain.
“ Match Your Supply Chain with Your Market”
– Mason-Jones et al. (2000)
Contingency theory – Lawrence and Lorsh (1986)
The performance of an organization depends on the appropriate fit between two or more factors
A model of Contingency theory-based strategic research
External and internal factors
Business strategy (Morash, 2001; Ward and Duray, 2000; Ward et al., 1996)
Environmental uncertainty (Chow et al., 1995; Narasimhan and Kim, 2002; Yusuf and Adeleye, 2002)
Product characteristics (Fisher, 1997; Huang et al, 2002;)
Strategies should be supported by practices
Impact of practices on performance
What factors will have impact on decisions of supply chain strateg ies ? How do those factors influence the supply chain strategies?
What kinds of supply chain management practices should firms choose to improve their competitiveness based on the selected strategy?
What are their impacts on firms’ performance?
Conceptual Model Environments Business Strategy Supply Chain Strategy Practices Performance Product Char.
Porter’s (1980) generic strategies
Focus on such factors that can help a firm reduce cost and maintain a low-cost position in the competition
The unique image or value of a firm’s product and service
Another view of strategy?
We should view the strategic management from a new view of pursuing the commonalities among firms instead of an atomistic view. (Dess and Devis, 1984)
Bowersox et al. (1989)’s typology
Fisher’s (1997) typology
efficient supply chain
responsive supply chain
Morash’s (2001) typology
customer closeness .
Cigolini et al. (2004)’s typology
efficient supply chain
lean supply chain
quick supply chain.
Yusuf et al. (2003)’s typology
lean supply chain
agile supply chain
Comparison between previous findings Fashion-driven /technology-driven products, manufacturing flexibility Quick supply chain Compete simultaneously on price, novelty, quality and customer service Lean supply chain Commodities with high volume, focused on operation, high efficiency Efficient supply chain Cigolini et al. (2004) Collaborative communications with customers, high value-added products Customer closeness Operational excellence Responsive supply chain Efficient supply chain Findings Minimize cost, eliminate waste, standardized products. Morash (2001) Characteristics Authors Respond quickly to uncertainty, innovative products, supplier selection based on speed & flexibility Cost reduction, functional products, supplier selection based on cost & quality Fisher (1997)
Comparison between previous findings In conclusion, the basic supply chain strategies should include lean supply chain and agile supply chain, although they were described differently in previous literature. Agile supply chain Lean supply chain Findings Characteristics Authors Fashion products, volatile demand, high variety, respond to customer Commodities, predictable demand, low variety, cost reduction Mason-Jones et al. (2000) Christopher (2000) Yusuf et al. (2003)
Lean supply chain
Forming a value stream from suppliers to final customers to eliminate all kinds of buffering cost in the system and to ensure a level schedule in production in order to maintain the competitive advantage through economic of scale in a stable and predictable marketplace .
Agile supply chain
Developing a flexible and reconfigurable network with partners to share competences and market knowledge in order to survive and prosper in a fluctuating market environment by responding rapidly and cost-effectively to changes
Distinguished Characteristics of leanness and agility Source: Mason-Jones et al. (2000) Consultative Algorithmic Forecasting mechanism Immediate and volatile Long-term Contractual Stockout penalties Obligatory High desirable Information enrichment Assign capacity Buy materials Purchasing policy Marketability costs Physical costs Dominant cost High Low Profit margin Availability Cost Customer drivers Short Long Product life cycle High Low Product variety Volatile Predictable Marketplace demand Fashion goods Commodities Typical products Agile supply Lean supply Distinguished attributes
Literature review I
Business strategy & supply chain strategy
Very few literatures regarding such a topic
Supply chain strategy should support firm’s competitive objectives
Cigolini et al. (2004)
Cost leadership needs lean supply chain
Long-term and rigid relationship with suppliers
Standard products to customers
Low cost distribution
Differentiation needs agile supply chain
Flexibility and speed
Integration with suppliers, customers, and even competitors.
The manufacturers are more likely to adopt lean supply chain strategy when they use overall cost leadership as their business strategy .
The manufacturers are more likely to adopt agile supply chain strategy when they use differentiation as their business strategy .
