categorization

Types of Supply Chains

Daniel Dumke — Mon, 28 Nov 2011 15:59:00 +0000

As a good book with current research on supply chain management I often recommend Supply Chain Management and Advanced Planning: Concepts, Models, Software, and Case Studies, edited by Stadtler and Kilger. In this review I refer to chapter 3 of that book, which goes into the details of different types of supply chains.

The understanding of the specific types of supply chains is especially useful from a viewpoint where multiple supply chains are analyzed. This could be within a larger company with several different supply chains or a consultant or researcher who wants to tailer strategies to reduce risks for a specific type of supply chain network.

Structure

The chapter is conceptual in nature and prescribes supply chain attributes which may be functional or structural in nature. As the last part a consumer goods and a computer assembly supply chain from a previous case study are characterized according to that scheme.

Functional attributes

The functional attributes fall into four categories: procurement type, production type, distribution type and sales type (figure 1).

Figure 1: Supply Chain Typology: Functional Attributes (Meyr, Stadtler, 2008)

Structural attributes

The structural attributes define the topography of the supply chain and the integration and coordination. They are summarized in figure 2.

Figure 2: Supply Chain Typology: Structural Attributes (Meyr, Stadtler, 2008)

Case: consumer goods

Using the data from a case study the authors then select the parameters of a typical supply chain in the consumer goods industry. Figure 3 shows the supply chain’s distribution network, starting with the factories, the central and regional warehouses and the trans-shipment points (CW, RW, TP) and ending with the retailers.

Figure 3: Case Study: Consumer Goods (Meyr, Stadtler, 2008)

From the case study the authors select the following functional and structural attributes of a typical consumer goods supply chain (figure 4).

Figure 4: Case Study: Consumer Goods Supply Chain (Meyr, Stadtler, 2008)

Case: computer assembly

Another case study unravels the typical properties of a supply chain for computer assembly (figure 5).

Figure 5: Case Study: Computer Assembly (Meyr, Stadtler, 2008)

Conclusion

Analyzing the strategic properties of supply chains is also quite important to my own research as well, and I find the selection of the different attributes in this chapter quite intriguing, even though some of them might be too far on the operational level.

The application of such a framework on the other hand requires a lot of care, since the parameters have to be analyzed and applied equally for each supply chain. Especially in the case of a generalization, where a “typical” case should be described, it is, in my point of view, necessary that the foundation of these common denominators are clearly described, a feature which is missing in the chapter completely.

I also doubt that it is possible to deduce the properties of an average supply chain from a singular case study at all. So one has to ask if the right method has been chosen for this chapter.

Nonetheless, overall I do think the categories which have been suggested can be very useful to analyze and differentiate supply chain types.

Reference:

Meyr, H., & Stadtler, H (2008). Types of Supply Chains Supply Chain Management and Advanced Planning, 65-80

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Categorization of Supply Chain Risk and Risk Management

Daniel Dumke — Mon, 16 May 2011 14:13:00 +0000

Several questions I receive concern the very basic elements of supply chain risk management. Since reading “Categorization of Supply Chain Risk and Risk Management” by Norrman and Lindroth (2004) I often referred to it, to describe the different aspects.

Framework

Norrman and Lindroth suggest a three dimensional framework to analyze different supply chain risk management issues (figure 1). The dimensions are:

Unit of analysis, describing the levels which are affected by this issue (more local to the company or affecting the whole supply network)

Type of risk or uncertainty, describing if the issue is operational or strategic

Risk and business continuity management process, which shows the stage within the risk management process

Figure 1: Supply Chain Risk Management Framework (Norrman and Lindroth, 2004)

The framework can be applied to many supply chain problems, an example of which can be found in figure 2.

Figure 2: Application of Supply Chain Risk Management Framework (click to enlarge; Norrman and Lindroth, 2004)

Definition of SCRM

Supply chain risk management can be defined as,

… to collaboratively with partners in a supply chain apply risk management process tools to deal with risks and uncertainties caused by, or impacting on, logistics related activities or resources’ (Norrman and Lindroth, 2002)

Since SCRM is dealing with more than the risk from a single company it takes a broader perspective than the traditional risk management approach. It also considers the rippling effects of events connected entities.

