Empirical Research

Researchers’ Perspectives on Supply Chain Risk Management

Daniel Dumke — Mon, 23 Jul 2012 12:36:48 +0000

The article on review today serves two distinct needs, by summarizing the current (2012) state of supply chain risk management.
The title of the article implies, that this is only a summary relevant for researchers. But this is not the case: of course there is also a short summary of current research and supply chain risk management, but a major part consists of two focus groups with practitioners and researchers, to define the current gaps in supply chain risk management.

The full length article can be found here.

Objective and methodology

There is a huge diversity in the topics, opinions, and research methodologies in the field of supply chain risk management. This is only natural, since research in supply chain risk management is still in a very early stage.

However it helps, once every couple of years, to summarize the current state-of-the-art and to categorize the most influential thoughts. These summaries help to focus research efforts and guide them within predefined bounds.

The goal of the authors is to examine the diversity in scope and research tools. For this the authors use three steps:

carry out direct observations of the researchers’ output (literature analysis);
gather evidence through surveys of focus groups of researchers aided by open- ended questionnaires; and
seek confirmation and additional information through a formal survey of a large group of researchers.

Results: diversity in scope and research tools

Figure 1 summarizes some of the most often used definitions for supply chain risk. The listing shows that there is still a large variety in definitions of risk.

Figure 1: Literature: Research Definitions for Supply Chain Risk (Sodhi, Son, Tang, 2012)

Figure 2 highlights different research methodologies which are employed in literature. As you can see a large proportion is focused on conceptual work.

Figure 2: Literature: Methods employed in Literature (Sodhi, Son, Tang, 2012)

Results: definition gap

The authors presented three open-ended questions to a practitioners’ focus group.
The first question was: what is supply chain risk management?
Figure 3 summarizes the results highlighting the fact, that most practitioners see supply chain risk management concerned mostly with the variations of supply and demand.

Figure 3: Practitioners: What is Supply Chain Risk Management? (Sodhi, Son, Tang, 2012)

The second question revolves around the classification of supply chain risk management in regards to other management areas. For most respondents SCRM is seen as a subset of supply chain management.

Figure 4: Practitioners: How does SCRM relate to SCM? (Sodhi, Son, Tang, 2012)

The answers to the last question shows that supply chain risk management is also seen as a subset of the enterprise risk management (ERM).

Figure 5: Practitioners: How does SCRM relate to Enterprise Risk Management? (Sodhi, Son, Tang, 2012)

Results: research survey

Building on the prior results, the authors conducted a small survey using seven questions/statements regarding the current state of supply chain risk research.
Figure 6 lists the questions.

Figure 6: Researchers Questionnaire (Sodhi, Son, Tang, 2012)

As you can see the questions are mostly normative, looking for answers on how things should be.

The results therefore are meant to close the gaps.
According to the survey supply chain risk should be concerned with dealing with unknown, disruptions/disasters/low probability, high-impact events (figure 7).

Figure 7: Researchers: Definition of Supply Chain Risk Management (Sodhi, Son, Tang, 2012)

There still is an agreement towards the process Gap, even though it is not as pronounced. The answers however are not very clear as well (better foundation of SCRM, closer industry collaboration and case-studies, better way to publish and share research).

Figure 8 collects the answers to the question on how the methodology gap should be remedied.

Figure 8: Researchers: How should the Methodology Gap be addressed? (Sodhi, Son, Tang, 2012)

The focus should still be on qualitative empirical work (case studies and similar methods) to gather more insights about supply chain risk management practices first.

Conclusion

Supply chain risk management has been around for about one decade now. Considering the complexities of the field it has had a good start up to now. It is only natural that there are still many missing pieces that have to be found and linked together to generate a comprehensive picture of supply chain risk in a descriptive and normative way.
Supply chain risk management is not always established as a distinct function/department in companies. So it seems that businesses do not agree on how to integrate supply chain risks into their decision-making processes. It shouldn’t come as a surprise that descriptive research in supply chain risk management leads to a huge variety of results.

If you want, you can learn more about Practitioner Views on Supply Chain Risk Management.

Reference:

Sodhi, M.S., Son, B-G., & Tang, C.S. (2012). Researchers’ Perspectives on Supply Chain Risk Management Production and Operations Management, 21 (1), 1-13

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An Empirical Investigation into Supply Chain Vulnerability

Daniel Dumke — Tue, 05 Jun 2012 06:30:56 +0000

One basic assumption in risk-aware supply chain design is the notion that the design of the supply chain actually has an impact on the vulnerability of the supply chain.
This question has been analyzed about six years ago in a broad empirical study by Wagner and Bode.

Method

The authors use a rather large sample of companies in Germany. Overall nearly 5000 supply chain professionals were asked to participate and 760 actually took part in the study.
Most sample companies had an industrial focus (72% versus service (20%) and trade (9%)).
This study is founded on a similar sample as this other study by Wagner and Bode analyzing the impact of risks on supply chain performance.

Model

The author focus on some supply chain design variables, which supposedly increase supply chain vulnerabilities. Figure 1 shows the assumed relationship between those drivers of supply chain vulnerability and three supply chain risk categories.

Figure 1: Concept: Relationship between Design and Risk

The authors propose the following hypothesis, which are then tested using the empirical data:

H1: The higher the drivers of supply chain vulnerability, the higher the level of demand side risk a firm faces.

H2: The higher the drivers of supply chain vulnerability, the higher the level of supply side risk a firm faces.

H3: The higher the drivers of supply chain vulnerability, the higher the level of catastrophic side risk a firm faces.

Results

The results show that all hypothesis are supported by the findings of the authors. However the design factors/vulnerabilities only explain part of the observed supply chain risks (7% for H1, 13% for H2, 3% for H3).
Demand side risk was influenced by strong customer dependence and strong supplier dependence.
Supply side risk was influenced by supplier dependence, single sourcing and global sourcing.
Lastly, catastrophic risk was impacted by the degree of global sourcing.

The authors draw the following conclusions:

First, the supply chain vulnerability variables in our model explain a rather small portion of the variance in the risk arising from demand side risk sources. It is a low but not astonishing value since the majority of the vulnerability variables focuses on the upstream supply chain. However, the results reveal that customer dependence increases demand side risk. This finding indicates that firms that are dependent on some customers are exposed to a higher risk of suffering from the detrimental effects of demand volatility and poor downstream information. This could be because of order batching or limited possibilities of demand pooling. […] This leads to the hypothesis that, beyond the investigated variables, there are several additional aspects both internal and external to the supply chain that determine a firm’s exposure to supply chain risk.

Second, risk derived from supply side risk sources is elevated by supplier dependence, single sourcing and global sourcing. Supplier dependence obviously amplifies the threat from poor quality, supply shortages, sudden demise of one of these suppliers, and poor logistics performance. Although this argumentation also applies to single sourcing, the single sourcing approach seems to be less hazardous than general dependence on some suppliers. This is because single sourcing is usually aligned with a closer relationship that might absorb some of the supply side risk.

