Supply Chain Configuration


Globalization is revolutionizing the way manufacturers operate and perceive themselves. A key question in the pursuit of excellence in global value chains remains: from where does the firm primarily derive its competitive advantages? Does the firm primarily rely on the marketing- and positioning-oriented aspects, which it derives from product/service development, or from its operations resources and capabilities? Arguing against current governing beliefs, this chapter claims that sustainable competitive advantage may be gained through excellence in operations capabilities, as firms purposefully work their way around traditional tradeoffs. Forward-thinking companies see their global value chain as an opportunity to innovate their operations systems, seeking lower cost, new manufacturing capabilities, improving customer responsiveness, and entering new markets, but also realizing that tapping into these opportunities requires a fundamental rethinking of their current supply chain configuration. In the pursuit of this rethinking, these companies have succeeded in developing innovative and robust operations networks, from which they build and sustain competitive advantages. This chapter takes its outset in four such companies that have been through this transition, but with different initiating conditions, different sets of choices with regards to process and content, and with different supply chain configurations as outcomes. We know of their success, but have little knowledge about why. Therefore, in this chapter, we aim to map and understand the current conditions and process for supply chain configuration and its effects on the resulting supply chain configuration.

The increased scale and scope of global operations, both with respect to markets and supply, has broadened the scope of manufacturing and supply chain management. The supply chain has undergone a radical fragmentation geographically as well as in terms of functional sub-categories and organizational boundaries, leading to an ongoing reorganization of the value chain on a global scale. This has partly rendered the division between operations management and supply chain management obsolete.

At the same time, drastic reductions in product lifecycles and delivery times have eliminated inventories and, as a consequence, have called for management of interdependencies among subsystems. This means that increased complexity has worked its way into supply chain management partly induced by the nature of activities and partly by the organization of these activities. In addition to this increased complexity, the environment has become more dynamic. Not only do we experience more frequent changes in customers' preferences, but we also see them in products and processes. But the direction of change has become more difficult to predict. This calls for an unprecedented capability of a supply chain system to become agile, but also to make the most from the global resources the company appropriate.

In the midst of these transitions, the role of manufacturing in Western economies has been questioned, and the quest for higher-value-added activities has been strong, leading to an unprecedented wave of outsourcing and offshoring initiatives. This wave, however, builds on the basic assumption of manufacturing as a cost function, which reduces the strategic role of manufacturing to complying with global cost structures. This assumption may, though, prove to be faulty, and this chapter makes a call for reconceiving the strategic role of the manufacturing function in Western economies in the midst of global value creation.

The need to look at manufacturing and the supply chain in a new way is supported by the European Union initiative Manufuture. A "Vision for 2020" report (European Commission, 2004) describes, among other things, a needed transition in four main areas:

  • From resource-based to knowledge-based manufacturing
  • From managing a linear process to dealing with a complex operations set-up
  • From individual sources of competitive advantage to systems-based competition
  • From mono-disciplinarity to trans-disciplinarity

The report emphasizes the need to innovate within manufacturing and to integrate multiple perspectives and disciplines. This also applies to the supply chain, where the above-mentioned challenges to industrial firms call for a capability to quickly reconfigure the supply chain at the same time that increased emphasis should be placed on knowledge and competence development. In response to these transitions, it is argued that we need to provide a broader approach to configuration of supply chains. In this chapter, we shall, therefore, introduce four generic supply chain roles (Full scale, benchmarking, ramp-up, and prototype) and, based on case studies, discuss their implications for the configuration of supply chains.

In the next section, we shall first review the literature on operations networks and manufacturing strategy to provide a background for introducing four generic strategic roles of supply chains. This is followed by a section with four case studies, introduced by a discussion of methodology and concluding with a cross-case analysis. The last section will deal with implications for the configuration of supply chains.

Source: Brian Vejrum Waehrens, Jens Ove Riis, and John Johansen,
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