Supply Chain Configuration

Read this article, which examines the challenges western nation manufacturers currently face. Specifically, it covers firms in industrial products, toys, fast fashion, and designer furniture.

Strategic roles of supply chains

In the following, we shall adopt the broader view of manufacturing presented above as the fourth perspective, seeing manufacturing as an integral part of supply chains or orchestrated manufacturing networks. We are focusing on manufacturing to determine whether it takes place in a plant owned by an industrial company or if it is carried out by a supplier. This allows us to study some of the key issues of supply chain management, for example accessibility of capabilities, reliability of delivery, competence development, and organizational learning in the context of the ongoing network-based reconfigurations. Furthermore, we shall make use of the third classification presented above to support this extended manufacturing process perspective.

In previous work, five different roles were identified. Full-scale production is carried out exclusively by manufacturing, whereas the following four roles support one or more functions, such as ramp-up (which builds on the key relations to sales and product development), prototype production (with key relations to product and process development, sales and sourcing), benchmarking (with key reference to sourcing), and laboratory production (with key relations to product and technology development). We take the ongoing reorganization of the global value chain discussed in section 3 as a basis for stating that it is possible to use these roles to identify four strategic roles related to the increasingly fragmented and distributed supply chains. By including "laboratory production" into "prototype production," we obtain four generic roles, which respond to current global supply chain reorganizations by reintroducing operations into considerations of corporate competitiveness and, as a result, raise new demands on operations capabilities:

Full-scale manufacturing and sourcing: This role deals with the daily operation to secure precise and swift delivery to market demand. As mentioned above, this has become a complex task with globally distributed production plants and global sourcing and demanding customers. In addition, market fluctuations call for agility to be able to escalate volume and to down-size.

Benchmarking: This is an important task for an industrial firm to continuously examine, and one consideration a company undertakes constantly is if other suppliers can deliver better, e.g. in terms of reliability, quality, and cost. This should also include the firm's own plants and may result in recommendations for improvement or shift in suppliers. These capabilities are too important today to be embedded within one single functional domain (sourcing), but depend on ongoing collaboration between partners and function across the value chain. In contrast to the Full-scale role where establishment of mutual trust in a supply chain or network is a key concern, the Benchmarking role implies a capability to smoothly shift partners in a network and, thus, introduces process-based robustness and raises demands on the capability to specify.

Ramp-up: As an industrial firm introduces a new product line or opens a new market, a new supply chain needs to be established. This calls for a capability to quickly configure a supply chain, taking into account the specific nature of the product, markets, and suppliers. A design framework based on modular business processes has been a solution for some companies.

Prototype: When an industrial company wants to introduce new business models, new technologies, and new materials, strong cooperation between all functions is needed. The supply chain has the task of engaging potential suppliers in new product and process development.

Four roles – four working modes

The four roles respond to different types of supply chain configurations, with the full-scale and the prototype roles positioned at either end of a continuum from a tight to a loose supply chain structure. But at the same time, they also represent different types of demands that the supply chain configuration has to cater for. Therefore, in a specific company situation, the four strategic roles of the supply chain may not have equal weight. Yet, any role cannot be neglected, as it presents the company with important supply chain dilemmas, the reconciliation of which may turn into competitive capabilities. As they may already have become apparent, the strategic roles ask for different organizational working modes and put different capabilities to the fore of attention. For example, the Full scale operation requires a well-oiled business system, often based on many pre-programmed decisions, whereas the Prototype role relies on personal contacts and tacit knowledge shared by several individuals and/or companies.