Third, when it comes to risk from catastrophic risk sources it has to be taken into consideration that the sample data was collected in Germany which has been a very “calm” place with regard to disasters. Here, it is solely global sourcing that is a significant factor that exposes firms to higher risk from catastrophes. The implementation of a global sourcing strategy stretches the supply chain geographically which ultimately means more peril points for the information and material flow. The robustness and resilience of regional or national supply chains is usually higher. Surprisingly, the study shows that supplier dependence decreases the risk exposure to catastrophes. Again we would argue that this is because of lack in supply flexibility. Firefighting against the consequences of catastrophic events might be more successful with the ability to quickly adjust the supply.

Conclusion

I would argue that it is always hard to measure risk consistently in a qualitative study. People are likely to evaluate the same risk quite differently, which might lead to unclear results.
Furthermore the low impact of these specific design variables emphasizes the view that there are many more factors (internal and external) that impact the exposure to supply chain risk.

Reference:

Wagner, S.M., & Bode, C. (2006). An Empirical Investigation into Supply Chain Vulnerability Experienced by German Firms Erich Schmidt Verlag, 79-96

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Negotiation Strategies in Supply Chain Management

Daniel Dumke — Mon, 09 Apr 2012 11:01:28 +0000

Within a supply chain many supplier-buyer relationships exist. Even though supply chain management aims to take a high level view, these dyadic relationships form the basis of the supply chain and therefore should be the focus of a supply chain analysis.

The negotiation of the terms of these relationships defines the structure of the supply chain and can affect the power and profit distribution within the supply chain itself.

So, this week we’ll have a closer look at negotiations in the supply chain using a 2008 paper by Frederik Zachariassen.

Method

As usual the work starts with an overview on negotiation-related literature in supply chain management and more general cases. The author finds several sources dealing with supply chain related negotiations, but notes:

The amount of negotiation literature dealing with negotiation strategies in a [general] commercial, business relationship is sparse and lacking in empirical research as stated in the introduction.

Due to these conclusions the core method is set to a case study to analyze the negotiating strategies on a general, qualitative level.

Overall 25 interview- and 15 observation-hours were conducted with a focal company and their suppliers. All results have been anonymized and “the total hours of interviews were split up between interviewing purchasing personnel on site of the case company and interviewing suppliers that interacted closely with the case company”.

Two universal negotiation types emerge:

The distributive negotiation strategy is used by those negotiators, who believe that they and their counterpart have fundamentally opposed interests. As a result, negotiators believe that negotiations essentially can be described as win-lose situations, in which one should try to argue as aggressively and intensively as possible in order to convince the other party of price reductions, reduced delivery time, etc. In negotiation literature, it has been paralleled to one-off relationships, e.g. arm’s length relationships.

On the contrary, the integrative approach seeks to reconcile the parties’ divergent interests and provide both parties with joint benefits as an outcome of the specific negotiation. This approach emphasises the need for trust, mutual understanding, openness and a sense for empathy. As such, the integrative approach attempts to capture synergistic advantages in the form of mutual gains, and therefore believes in win-win relationships.

Results

Figure 1 shows the resulting framework to structure different supplier-buyer-relationships and the corresponding negotiation strategy. Overall four cases can be distinguished.

Figure 1: Relationship Type vs. Negotiation Strategy Matrix (Zachariassen, 2008)

In the ritual case a arms-length relationship is met with a distributive/competitive negotiation approach.

As an arm’s length relationship has relatively low-switching costs compared to the more strategic partnership, both parties expressed an indifference towards the other party when considering the outcome of the negotiation. That is, should the counterpart in the negotiations demand a too unrealisable price when compared with the market price, the negotiator would simply exit the negotiation and contact other suppliers/buyers. […] Here, buyers and suppliers would often manipulate numbers and statistics by presenting them in Excel spreadsheets that were at best confusing for the counterpart, only to be briefly presented in the negotiation setting. Graphs of for instance the recent price development of a standard good would often be manipulated, so that curves would be represented as flatter or steeper depending on the point, buyers or suppliers wanted to make.

In a exploitation setting greater integration is sought in a arms-length-relationship setting. This combination is seen very critical:

Buyers and suppliers remarked that taking the chance of being completely open and trusting towards the other party would be too high considering the risk of the other party exploiting the other party. One supplier remarked that that would at best be naive and would be inexpedient insofar as negotiating the best deal for their respective firms.

For the partnership approach the manipulation category represents the case where companies used more subtile techniques to enforce their competitive pricing ideas, example:

The buyers resided in a larger and more powerful firm that all things being equal had more negotiation power than the suppliers. During the participant observations of strategic partnership negotiations, it quickly became apparent that the buyers opted for a distributive negotiation strategy. It differed, however, from the arm’s length relationship one by employing more subtle, rhetorical devices in order to argue towards the suppliers that prices should go down. The subtlety lied in the buyers’ sophisticated approach to bargaining.

Lastly, in a partnership relationship a more integrative approach could be used, leading to a alignment categorization:

This was characterised as a more of a hypothetical situation by buyers and suppliers. That is, both would not opt for this approach when considering strategic partnerships. […] both buyers and suppliers would express concern regarding the disclosure of strategically relevant information, loss of power and loss of control in strategic partnerships due to a too open approach to negotiating and cooperating.

Conclusion

In this study the author analyzed two distinct negotiation approaches in supply chain management within two separate relationship settings.

Core implication of this practice-view on this questions is that neither in a arms-length nor in a partnership relationship, the strategic partnership negotiation strategies are considered as an viable option.

Of course, this is a quite interesting finding, which I would have loved to see questioned by the author a little bit more.

There are definitely case studies proving that a close and integrative relationship can work and on the other hand SCM literature often complains the lack of strategic integration on the supply chain but also the individual level.

So the real question is: what are the core drivers to an integrative negotiation approach and what are the external factors influencing this decision?

Reference:

Zachariassen, F. (2008). Negotiation strategies in supply chain management International Journal of Physical Distribution & Logistics Management, 38 (10), 764-781 DOI: 10.1108/09600030810926484

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Natural Disaster Management Planning

Daniel Dumke — Mon, 27 Feb 2012 14:44:45 +0000

After the 2004 tsunami, which heavily affected parts of Thailand and Indonesia, national and international disaster response was quick to support the affected regions.

Within several weeks of the disaster, approximately 400 international non government organizations (NGOs) were working in Indonesia alone providing basic assistance to the affected population.

Introduction to disaster relief

Several factors are necessary to improve response activities:

Preparedness in vulnerable regions, focussing on the “ability to respond quickly and appropriately”.

