Designing Supply Networks in Manufacturing Industries

Read Sections 1 and 2 of this article. The study investigates how automotive original equipment manufacturers (OEMs) design supply networks. In Table 2, notice how personal ties and contractual, transactional, and professional network ties play a role.


Faced with a changing business environment in which the coordination of the complex global networks involved in a firm's activities is becoming a prime source of competitive advantage, more supply chain management (SCM) researchers have focused on the simultaneous interactions among multiple supply chain entities within the supply network, rather than searching for dyadic or triadic ties between one original equipment manufacturers (OEM) and its immediate supplier(s). Network thinking and analysis were originally regarded as a subtype within the general framework of structural sociology. In certain respects, the field of sociology viewed the emergence of networks - the collection of interpersonal ties (e.g., kinship, friendship, communication, co-membership, etc.) - as a social and psychological phenomenon occurring among non-predetermined individuals through face-to-face conversations. In business settings, however, these networks do not spontaneously emerge from face-to-face interaction among non-predetermined individuals; rather, corporate managers strategically orchestrate these relationships by acting as network architects who designate the member companies of the network and its objectives. In this vein, business academics have predominantly explored how a firm can manage its portfolio of multiple simultaneous alliances. Yet an important question still remains unclear: "What determines different network architectures"; in other words, what are the strategic antecedents of network properties? Working from a strategic network perspective emphasizing the importance of network design in achieving a firm's strategic objectives, Doreian hints at the existence of antecedents of network architecture by asserting that the first principle of network formulation is that "networks have instrumental character for network members as these members have structured goals and some goals are achieved through network choices".

In the above vein, SCM researchers and practitioners have also conjectured the existence of antecedents for heterogeneous supply network architectures. For instance, facing a turbulent business environment, firms need to build and maintain multiple supply bases which are "the portion(s) of the (bigger) supply network that is within the managerial purview of the focal company". While it is obvious that the strategic network perspective should be considered an integral component of theory in SCM because researchers consider multiple entities commonly composed of large numbers of firms from multiple interrelated industries, empirical SCM research has confined itself to simple descriptions of supply network characteristics. Without considering the possible antecedents of network formulation, studies may give misleading answers about how different supply networks across various contexts should be managed. Goal conflicts are also more likely to arise in a supply network setting that essentially consists of multiple tiers of legally separate profit-making organizations with their own strategic goals; in other words, an OEM cannot attain supply chain success without deliberately designing its entire supply network in accordance with different strategic intents. Therefore, in exploring supply network phenomena, it is reductive to rely on the sociological viewpoint, which characterizes networks in terms of spontaneous and informal face-to-face conversations among non-predetermined individuals. Rather, a supply network should be viewed as a systematic outcome which is intentionally and strategically designed, implemented, and maintained in service with the OEM's strategic intent(s).

In line with this argument, this study attempts to address a theoretical and empirical gap in supply network research by exploring the unknown strategic antecedents of different supply network architectures. Specifically, it looks into the following questions:

(1) Are an OEM's strategic intent choices associated with supply network architecture; and

(2) If so, what differential effects do those strategic intents have, and which architectural properties of the supply network are effected? To categorize strategic intents, this study borrows from Fisher's supply chain design considerations where strategic intent is categorized by focus on cost leadership or market responsiveness. Drawing upon a unique dataset which allows analyses of multiple directed valued supply networks, this research sheds lights on the unresolved question of the supply network antecedents in a directed valued network setting and, consequently, offers a strategic supply network perspective. The remainder of this study is structured as follows: Section 2 provides the theoretical background and develops the hypotheses; Section 3 reviews the data, measures, and research methods used to test the proposed hypotheses; Section 4 provides the key results and interpretations; Section 5 presents the results of additional field investigations which provide further insights into the quantitative and qualitative findings, and is followed by Section 6 that discusses the contributions of this research and directions for future work.

Source: Myung Kyo Kim and Ram Narasimhan,
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