Supply chain integration strategies in fast evolving industries

Purpose - The purpose of this paper is to define the "fast evolving industry" (FEI) and its supply chain management (SCM) challenges. The authors review and structure the literature regarding integration strategies and implementation methods to develop a strategic decision-making framework for SCM in the FEI. Design/methodology/approach - The authors conduct a review of SCM literature, including supply chain strategy, supply chain integration (SCI), agile and responsive supply chain and SCM for innovative and fast-changing industries. The authors develop a conceptual model and a decision-making framework and use four mini cases to provide support for the model and framework. Findings - The FEI, characterised by a high level of innovation and differentiation, short products/services lifecycle and high variety, is yet to be fully defined. Inherent uncertainty in FEI supply systems makes SCM in these industries a complex but strategic task for their managers. The framework and the model offered in this study, which employ a core competency concept and provide risk management strategies, offer a strategic tool for managers and scholars in the field to optimise their integration strategies and to operationalise integration decisions. Originality/value - Little research has been published on transferable and cross-industrial SCM in FEIs. This paper defines the FEI and its resource-related concerns and then offers a conceptual model and a strategic decision-making framework for SCI in FEIs

Partner Trust Level in Collaborative Demand Forecast Sharing and its Impact on Supply Chain Profitability

Considering trust as a critical factor for successful collaborative demand forecast sharing, this paper studies the dynamic relationship between trust level-based forecasting capability and supply chain profitability. We develop a forecasting coordination model to examine how the enhanced partner trust level can influence the forecasting evolution to improve demand forecasts’ accuracy. We estimate costs and profits from demand forecast sharing under varying trust levels between a buyer and a partner supplier and then determine the optimal level of trust for both parties to create the maximum economic value through collaborative demand forecast sharing. To assess the opportunity costs associated with no demand forecast sharing, we compare a joint forecasting supply chain’s profitability with a supply chain where the supply chain partners maintain separate demand forecasts. We find that once the buyer and the supplier agree to engage in demand forecast sharing with a joint goal of supply chain profit maximization, they should be able to retain the collaborative trust that is as closer to an absolute level as possible throughout their working relationship. Thus, the model presented in this study may help both the buyer and the partner supplier evaluate how supply chain profitability can improve as they modify their partner trust levels and determine the optimum trust-level policy for mutual benefits

Supply chain forecasting when information is not shared

The operations management literature is abundant in discussions on the benefits of information sharing in supply chains. However, there are many supply chains where information may not be shared due to constraints such as compatibility of information systems, information quality, trust and confidentiality. Furthermore, a steady stream of papers has explored a phenomenon known as Downstream Demand Inference (DDI) where the upstream member in a supply chain can infer the downstream demand without the need for a formal information sharing mechanism. Recent research has shown that, under more realistic circumstances, DDI is not possible with optimal forecasting methods or Single Exponential Smoothing but is possible when supply chains use a Simple Moving Average (SMA) method. In this paper, we evaluate a simple DDI strategy based on SMA for supply chains where information cannot be shared. This strategy allows the upstream member in the supply chain to infer the consumer demand mathematically rather than it being shared. We compare the DDI strategy with the No Information Sharing (NIS) strategy and an optimal Forecast Information Sharing (FIS) strategy in the supply chain. The comparison is made analytically and by experimentation on real sales data from a major European supermarket located in Germany. We show that using the DDI strategy improves on NIS by reducing the Mean Square Error (MSE) of the forecasts, and cutting inventory costs in the supply chain

Using risk sharing contracts for supply chain risk mitigation: A buyer-supplier power and dependence perspective

The paper aims to understand buyer-supplier power and dependence scenarios following a risk sharing contract. The study develops a supply chain risk sharing contract to mitigate demand uncertainty and price volatility related risks in a globalised business environment. An integer programming model is developed and analysed following an automotive case study to generate insights into buyer-supplier relationships. Multiple buyer-supplier power and dependence scenarios are considered to reflect the possible leverages involved in the decision-making. The situational strength evaluated through buyer-supplier power and dependence illuminates the inherent complexity in contract negotiation. Thus there is an evident need to develop risk sharing contracts for mitigating global risks. The developed relationship framework and risk sharing contract model are expected to help SC managers in better understanding behavioural aspects during contract negotiations. The risk sharing contract model proposed here also contributes to a potentially novel perspective on existing theory in buyer-supplier power and dependence by providing a relational perspective on the dynamics of supply chain design and collaboration