Local involvement. The local authorities and population directly involved in a disaster also are “in the best position to respond immediately” to a disruption.

Coordinated needs assessment, which also includes local groups ensures that support can be given on efficiently where required

Information sharing: “Emergency preparedness and response stages are driven by information”. Therefore sharing information between the disaster response parties is an important factor to improve overall outcome.

Logistics expertise and efficiency. Natural disasters often leave most critical infrastructure destroyed. To quickly support a large number of road access is of utmost importance. “Logisticians play an important role during the initial emergency period, they are often given limited authority to carry out their decisions. Frequently too, the assessment teams sent by humanitarian agencies to determine the needs of the affected population do not include logisticians. When logisticians are not included in the planning and decision-making process this causes delays in distributing relief.” Also local logistics expertise should be levered to further foster the speed of delivery.

Method

To build her disaster response model the author conducted several interviews with disaster relief managers involved in the 2004 tsunami. The goal was to assess the degree of execution of the above mentioned factors.

The interviews were carried out with of five NGO and government managers (figure 1).

Figure 1: Interviewee Sample Group (Perry, 2007)

The author summarized shortfalls in several key areas, including preparedness, local involvement and coordination (figure 2).

Figure 2: Disaster Response Shortfalls during the 2004 Tsunami (Perry, 2007)

Model

Drawing from the cumulative findings of the extensive pre- and post-tsunami literature analysis and the research findings, a hindsight model of effective natural disaster response management planning has been developed that is holistic and inclusive.

Figure 3 summarizes the relevant stakeholders and tasks.

Figure 3: Holistic Model for Effective Disaster Response (Perry, 2007)

Key elements include:

the rigorous monitoring and forecasting of natural disaster risk and mitigating the effects of an impending disaster, with risk reduction activity, natural hazard forecasting, adoption of viable early warning systems;

the building of awareness through high profile, broad-based disaster planning and awareness programs led by the local government and building networks and trust;

the addressing of demographic vulnerability, poverty and long-term, sustainable livelihoods;

the linking of all stages from forecasting, warning, mitigation, response and recovery to community development for resilience;

the incorporation of disaster management protocols, social policy, international support, training programs in logistics and response, simulation programs, empowerment of local communities and encouragement of improvisation in chaotic scenarios; and

assurances that there is adequate funding for all facets of natural disaster management and reducing risk, with suitable early warning systems and protocols, the development of a cadre of local expertise, particularly in the field of logistics as well as planning for a positive future for vulnerable communities.

Conclusion

I presented this model for two reasons. First, for its inclusion of the logistics aspects of humanitarian disaster relief efforts. Second, for the aspects which might be transferable a business situation.

The model especially highlights the need for quick information by extensive communication and local knowledge and capabilities to deal with disasters swiftly.

One caveat I would like to mention, even though the study and the model are backed extensively using related literature, I was missing a broader empirical foundation of the work. Five interviews (as in-depth as they may be) just are not enough to build a reliable model. Further testing is therefore required!

Reference:

Perry, M. (2007). Natural disaster management planning: A study of logistics managers responding to the tsunami International Journal of Physical Distribution & Logistics Management, 37 (5), 409-433 DOI: 10.1108/09600030710758455

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How relevant are Business Sciences to managerial Practice?

Daniel Dumke — Wed, 16 Nov 2011 12:05:00 +0000

There are only very few studies, which investigate the impact of research in business has on the actual research field.

In other fields the impact is easily seen. Without research there would be no modern medicine, without research there would be no buildings rising 800m and more.

But where would business be without research in the business and economics sciences?

For the part of operations management (OM) research the authors de-Margerie and Jiang (2011; “How relevant is OM research to managerial practice?”) analyze the key factors of literature to be relevant for practitioners.

Method

Impact on business oriented problems is a major criterion for many leading OM journals. To analyze the factors the authors employed an expert panel, made up from senior practitioners with cross-functional experience in international operations. Each of them was assigned with the task of reading and assess the ten most downloaded papers of the Journal of Operations Management.

The selected papers are listed in figure 1.

Figure 1: Top ten downloaded Papers (Journal of Operations Management; from 2004 to 2007; de-Margerie and Jiang, 2011; click to enlarge)

The assessment was based on seven criteria and graded on a five point Likert scale.

Descriptive relevance (e.g. “this article’s findings represent the ‘real world’”)

Goal relevance (e.g. “the article produces definitive results for decision making”)

Non-obviousness (e.g. “this article’s findings are just common sense”)

Timeliness

Readability (e.g. “this article is too abstract or complicated to be understood”)

Topic (e.g. “this article has a guideline that connects the reader to the problem and solutions”)

Usefulness

Results

Based on the direct survey data from practice [in this study], this research empirically derived a much smaller number of dimensions as replacements for the original variables of relevance while still retaining their original character.

The first finding is represented by the three criteria which are used by the practitioners to evaluate OM research.

“whether academic research is applicable or implementable to the practice;”

“whether academic research provides novel insights or new perspectives to management; and”

“whether academic research helps practitioners recognize their situation (i.e. communicates in recognizable ways).”

Furthermore the authors show that the evaluated ten papers did achieve high score in the second and third criterion.

Since these papers were primarily downloaded by other OM researchers, these papers should be important or relevant to other OM scholars’ research. Therefore, we may conclude that the academia of OM shares the second and third criteria of relevance with the practice.

The authors explain the lower scoring of the first criterion with the “the conflict between academic research’s goal and executive’s expectations. Practitioners expect to obtain immediate resolutions of current problems in specific operational contexts. In contrast, scholarly researchers ‘are required to reflect on the implications of innovations in an effort to distill knowledge that will stand the test of time and be applicable over a wide array of situations’”

Conclusion

This again was a very nice article.

Methodically, all steps are explained in detail and the assumptions seem reasonable.

Formally, the article guides the reader through its content without loosing the red thread from the research question to the presentation of the results.

Content-wise, the article touches interesting new grounds. Of course research should never follow practice blindly, so a gap between research and practice is only natural. For me, another interesting question on a broader scale would be, to what degree business research is transferred to practice.

Reference:

de-Margerie, V., & Jiang, Bin (2011). How relevant is OM research to managerial practice? International Journal of Operations & Production Management, 31 (2), 124-147

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Supply Risk Management from a Small Company's Perspective

Daniel Dumke — Mon, 14 Nov 2011 15:53:00 +0000

This study takes a closer look at supply risk management, but this time from the perspective of several small companies. This article tries to answer the questions what risks small company owners (SCOs) see and how SCOs mitigate those risks.

Method

A case study with eleven small companies was conducted. The companies had between 1 and 12 employees. Overall 26 interviews were conducted (90 minutes on average). In addition, two seminars were held, to present the preliminary results and discuss the findings. The seminars were also used to generate additional data and validate existing results.