Literature review I
Environment and Strategy
Differentiation in volatile environment and cost leadership in stable environment (Hofer, 1986, Kim and Lim , 1988, Miller, 1988 and Ward et al. , 1996)
Agile supply chain in less predictable environment (Christopher, 2000; Mason-Jones et al., 2000; Yusuf et al., 2003)
Lean supply chain in stable environment (Katayama and Bennett, 1996; Mason-Jones et al., 2000; Cooney, 2002; Yusuf et al., 2003)
Dimensions of environmental uncertainty
In the research on business strategy (Dess and Beard, 1984)
In the research on supply chain (Chen and Paulraj, 2004)
The manufacturers are more likely to adopt the differentiation strategies (i.e. innovative differentiation, product differentiation and marketing differentiation) as the environments are more fluctuate.
The manufacturers are more likely to adopt the overall cost leadership strategy as the environments are more stable and predictable.
The manufacturers are more likely to adopt the lean supply chain strategy as the environments are more stable and predictable.
The manufacturers are more likely to adopt the agile supply chain strategy as the environments are more fluctuate.
Literature review II
Product characteristics and strategy
Functional products need efficient supply chain and Innovative products need responsive supply chain (Fisher, 1997)
system – classify product into four clusters and different kinds of products need different manufacturing structure (Childhouse et al., 2002; Aitken et al., 2003)
Production-dominant need scale-efficient process and mediation-dominant need scale-inefficient process (Randall and Ulrich, 2001)
Fashion goods need more agile supply chain (Bruce et al., 2004)
Innovative product need agile supply chain and standard product need lean supply chain (Huang et al., 2002)
The manufacturers are more likely to select lean supply chain strategy as the products are more functional.
The manufacturers are more likely to select agile supply chain strategy as the products are more fashionable .
Literature review III
Leanness vs agility – Cumulative model
Ferdows and De Meyer (1990)
Building manufacturing capabilities in order: quality, delivery, flexibility, and cost
Building manufacturing capabilities in order: quality, dependability, delivery, cost, flexibility, innovation
Leanness and agility
Agility depends on a range of capabilities such as TQM and JIT
Brown and Bessant (2003) , Goldman et al. (1995)
Leanness may be a constituent of agility
Christopher (2000) , Kidd (1994), Robertson and Jones (1999)
Strategies and practices OOO OO AMT OOO O Organizational change OOO O Customer enrichment OOO OO Customer integration OOO OOO Internal integration OOO OOO Supplier integration OOO OOO TQM OOO OOO JIT system Agility Leanness Practice bundles
The manufacturers that focus on lean supply chain strategy will have high degree of adoptions of lean practices, such as JIT, TQM, supplier integration and internal integration.
The manufacturers that focus on agile supply chain strategy will have almost equal degree of adoptions of the lean and agile practices including JIT, TQM, supplier integration, internal integration, customer integration, customer enrichment, organizational change and AMT.
Literature review IV
Practices and Performance
JIT purchasing has positive impact on performance (Dong et al., 2001; Kelle and Miller, 1998)
JIT production system has positive impact on performance (Golhar and Stamm, 1991; Joo and Wilhelm, 1993)
TQM has positive impact on performance (Flynn et al., 1994; Ahire et al., 1996; Kaynak, 2003)
Postponement strategy has benefits to firms (Lee and Tang, 1997; Johnson and Anderson, 2000)
Supply chain integration has positive impact on performance (Narasimhan and Das, 1999; Fronlich and Westbrook, 2001)
Dimensions of business performance
Cost reduction, Inventory turnover, Labor productivity etc.
Pre-sale services, Product support, Dependability etc.
Volume, Mix, New product flexibility
(Beamon, 1999; De Toni and Tonchia, 2001; Gunasekaran et al., 2001)
H6a: The manufacturers can increase their operational performance through the extensive use of the lean and agile practices.
H6b: The manufacturers can increase their customer service level through the extensive use of the lean and agile practices.
H6c: The manufacturers can increase their flexibility through the extensive use of the agile practices.
The business strategies, environmental uncertainty and product characteristics are very important factors that have significant impact on the selection of supply chain strategy.
The cumulative model is appropriate to describe the relationship between two supply chain strategies and the eight practices bundles.
The congruence between environment, strategy and practices will lead to better performance.