There are several definitions for risk. The Royal Society defined it in 1992 as:

risk is the chance, in quantitative terms, of a defined hazard occurring. It therefore combines a probabilistic measure of the occurrence of the primary event(s) with a measure of the consequences of that/those event(s)

An important dimension of risk is its contextual association, which can be strategic, financial, operational, commercial or technical:

Strategic: the risk of plans failing or succeeding, e.g. marketing strategy, changes in consumer behavior or political/regulatory changes.

Financial: the risk of financial control failing or succeeding.

Operational: the risk of human error or achievement, e.g. design mistakes, unsafe behavior, employee practices risk, sabotage.

Commercial: the risk of relationships failing or succeeding, e.g. business interruption due to loss of key executive, supplier failure or lack of legal compliance.

Technical: the risk of physical assets failing/being damaged or enhanced, e.g. equipment breakdown, infrastructure failure, fires, explosion, pollution, etc.

But the locational source of the risk is as important and can be divided into (a) externally-driven or environmental risk, (b) internally-driven or process risk, © decision-driven or information risk.

Risk Management Process

After highlighting some basic aspects of SCRM and risks in the supply chain context, the authors present their risk management process, which contains three elements: Risk Analysis and Assessment, Risk Management and Business Continuity Management (BCM).

The process starts with a listing of the risks affecting the supply chain using Fault Tree Analysis (FTA) and assessing the effects of those events in case they happen on the supply chain using Event Tree Analysis (ETA). As the second step, the decision has to be made if the risk can be accepted or if the risks can be mitigated by reducing the likelihood or impact.

Thirdly, one can argue if BCM (see figure 3) has to be part of a risk management process, nonetheless it is related, since it covers the aspect of planning for when an adverse event happens.

Figure 3: Business Continuity Management (Norrman and Lindroth, 2004)

Conclusion

The framework combines several important aspects of risk management in general and specifically supply chain management. It is therefore very suitable for an introductory purpose on supply chain risk management.

Reference:

Norrman, A., & Lindroth, R. (2004). Categorization of Supply Chain Risk and Risk Management Supply Chain Risk (Ed. Clare Brindley), 14-27

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Strategic Supply Chain Design and the Product-Relationship Matrix

Daniel Dumke — Mon, 14 Feb 2011 14:06:00 +0000

Yet another case study. This time on strategic network design. Why? A major problem for businesses is to find the right strategy for a given situation. And “right” here means optimal (for a given KPI).
Research question might be: Are there general categories which can be used to make different decision situations comparable? And if yes, what would optimal strategies under these circumstances be?

Definitions

Seuring (2009) tries to answer the first research question using case studies. From literature he defines the strategic decision fields to be

Product design/engineering (products or parts),
Plant and equipment (plant),
Organisation and management (processes),
Labour and staffing (people) and
Production planning and control (planning).

For Seuring the SC decisions best can be categorized using a two dimensional matrix with the supply chain at the y-axis and the product dimension on the x-axis. As you can see in figure 1 he does not focus on the supply / demand side (like eg. Fisher 1997), but in both dimension aims at the process view.
The supply chain dimension with can be divided into configuration and operation, the product dimension into the product design, production and return phase.

Figure 1: The Product-Relationship-Matrix in Supply Chain Management (Seuring, 2009)

Advantages

Overall this framework shows a sequential view on the strategic decisions in a supply chain. But it also supports dynamic adaptations to differing origins, eg: A redesigned product within an existing supply chain would only make the steps II (Product design) and IV (Process optimization) necessary; changes to the network, like adding a new supplier, would concern square III (Formation of production network).

Cases

Using five different cases Seuring goes through the above mentioned strategic decision categories. The cross-case analysis reveals that the categories may sometimes be overlapping (production and return phase), but the decision can still be sorted into one or the other category.

Conclusion

As described in the introduction, the next step would be to use these categories to find general, optimal strategies which should be followed in each of the parts of the matrix in figure 1.
But while I was reading the paper I realized that this might not be possible, since the steps are to vague for that.

Hence, the framework offers an alternative approach, which not only takes a look at the content of the decision, but also adds a process perspec- tive. Such a more dynamic approach allows structuring the related decision based on the relationship and the product life-cycle dimension.

So my question, how can you use this framework beside finding optimal solutions for network design problems?
One suggestion might be, to use the process nature of the framework and analyze the organizational relationships while going through the different decision phases.

What do you think?