Informants rarely used terms such as supply risk, risk management, probability reduction, supply chain or even purchasing. [… So] Instead of forcing risk management terminology upon informants, possibly provoking misunderstandings and incomplete accounts, the idea was to let the SCOs provide rich accounts of their purchasing and SCM practices in layman’s terms. In the dialogue information was sought out that allowed plausible interpretations of supply risk management practices.

Figure 1 summarizes some facts about the companies.

Figure 1: Facts on the Case Study Companies (Ellegaard, 2008; click to enlarge)

Risk mitigation approaches

From literature the author develops three types of supply risk management / mitigation activities, namely: increased knowledge, reduced probability and reduced impact (figure 2).

Figure 2: Risk Management Alternatives (Ellegaard, 2008)

Knowledge

Knowledge increasing practices were infrequent among the studied SCOs. They spend limited time and resources actively acquiring knowledge about suppliers and supply markets and therefore possessed limited information […]. Only one SCO interacted with suppliers often.

Probability reduction

Probability reduction had the highest priority in these companies. Elimination of severe risks formed the backbone of SCO practices. […] In order to eliminate certain severe risks, the SCOs sourced locally, exhibited source loyalty, and were careful not to reveal proprietary product knowledge to suppliers.

Effect reduction

None of the SCOs held reserve capacity and practiced mainly single sourcing, with the aim of tying up as few resources as possible. The very limited reserves left the SCOs quite vulnerable to certain types of risks. Any specific events with the potential to obstruct delivery capabilities of suppliers, such as a fire, take-over, bankruptcy, up-stream material shortages etc. could bring SCO production to a halt.

All results are summarized in figure 3.

Figure 3: Supply Risk Mitigation Approaches (Ellegaard, 2008; click to enlarge)

Lessons learned

Despite the autodidact and informal purchasing practices of

the studied SCOs, there may be much to learn from these practices, even for state-of-the-art purchasing/SCM departments. The SCOs specialised in a few supply risk management practices that seemed to complement each other well. The study suggests that effective supply risk management is not only about adopting a wide range of sophisticated risk reduction practices. The challenge may be more connected to finding the right mix of practices, which fits the available resources and is sufficient to secure against supply risks. Supply chain managers should realise that:

different supply risk management practices require different levels of expertise and resources;

only a limited number of potential supply risk management practices may be necessary; and

supply risk management means adopting the exact mix of practices that provides security.

Conclusion

This study provides some missing insights into risk management practices of small enterprises. As the author, I do think that there are still things even larger companies can learn from their mitigation strategies: Prioritization and focus of risk management activities which deem to be most effective with the given resources may be one of those.

Reference:

Ellegaard, C. (2008). Supply risk management in a small company perspective Supply Chain Management: An International Journal, 13 (6), 425-434 DOI: 10.1108/13598540810905688

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Supply Chain Flexibility in an uncertain Environment: exploratory Findings from Five Case Studies

Daniel Dumke — Mon, 07 Nov 2011 12:47:00 +0000

This is another look at flexibility strategies to reduce uncertainty in supply chains. This time from the point of view of five Chinese companies in the apparel industry.

Method

The authors use a case study to “illustrate and examine the different flexibility strategies adopted by supply chain participants as a result of different environmental uncertainties.”
The five companies cover different parts of the apparel supply chain. A garment and a fabric manufacturer (companies A and E, respectively), two trading companies (C and D) and a brand company (B). This diverse sample should enable the authors to make more general deductions from the generated data.
Figure 1 shows some relevant background information for the companies.

Figure 1: Case Study Companies (Yi et al., 2011; click to enlarge)

Results

The first questions revolved around the perceived uncertainties experienced by the participants. All companies mentioned that emergent orders, uncertainties about material cost and the aggressiveness of the competition are perceived as major uncertainties (figure 2).

Figure 2: Perceived Uncertainties by the Companies (Yi et al., 2011; click to enlarge)

Several different supply chain strategies were employed, a summary is displayed in figure 3.

Figure 3: Flexibility Strategies employed (Yi et al., 2011; click to enlarge)

The authors especially wanted to highlight the influence of different environmental aspects on the chosen strategies. No pattern emerged when analyzing which flexibility strategies are used for which uncertainties.
So next the authors examined the impact of the general level of uncertainty experienced by the companies and compared it with the supply chain flexibility level chosen.
The authors came up with a matrix (figure 4). Where they contrast SC uncertainty and flexibility. Companies D and B find themselves in the conservative corner while E, C and A employ a high level of flexibility to combat the uncertainties. From the interviews the authors also deducted the future positions of the companies A and B, which are indicated as A’ and B’.

Figure 4: Supply Chain Flexibility vs. Uncertainty (Yi et al., 2011)

Next the authors discuss their findings and reach four conclusions:

A low level of uncertainty in the supply chain leads to the adoption of a conservative flexibility strategy.
A high level of uncertainty in the supply chain leads to the adoption of an agile flexibility strategy.
An aggressive flexibility strategy can be proactively adopted through restructuring a firm’s operating system to reduce environmental uncertainties.
An aggressive flexibility strategy can be proactively adopted through creating new opportunities to improve a firm’s supply chain flexibility.

Conclusion

I like case study research, since usually you can gain some really genuine and new insights, in this case: What are other companies doing to contain uncertainty and how are they employing flexibility for that?

In this case I liked the paper a lot as well… up to the matrix. I don’t like matrices where the axes are not independent, because that’s not how you generate a matrix. Take the Growth-Share-Matrix, where you have the axis market growth and market share. The one is dependent on the market and the other on one company’s share in it. Relation to one another: Independent.
Here we have uncertainty on one axis and a strategy to reduce uncertainty on the other. So of course most companies would lie somewhere in the middle. So there is not much to learn from it. Of course there is not a one-to-one relationship, but anyway.

I had several more points to complain (number of interviews also only five, conclusions drawn are directly linked to their flawed matrix-framework and no quantitative measures to assess the flexibility and uncertainty levels).
But I still think the strategies mentioned from the interviews are still worth considering when choosing your own strategies.

Reference:

Yi, C.Y., Ngai, E.W.T., & Moon, K.-L. (2011). Supply chain flexibility in an uncertain environment: exploratory findings from five case studies Supply Chain Management: An International Journal, 16 (4), 271-283

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Matching Product Architecture with Supply Chain Design

Daniel Dumke — Wed, 19 Oct 2011 15:31:00 +0000

This review is about a preprint article which already has been accepted for publication by the “European Journal of Operational Research”. But since there is only a limited space for articles in each issue of the journal, final publication of the article is delayed.
One could now argue in a general note that this behavior also signifies a delay of the progress of supply chain research over all, with all its negative long term effects. Furthermore, in the days of the internet journals should not limit themselves to an artificial (article) limit, but see only the sky or in this case the number of quality publications as their limit.
But in this case I was able to gain access to an early copy.