Research in Supply Chain Management: Issue and Area Development

Today the study of supply chain management (SCM) is growing rapidly and provides a great opportunity to do research both empirical and theoretical development. Research opportunities in SCM has been reviewed by many researchers and grouped into many categories. This paper contains a review of research SCM and classify into 7 categories, namely (1) SCM Operational Management & Strategy, (2) knowledge management, (3) Relationship Management, (4) Information Technology in SCM, (5) Supply Chain Design, Logistics & Infrastructure, (6) Global Issues, (7) Environment, Legal & Regulations. The issue in each category and research opportunities will be discussed in this paper. Keywords: Supply Chain Management, Research Opportunities in SCM, Issue in SC

Markets and Supply Chains: An Investigation of the Institutions Influencing the Farm-Supply Chain Interface

Farm-level operations have lasting and amplified impacts that promulgate the entire supply chain, and the farm is increasingly in the forefront of today’s headlines on topics such as social responsibility, environmental sustainability, traceability, and food safety. Despite its significance, however, the farm remains a ‘black box’ and has traditionally operated independently with little information-sharing, trust, or collaboration with buyers downstream. This dissertation begins to unpack this ‘black box’ by employing different methodologies to identify the factors influencing exchange in the farm-supply chain interface. In Essay 1, I examine why the farm continues to be a challenge for ‘traditional’ collaborative approaches to buyer-supplier exchange. I use an interpretive approach to identify the individual and institutional factors influencing farmers’ operations decision-making. Field interviews reveal that farmers approach buyer-supplier exchange differently and tend to rely more heavily on market mechanisms to coordinate activities with buyers and inform their decision-making. In Essay 2, I build on this finding to examine the institutional factors influencing exchange in the spot market, which accounts for a majority of the total value of agricultural commodity production. I use a proprietary data set and time series econometrics to investigate how spot market exchanges between farmers and buyers are influenced by the futures market—an institution serving critical informational and risk management functions in the industry. In line with the predictions of Austrian economics, the findings indicate that farmers and buyers use the information conveyed by the futures market as they negotiate prices in the spot market. In Essay 3, I build on this finding and further explore how the futures market influences spot market exchanges by examining how information asymmetry affects the price adjustment process. I draw on economic theory to develop hypotheses that are tested using a proprietary data set and nonlinear time series econometrics. The findings suggest that buyers exploit their informational advantage by adjusting spot market prices asymmetrically. Taken together, the three essays demonstrate how institutions influence decision-making and exchange in the agricultural supply chain and offer important insights for theory, practice, and public policy

Ensaios sobre flexibilidade da cadeia de abastecimento: uma abordagem de opções reais