Reference:

Seuring, S. (2009). The product-relationship-matrix as framework for strategic supply chain design based on operations theory International Journal of Production Economics, 120 (1), 221-232 DOI: 10.1016/j.ijpe.2008.07.021

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Segmenting Supply Chain Strategies

Daniel Dumke — Wed, 01 Sep 2010 06:05:00 +0000

For researchers and practitioners alike it is important to differentiate supply chain strategies.

Introduction

Not only Fisher (1997) showed, that there is no one-fits-all supply chain. But what are the criteria for should be used for supply chain segmentation?
Fisher focusses on on the product only, and he concludes, that a standard/functional product should be processed by a lean supply chain and innovative products by agile supply chains.

Segmentation Tree

Brun and Castelli (2008) base their research on an in-depth case study of the Italian fashion industry and a literature review. Their goal was to find a categorization for supply chain strategies and they found that strategies are segmented using a tree structure based on products, brand and distribution channel.

Segmentation Tree to categorize Supply Chain Strategies

Conclusion

I found two major drawbacks of this study:

The case study is located in an industry where supply chain management is viewed more as an subordinate function to marketing and communications, therefore it is quite unclear if these results also apply for other industries.
I am missing recommendations for the right strategy for different products, channels, etc.

Reference:

Brun, A., & Castelli, C. (2008). Supply chain strategy in the fashion industry: Developing a portfolio model depending on product, retail channel and brand International Journal of Production Economics, 116 (2), 169-181 DOI: 10.1016/j.ijpe.2008.09.011

Fischer, Marshall L. (1997). What is the Right Supply Chain for Your Product? Harvard Business Review, 105-116

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Topology of Supply Chain Risks

Daniel Dumke — Sat, 27 Feb 2010 18:55:00 +0000

S. Rao and T.J. Goldsby’s published an article in 2009 on the topic of “Supply chain risks: a review and typology”.

The article is devided into three sections. Definition of Risk / supply chain risk, overview of supply chain risk literature and identifying risks in the supply chain.Rao and Goldsby first summarize some of the definitions for risk. After a short introduction of the origin of risk in the research they start with the question if you should look at risk either as only the adverse effects of a possible event or as negative and positive consequences (so not only the risk but also the opportunities).

Managers tend to interpret risk as only the downside part so the authors decide to concentrate on this as well. To support their point they summarize eight definitions for risk starting in the 1950s with the definition by Markowitz, two of those define “risk” as risk and opportunity.

Building on this Rao and Goldsby go on summarizing current definitions of supply chain risk management, starting with Christopher (2002) to Manuj and Mentzer (2008). Concluding that “any approach to SCRM needs to look at understanding and reducing vulnerability to the supply chain as a whole, rather than at a focal firm level. In other words, the quest is for a global optimum rather than a local one.”

In the next part the authors summarize the key contributions of 55 selected papers on SCRM in one sentence.

In part three they develop a framework to identify risks in the supply chain.

Risk Framework as suggested in Rao and Goldsby (2009)

Each risk (beside “problem specific risk” and “decision maker risk”) is discussed and explained in detail.

Conclusion

The paper appears as three very distinct parts. The parts are only loosely connected and each one could have made separate papers as well.

Part One: The risk definition is to short and very one sided to be used for a discussion of what risk or supply chain risk management really is or should be. For example, there is no differentiation between risk and uncertainty and the terms are used for each other without consideration. Furthermore the argument for only taking the downside of risk into account, neglecting opportunities, is discussed, but result is not satisfying, since in many cases optimal decisions can only be meet when both sides are taken into account.

Part Two: Overall Rao and Goldsby deliver a good and broad review of the SCRM literature, even though it is only indicative and not exhaustive as they note.

Part Three: Here the authors try to define a new risk framework for managing supply chain risks. After reading the definitions for supply chain risk management (Quote: “…collaborative risk management…”) I was expecting nothing less than a framework which includes risks not only of the individual supply chain actors, but also the supply chain as a whole. But it seems that the presented framework is a collection of several already known risk sources for a single company, the two new aspects in their framework (“problem specific risk” and “decision maker risk”) are not discussed and left for further research.

Reference:

Rao, S., & Goldsby, T. (2009). Supply chain risks: a review and typology The International Journal of Logistics Management, 20 (1), 97-123 DOI: 10.1108/09574090910954864

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