Product design & supply chain management

I already wrote several times (1, 2, 3, 4) on how product architecture and supply chain design could be integrated, so this is not really a new topic. But it also touches a more integrative approach of supply chain management.

Building from the early models, where a supply chain could easily be defined by a handful of properties, supply chain models nowadays reach a new level of complexity. One of these extensions is the integration of supply chain activities into the product development process, which is supposed to yield (if we trust case studies like IKEA) enormous benefits in every performance aspect of the supply chain and ultimately the company.In the study reviewed Nepal, Monplaisir and Famuyiwa first develop a conceptual and mathematical model to integrate the supply chain design decisions into the product development process. In a second step this model is then tested using two case studies.

Model

The authors suggest an integrated three step process: 1) selection of product architecture, 2) evaluation of potential suppliers, and 3) optimal configuration of supply chain.

The first step includes the development of a generic bill of materials (GBOM) for every possible product architecture scenario. Figure 1 shows the GBOM for an example Product X.

Figure 1: Generic Bill of Materials for an exemplary product (Nepal et al., 2011)

This product design also leads to a similar generic supply chain structure which is shown in figure 2.

Figure 2: Corresponding Generic Supply Chain for Product X (Nepal et al., 2011)

The second step focusses on the identification and evaluation of available the supply chain participants. Necessary information, like production cost, lead-time and compatibility index has to be collected.
The compatibility index itself is developed by the authors as well and contains information on the compatibility of this potential supplier regarding the structural, managerial and financial dimension. Each of the dimensions is then weighted to generate the complete index. Since the compatibility of the future suppliers is hard to judge before the product is even designed, the authors employ fuzzy logic, allowing them to use ranges for each of the compatibility indices instead of fixed numbers.

The last step aims to find the optimal supply chain configuration. This is done for each product architecture scenario by using a linear goal programming model, where total supply chain cost are minimized while maximizing the compatibility between the partners.

Case studies

There are two case studies, one on bulldozer assembly and manufacturing and the other on an automotive climate control system. I will only talk about the first case since I found it more interesting.

For the case the authors exercise the three steps mentioned above. First they design two different product architectures (integral and modular architectures; figure 3) and the corresponding generic supply chain networks (figure 4).

Figure 3: Case Study: Generic Bill of Materials for Bulldozer Manufacturing (Nepal et al., 2011; click to enlarge)

Figure 4: Case Study: Generic Supply Chain Network for Bulldozer Manufacturing (Nepal et al., 2011; click to enlarge)

Lastly, the authors collect the necessary information of the potential suppliers regarding cost, lead-time and ranges for the compatibility index for two different process options:

Two alternatives are considered for each node. If the node is a procurement stage, the first alternative represents the standard supply option (that is, the existing procurement arrangement). The second option represents a consignment option where the supplier is responsible for providing immediate delivery to the bulldozer line. Similarly, for the assembly node, the first option represents the standard manufacturing method while the second option represents an expedited alternative that corresponds to a supplier who has invested in process improvement efforts in order to decrease its supply lead-time.

After solving the model in the next step, the authors conclude:

In the majority of the bulldozer supply chain stages for a modular architectural design, option two has been selected. While it is more expensive than option one, option two has a lower production lead-time and higher compatibility ratings for all stages because its modularity increases the degree of dependency, based on relative costs of inputs, between supply chain nodes.

Compared with base results, where only supply chain costs are considered, this model delivers a solution which performs (slightly) worse in cost (+0,36%), but on the other hand has the potential to deliver a much more balanced and robust solution considering also compatibility issues.

Conclusion

I found the paper to be a great read and I cannot add anything else to the issues the authors already detected and mentioned in their own conclusion:

Risk factors are missing in the model (e.g. random service times)
Additional factors like sustainability and flexibility should be considered
It is very obvious that this is again a supply oriented model, so it would be great to see how distribution network decisions behave when including product design decisions (since the customers might also change depending on the product design decisions)

Reference:

Nepal, B., Monplaisir, L., & Famuyiwa, O. (2011). Matching Product Architecture with Supply Chain Design European Journal of Operational Research : 10.1016/j.ejor.2011.07.041

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Research Critique: Determinants of Strategic Supply Chain Risk Management

Daniel Dumke — Wed, 17 Aug 2011 12:44:00 +0000

In 2010 Lassar et al. did a grounded theory study (see here for more information on techniques for theory creation) on the question of what the determinants of strategic supply chain risk management might be?

Methodology

The authors used a grounded theory approach to validate their theory. GT consists of a series of interviews where each subsequent interview may build on the last one with the goal of exploring a concept from different angles. In the case of Lasser et al. the focus was on high tech companies located in Mexico. As a first step the authors build their conceptual model for the determinants of strategic supply chain risk management based on literature. They hypothesis that supply chain risk management is built on resources available for the company (resource based view), the network and performance criteria.

Resources include organizational systems and processes, information, knowledge, capabilities, partners and alliances, and other assets.

Based on this theoretical background the researchers conducted 24 interviews within eight different companies.

Results

The interviews lead to a multitude of answers in five key areas:

How do firms conceptualize and define supply chain management?
What kind of processes and systems do supply chain participants utilize in their enterprises?
How committed is senior management to SCM?
What role does performance play in supply chain management?
What specific risk management actions do companies employ?

Our qualitative assessment of the sample firms – multinational buyers along with suppliers – confirms that a symbiotic triad of resources, networks, and performance are key determinants of strategic risk management in supply chains in one important emerging market – Mexico.

Critique

I seldom use a critique section for an article, since usually I only present articles which I deem well written, reliable and interesting.
This study sounds very interesting at first, so I included it on my reading list, but during the evaluation process I came to the conclusion that I found it unpresentable. I really struggled with myself, but then after I continued reading it, I started to realize that this is a great chance for showing you some of the things I dislike in a scientific paper.