Doutoramento em Gestão IndustrialA presente tese investiga o processo de tomada de decisão na gestão de cadeias de abastecimento, utilizando um quadro de análise de opções reais. Especificamente, estudamos tópicos como o nível de inventário ideal para protecção contra a incerteza da procura, o momento para implementação de capacidade flexível em mercados onde existe complexidade no mix de produtos, o tempo para o reforço do factor trabalho visando requisitos de serviço ao mercado, e as decisões entre integração e outsourcing num ambiente de incerteza. Foram usadas metodologias de tempo discreto e contínuo para identificar o valor ideal e o calendário das opções a adoptar, quando a procura é estocástica. Além disso, foram considerados os efeitos dos requisitos dos mercados, como a complexidade na oferta de produtos e o nível de serviço. A procura é representada recorrendo a diferentes processos estocásticos, o impacto de saltos inesperados também é explorado, reforçando a generalização dos modelos a diferentes condições de negócio. A aplicabilidade dos modelos que apresentamos permite a diversificação e o enriquecimento da literatura sobre a abordagem de opções reais, no âmbito das cadeias de abastecimento. Níveis de inventário flexíveis e capacidades flexíveis são característicos das cadeias de abastecimento e podem ser usados como resposta à incerteza do mercado. Esta tese é constituída por ensaios que suportam a aplicação dos modelos, e consiste num capítulo introdutório (designado por ensaio I) e mais seis ensaios sobre factores que discutem o uso de medidas de flexibilidade nas cadeias de abastecimento, em ambientes de incerteza, e um último ensaio sobre a extensão do conceito de flexibilidade ao tratamento da avaliação de planos de negócio. O segundo ensaio que apresentamos é sobre o valor do inventário num único estádio, enquanto medida de flexibilidade, sujeita ao crescente condicionalismo dos custos com posse de activos. Introduzimos uma nova classificação de artigos para suportar o indicador designado por overstock. No terceiro e quarto ensaio ampliamos a exploração do conceito de overstock, promovendo a interacção e o balanceamento entre vários estádios de uma cadeia de abastecimento, como forma de melhorar o desempenho global. Para sustentar a aplicação prática das abordagens, adaptamos o ensaio número três à gestão do desempenho, para suportar o estabelecimento de metas coordenadas e alinhadas; e adaptamos o quarto ensaio à coordenação das cadeias de abastecimento, como auxiliar ao planeamento integrado e sequencial dos níveis de inventário. No ensaio cinco analisamos o factor de produção “tecnologia”, em relação directa com a oferta de produtos de uma empresa, explorando o conceito de investimento, como medida de flexibilidade nas componentes de volume da procura e gama de produtos. Dedicamos o ensaio número seis à análise do factor de produção “Mão-de-Obra”, explorando as condicionantes para aumento do número de turnos na perspectiva económica e determinando o ponto crítico para a tomada de decisão em ambientes de incerteza. No ensaio número sete exploramos o conceito de internalização de operações, demarcando a nossa análise das demais pela definição do momento crítico que suporta a tomada de decisão em ambientes dinâmicos. Complementamos a análise com a introdução de factores temporais de perturbação, nomeadamente, o estádio de preparação necessário e anterior a uma eventual alteração de estratégia. Finalmente, no último ensaio, estendemos a análise da flexibilidade em ambientes de incerteza ao conceito de planos de negócio. Em concreto, exploramos a influência do número de pontos de decisão na flexibilidade de um plano, como resposta à crescente incerteza dos mercados. A título de exemplo, usamos o mecanismo de gestão sequencial do orçamento para suportar o nosso modelo. A crescente incerteza da procura obrigou a um aumento da agilidade e da flexibilidade das cadeias de abastecimento, limitando o uso de muitas das técnicas tradicionais de suporte à gestão, pela incapacidade de incorporarem os efeitos da incerteza. A flexibilidade é claramente uma vantagem competitiva das empresas que deve, por isso, ser quantificada. Com os modelos apresentados e com base nos resultados analisados, pretendemos demonstrar a utilidade da consideração da incerteza nos instrumentos de gestão, usando exemplos numéricos para suportar a aplicação dos modelos, o que claramente promove a aproximação dos desenvolvimentos aqui apresentados às práticas de negócio.The present thesis researches the process of decision making in supply chain management using a real options analysis framework. Specifically, we address issues regarding the optimal inventory level to hedge against demand uncertainties; the timing for equipment capacity implementation under market product mix complexity; the timing for workforce capacity reinforcement aiming market service requirements; and the decisions between integration and outsourcing in an uncertainty environment. Discrete and continuous time methodologies were used to identify the optimal value and timing of the options to adopt, when the demand is stochastic. Additionally, the effect of market requirements, such as product mix complexity and service level, were also taken into consideration. The demand is modelled under different stochastic processes; the impact of unexpected shocks is also explored, which enhances the generalization of the models to different business conditions. The applicability of the models enables the diversification and enrichment of the literature on the real options approach, within supply chain concept. Flexible inventory levels and the flexible capacity are supply chain features that can be used to deal with demand uncertainty. The thesis is organized by essays that support the application of the models, and consists of an introductory chapter (essay I) and six trials on factors that enhance the use of supply chain flexibility measures in uncertainty environments and an extended essay on the concept of flexibility to the evaluation of business plans. The second essay we present refers to the inventory value in a single echelon, as a measure of flexibility, subject to cost constraints. We introduce a new items’ classification to support the indicator designated as overstock. In the third and fourth experiments we extend the concept of overstock, promoting the interaction and balance between supply chain echelons in order to improve overall performance. For a practical application of the approaches, we adapted the third essay to the performance management, to support the establishment of coordinated and aligned goals, and used the fourth essay to the coordination of supply chains, supporting the integrated and sequential inventory planning. In the fifth essay we analyse manufacturing technology features in connection with the company's product mix, exploring the concept of investment as a flexible measure to deal with uncertain demand volume and product range flexibility. We dedicate the sixth essay to the analysis of the input "workforce", exploring the economic conditions for increasing the number of work shifts and determining the critical point for decision making in uncertainty environments. In the essay number seven, we explore the concept of internalisation of operations, focusing our analysis in the trigger moment that supports decision making in dynamic environments. We complement the analysis by introducing temporal factors that could disturb the change, including the preparation stage prior to any strategic alternative. Finally, in the last essay, we extend the concept of flexibility in uncertainty environments to the business plans analysis. Specifically, we explore the influence of the number of decision points in the flexibility of a plan in response to increasing market uncertainty. As an example, we use the mechanism of sequential budget to support the model. The increasing uncertainty in demand has promoted supply chains agility and flexibility, limiting the use of many of the traditional management techniques, because of their inability to incorporate the effects of uncertainty. Flexibility is clearly a competitive advantage that companies should have and therefore must be quantified. With the models developed and results that are presented, this thesis aims to demonstrate the usefulness of considering the uncertainty impact in management tools, using numerical examples to support the application of the models and the interpretation of the results, which clearly seek to bring the developments to the actual business practices