The concept proves to be very vague
The authors build a concept for the influences on supply chain risk management from literature. The result: SCRM is based on resources, the network, and performance. The authors do discuss shortly what they subsume under these terms. But what is conspicuously missing is the reasoning for taking exactly these? Why not go with strategic choice and argue that SCRM is defined by the managers and their environment? Why is it the network and not the type of supply chain which defines the SCRM? As a result, already the first chapter leaves us with more questions than we had before.
No pictures
Even though I am a fan of nicely written paragraphs where a picture of what the author meant just pops into your mind, I also know that this writing-only method is not for everyone. So it is always a good idea to support a concept with a picture containing the key elements and their relations to each other and with their “environment”. For example the authors could have used a three column layout with SCRM on top and the determinants underneath? At least if its that what they meant.
Methodological discussion
Building on the definition of their framework the authors claim to use grounded theory to validate their concept. Sadly, there is no real description of the authors’ understanding of the methodology so I can only analyze the context.
To my understanding there are two different streams within grounded theory. One (my feeling is, that it’s the more popular one) particularly states, that grounded theory is based on the idea, that the theory has to develop itself during the interviews. This is done to prevent a very important thing: Bias. Every human interaction is somehow biased. So questions during an interview, not only contain the content of the question but also prejudice and believes of the sender of the question. And of course the interviewees not only respond to the content of the question but also the prejudice and biases. In this case the authors already had their completed framework in mind, and were supposedly steering the conversations towards their framework, of course confirming their preexisting believes. Interestingly I do not think you can find this bias easily in the results, but this does not mean it is not there.
Results
Even worse then a bias in the result, is the presentation of the results themselves. The goal of the interviews was to validate the preexisting believes of the authors (that’s is bad as explained above). But if I wanted to validate the concept, why not use this concept as a foundation for the outline of the discussion of the results. Why? I really have problems with seeing the correlation even between the headlines of their results (see above) and their concept? Some do correlate, but for example what does the “employment of risk management actions in a company” have to do with their concept of resources, network and performance. And in my point of view this gets worse the more you read the interpretations. So I am really asking myself: How could the authors really see their framework supported by the interviews?
Representativeness
Last and just a small addition: The authors rightfully state at the end that this study cannot be viewed as representative, since it only included a small sample of companies. So the authors imply that with a bigger sample (and the same method) it would be representative…? No! Grounded theory does not want to be representative, so this argument is just mute. The goal is instead to generate a valid (grounded) theory (not to validate a preexisting theory!), which can then be tested using other methods, like a survey.

Conclusion

I have to admit that I am not an expert on grounded theory either. So I may be wrong with the forcefulness with which I presented my opinion. But even if we abstract from the methodological aspects, the work can be summarized with two points:

Too little discussion of the methodologies and processes employed to generate these findings and
No obvious connection between their proposed concept and their own stated findings (or again too little elaboration).

The full study can be downloaded here.

Reference:

Lassar, W., Haar, J., Montalvo, R., & Hulser, L. (2010). Determinants of strategic risk Management in Emerging Markets supply Chains: the Case of Mexico Journal of Economics, Finance and Administrative Science, 15 (28), 125-140

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Supply Chain Risk Management in Financial Crises

Daniel Dumke — Wed, 03 Aug 2011 14:44:00 +0000

I am still abroad right now, but nonetheless I still want to keep the German share within the articles high. So I present to you the second article from German authors in just one week. On monday I already talked about Supply Chain Risk Management in the German Automotive Industry and so the second is today on how supply chain risk management is performed during a financial crisis.

The authors Constantin Blome and Tobias Schoenherr are both from the European Business School (EBS), one of only few privately owned German business schools. Their 2011 paper is on supply chain risk management during times of a financial crisis.

Methodology

The authors employ a case study design for two reasons:

Only little is known of the consequences of a economic crisis on supply chain risk management (and there are no other studies concerned with this topic).
Case study research is furthermore a good method to study complex phenomena.

The authors decided to focus on the procurement departments of eight participating companies, overall conducting 25 interviewees.

Results

From the interviews the authors inferred propositions in four categories:

Impact on SCRM

The effect of the financial crisis on SCRM process (risk identification, analysis, mitigation and monitoring) has been analyzed. The interviews indicate that the tasks within SCRM process are shifting towards a more comprehensive approach concerning all aspects.

A typical statement concerning the risk analysis is:

Before the financial crisis we didn’t have a very professional assessment of our suppliers’ financials; now we have a very good system working

Risk mitigation vs. acceptance

The authors differentiate two major strategic orientations: Risk acceptance and risk mitigation. They were able to identify two company classes: direct spend (most purchases are raw materials and input products; especially in manufacturing companies) and indirect spend (mostly service companies).
Based on this classification the authors found:

The current financial crisis fosters especially a risk acceptance (as opposed to mitigation) approach in direct spend firms. Indirect spend firms are already more focused on risk acceptance approaches and have not changed their behavior.

Service vs. manufacturing

Next the authors analyze the findings concerning the relationship between manufacturing and servicing companies and conclude:

Overall, we found that the emphasis on the four risk management processes was greater among firms procur- ing predominantly direct materials (manufacturing firms) than for firms producing primarily indirect items (service firms).

Enterprise risk management and SCRM

Finally the author analyzed the relationship between supply chain risk management and enterprise risk management and find that:

“The financial crisis has not influenced the relationship between ERM and SCRM.”
“The existence of an ERM system is a major antecedent for the implementation of a SCRM process.”

Conclusion

Case study research is meant to be the qualitative foundation for further in depth analysis using other methods like surveys, simulation or similar. Blome and Schoenherr deliver exactly this basis, by stating their results in the form of four propositions.

Reference:

Blome, C., & Schoenherr, T. (2011). Supply chain risk management in financial crises – A multiple case-study approach International Journal of Production Economics

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Supply Chain Risk Management in the German Automotive Industry

Daniel Dumke — Mon, 01 Aug 2011 10:01:00 +0000

While cleaning out some of my blog directories, I just found this article in my backup repository, I already wrote it over a year ago, but it still seems relevant. So without further ado: In their 2009 article Jörn-Henrik Thun and Daniel Hoenig from the Industrieseminar Mannheim (link only in German), present their research on Supply Chain Risk Management within the German automotive industry. Their goal was twofold: a) to identify supply chain risks and risk drivers, b) investigate measures for dealing with SC risks and their impact on SC performance.

Methodology

Therefore the authors conducted a survey with 67 companies from the automotive supply chains in Germany. Respondents were primarily managers in charge of supply chain management or logistics. The answers were measured using a five-point Likert scale (from “strongly disagree” to “strongly aggree”).

Results

Based on the results of the survey the following hypotheses could not be rejected and therefore can be seen as validated:

Supply chains are susceptible to supply chain risks

Complexity (eg. globalization) and efficiency (eg. outsourcing) of the supply chain are key drivers for supply chain risks

Internal supply chain risks have a higher likelihood to occur than external risks

Companies with a high degree of supply chain risk management show a higher performance than companies with a low degree

There is a difference between companies using preventive risk mitigation instruments contrary to those using reactive instruments in terms of supply chain performance

The most interesting finding in my view is that companies using preventive instruments show higher values in terms of increased flexibility, decreased stocks, reactivity, and cost reduction, whereas the group using reactive instruments shows higher average values concerning a reduction of the bullwhip effect and external disruptions resilience. And overall: companies implementing supply chain risk management strategies show higher performance values than others.

One of the hypothesis (“External SC risks have a greater impact on the SC than internal risks”) has been rejected. The authors explain this result as follows:

The […] result might be influenced by the fact that managers estimate the impact of incidents with a higher likelihood stronger since they implicitly reevaluate the impact based on its expectation value. However, the results indicate that most of the risks supply chains are confronted with arise from inside the supply chain. This indicates that managers are able to act on these risks directly.

Conclusion

Surveys are always subjective, so results from this survey might not be true for any other sample taken.

But the logic of the hypothesis might be skewed as well. The problem with correlations is that they work both ways. For example the hypothesis “Companies with a high degree of supply chain risk management show a higher performance than companies with a low degree” can also be interpreted the other way: Companies with high performance are more likely to implement risk management measures. And this is an especially interesting one, since to my knowledge it has not yet been analyzed.

Here is some more food for thought:

External risks in this sample of companies has been perceived as not more impactful than internal risks. So this might be true or it might be based on a skewed perception. What do you think? And if it’s true, does this hold true for all industries?

Performance gains are realized if we conduct supply chain risk management. What are the most effective strategies? What strategies are you following at the moment (reactive or preventive)?

Reference:

Thun, J., & Hoenig, D. (2009). An empirical analysis of supply chain risk management in the German automotive industry International Journal of Production Economics DOI: 10.1016/j.ijpe.2009.10.010

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Impact of Disasters on different Sectors

Daniel Dumke — Wed, 13 Jul 2011 11:04:00 +0000

I already wrote about different effect supply chain disruptions can have on a focal company and its stakeholders. Now I found another interesting article dealing with the impact of different disasters on different industries within the supply chain.

Method

The authors (Altay and Ramirez) use a exploratory empirical study to analyze the effect of over 3’500 historic natural disasters within over 150’000 firm-years.
From the literature analysis three hypothesis were generated:

H1: A firm’s financial leverage increases in response to a disaster.
H2: A firm’s TAT (Total Asset Turnover) will decrease in response to a disaster.
H3: A firm’s OCF (Operating Cash Flow) will increase in response to a disaster.

Two disaster databases were used to gather the relevant data about the disruptions. Three proxies for the overall effect of the disaster are used: ratio of damage over GDP, affected people by the disaster (per capita) and a composite measure based on the disaster count, affected population, the death toll and the damage.
These were then correlated with the financial leverage, the TAT and the OCF.

Results

Regarding their hypothesis the authors follow for all industries

“Results using our monetary proxy suggest a positive and time-persistent correlation between financial leverage and disaster damage for all sectors with the exception of extractive industries.”
“In general, firms become less efficient in managing their assets (lower sales as a percentage of assets) after a disaster.”
“When we turn to our composite measure, we see support for the negative impact of disasters on firm cash flows.”

The results are nonetheless not consistent over all proxies (damage, people affected and composite), so the authors follow rightly, that the correct proxy has to selected very carefully.

The authors go further in their data analysis and find that…

…damage by windstorms and floods seem to be dramatically different from that of an earthquake, providing evidence against the all-hazards approach.

furthermore:

We also show that the impact of floods on TAT of a firm is dependent on the firm’s position in the supply chain. We found that while upstream partners enjoy a positive impact, downstream partners have to plan for the opposite.

That last finding is quite interesting, since it shows that floods (and windstorms) seem to be disruptions which can be planned for and stock is accrued in advance and sold successfully.

Conclusion

The authors also take some effort to support the robustness of their results. The overall results remain unchanged after removing:

larger countries (with potentially more disruptions by which not all companies are affected equally),
G8 countries, and
countries with higher insurance consumption.

Overall I found this article kind of hard to read. Probably because the reading flow is disrupted by several multiple page tables which could have been moved to the appendix.
But still the article takes a new approach to evaluating the effect of supply chain risks on companies and industries and brings some interesting findings.

Reference:

Altay, N., & Ramirez, A. (2010). Impact of Disasters on Firms in Different Sectors: Implications for Supply Chains Journal of Supply Chain Management, 46 (4), 59-80

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Current Evolution of Supply Chain Management

Daniel Dumke — Mon, 02 May 2011 13:17:00 +0000

One very important part of supply chain management research is the historical analysis of supply chain practices and properties over time. Just recently I published an article on the development of supply chain strategies over the course of 20 years.
Today I want to highlight a more short term, nonetheless interesting analysis done using two surveys from 2003 and 2004 on the current state and evolution of supply chain management practices.

Surveys and Foundation

The results of the first survey were published in 2003. The 2004 study was meant as a follow up. Overall 209 participants mainly from North America and Europe from more than 20 different industries took part in the survey.
A major part of the survey consists of rating the performance in different areas of supply chain management (eg. purchasing, transportation, planning, inventory management…) based on a supply chain maturity model (figure 1). The differences between the results were then analyzed.

Figure 1: Supply Chain Maturity Model (Poirier and Quinn, 2004)

Results

There is some identifiable progress between the two years in terms of the maturity level. Figure 2 shows the results of the self assessment for 2004. The authors state that especially the high tech sector and retail show a high percentage of level 4 and 5 companies. Comparing 2003 with 2004 the results suggest a forward movement in all key areas except for the supply chain software and technology bit.

Figure 2: Results Maturity Level in Supply Chain Functions (Poirier and Quinn, 2004)

Another part of the surveys was the strategy development within the companies. The authors conclude that

overall strategy development continues to be a weak spot among the responding companies.

Especially due to a missing link between supply chain and business strategy. In 2004, over half of the companies reported to have no supply chain strategy. Only 25% agreed that their SC strategy is integrated into the business strategy. But still, the strategies are only shared with their entire supply chain by about 15%.
The authors infer that short term cost-reduction efforts still seam to be the major focus of supply chain management. This is also confirmed by a greater focus of the companies towards supply chain initiatives on reducing cost than increasing revenues.

The authors see the following hypothesis confirmed:

Companies and industries will vary widely in terms of their evolution agains the supply chain framework
Impacts of supply chain initiatives will be significant and well-documented, particularly with regard to cost savings and revenue improvements.
Companies will adopt technology solutions before improving their related processes, thereby foreclosing on the technology’s full benefits
Inter-enterprise collaboration will be a mark of the advanced firms
Customers will be the driving force behind many supply chain initiatives

Conclusion

Long term historical supply chain research can be a key in understanding the political drivers behind supply chain development within a company. And of course improving as a result. The research presented here is a good start in this direction but should be supported by a longer term continuity.
To be honest I was surprised that this short term view even spotted significant differences, since reaching another level in this maturity model usually would take more than one year (this then again shines back on the validity of the sample). And sadly I was not able to find a follow up article from one of the last years which repeated the study.

As always with questionnaire based surveys, especially those which have to be filled without guidance by one of the researchers, the results may heavily be biased by the interviewee and his environment.

From the deduction particularly the third hypothesis (“companies will adopt technology before changing processes”) seems to be hard to confirm in a survey alone and the presented evidence looks weaker than the others.

Reference:

Poirier, C.C., & Quinn, F.J. (2004). How are we doing – A Survey of Supply Chain Progress Supply Chain Management Review, 8 (8), 24-31

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supply chain management

empirical research

Practitioner Views on Supply Chain Risk Management

Daniel Dumke — Mon, 18 Apr 2011 11:14:00 +0000

In 2005 Uta Jüttner was researcher at the Cranfield University, UK, especially renowned for several minds working on supply chain risk management, like Martin Christopher or Denis Towill.

Key in understanding this field of research is to make an inquiry into how supply chain risks are managed in business environments. Jüttner first laid grounds for this by some conceptual work, I introduced here a while ago

Methodology

Jüttner used an exploratory, quantitative survey. They selected 1700 members of the UK Chartered Institute for Logistics and Transport (CILT), with a response rate of 8% 137 managers replied to the survey request.

Furthermore six focus group discussions were held, with seven or eight members.

Those methods were used to answer the following questions:

How well are supply chain risks recognized across a network?

What is the current state of practice in SCRM?

What are the perceived critical issues of SCRM implementation?

Figure 1: Industry Position of the Participants (Jüttner 2005)

Participants

Figure 1 shows the industry of the participants, whereas figure 2 shows the position within the supply chain.

Figure 2: Position within the Supply Chain (Jüttner 2005)

Results

The participants in the focus groups emphasized the importance of the network effects of supply chain risk sources. This importance was also reflected in the survey, where there was a statistically significant correlation between the effects of specific risk sources (like the foot and mouth disease outbreak) and the effect on ones own organization, the suppliers and customers. So those risks are not only affecting one supply chain partner, but often the whole network.

The next analysis focusses on the current state of the practice in SCRM – tools an processes, depth of understanding and business continuity planning. Jüttner concludes:

The findings do not reveal whether this leaning towards less formalised processes and tools is caused by a lack of understanding and/or from a lack of time commitment and discipline emphasised in the following quote. […] The results also show that among the organisations surveyed, a joint approach to managing risks does not seem to be widespread.

The research also reveals some critical issues in supply chains, which can be found in figure 3.

Figure 3: Critical Issues in Supply Chain Risk Management (Jüttner 2005)

Conclusion

As in many other studies like this one by Zsidisin, Jüttner’s study shows that supply chain risk practices are mostly understood but not very often used. These issues are also reflected in the open research question, with which the article concludes:

What are the motivators or inhibitors for companies to share risk related information?

Which risks are accepted by companies as shared supply chain risks?

How can the risk performance trade-offs in supply chain strategies be analysed and minimised?

How can the implementation of SCRM processes be organised within and across companies?

Reference:

Jüttner, U. (2005). Supply chain risk management: Understanding the business requirements from a practitioner perspective The International Journal of Logistics Management, 16 (1), 120-141 DOI: 10.1108/09574090510617385

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Effects of Process Maturity and Uncertainty on SC Performance

Daniel Dumke — Mon, 31 Jan 2011 16:16:00 +0000

Process orientation may or may not be a very hip topic right now. Nevertheless effective processes are a foundation for company performance. Lockamy, Childerhouse, Disney, Towill and McCormack (2008), analyze and explain the impact of process maturity and uncertainty on supply chain performance, the full paper can be obtained here free of charge.

In close collaboration with several businesses they conducted an empirical study on this topic, which I present in the following.

Business Process Orientation and Quickscan

Business process orientation can be described using the dimensions process management, process jobs and process view.

Process management & measurement means that the company is using metrics on aspects of the process such as output quality, cycle time, process cost and variability, in contrast to traditional accounting measures.

Process jobs focus on processes as opposed to functions, and are cross-functional in responsibility.

Finally, process view is the cross-functional, horizontal picture of a business involving elements of structure, focus, measurement, ownership and customers.

Relationship between Process Capabilities and Maturity (Lockamy et al., 2008)

The authors used the Quick Scan methodology with over 20 different supply chains. It consists of the following four methods: questionnaire analysis, process mapping, semi-structured interviews, modelling from numerical data.

Each quick scan took about two weeks at the site of the client and resulted in: a current status of the organization and the supply chain, evaluation of the maturity of its practices and processes and its ability to meet current and future customer needs, furthermore details on the management of uncertainty and interfaces beteween these areas.

Supply Chain Maturity and Uncertainty

Supply chain maturity is described here using five cumulative levels:

Ad Hoc, marks an unstructured supply chain with badly defined processes. Typical are no process measures and few “process jobs”.

Defined, stands for a level where processes and the supply chain has been defined. Process performance is measured sometimes.

Linked, describes a level where supply chain management jobs have been established and performance measures are conjointly evaluated with clients and vendors.

Integrated, traditional functions beginn to disappear, supply chain measures and management is embedded into the organization. This leads to reduced SC cost.

Extended, collaboration is routine, competition is based on a multi-firm supply chain.

Supply Chain Management Maturity Model (Lockamy et al., 2008)

Supply chain uncertainty is defined similar to Christopher and Peck (2004) and devided into process, control, supply, demand uncertainty. Based on other empirical study it can be stated that:

Supply chain uncertainty significantly contributes to poor customer service levels, excess inventory, long lead times, increased quality inspections, and bureaucratic decision-making processes.

Results

After collecting all data during the quick scan on the process maturity and experienced supply chain uncertainty levels the author drew the following conclusions:

Reductions in supply chain uncertainty can be achieved by increasing the maturity levels of processes employed within the supply chains

By increasing supply chain maturity levels and by correspondingly reducing uncertainty, firms can improve overall supply chain performance

Levels of maturity in the area of process structure and jobs can significantly reduce the level of control uncertainty within supply chains

Reductions in demand and control uncertainty can be achieved by increasing the maturity levels of process measures utilised within supply chains

Process Maturity vs. Supply Chain Performance (Lockamy et al., 2008)

Conclusion

One would think that better processes lead to better supply chain performance. But it is hard to objectively measure the maturity of a specific process. How do you grade them. For example maybe a process is documented, but to which level of detail and how are current is it? There are processes that work perfectly without having a process chart available which documents the exact interfaces.

So evaluating processes is always an extremely subjective task. I trust the reputation of the participating author that they used all due diligence necessary. Nevertheless it would have been great to see more details on how the evaluation has been conducted.

Reference:

Lockamy, A., Childerhouse, P., Disney, S., Towill, D., & McCormack, K. (2008). The impact of process maturity and uncertainty on supply chain performance: an empirical study International Journal of Manufacturing Technology and Management, 15 (1) DOI: 10.1504/IJMTM.2008.018237

Christopher, M., & Peck, H. (2004). Building the Resilient Supply Chain The International Journal of Logistics Management, 15 (2), 1-14 DOI: 10.1108/09574090410700275

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