Matching Product and Supply Chain Characteristics

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University of Southern Denmark Campus Odense M.Sc. in Economics and Business Administration – Strategy and Organization

MATCHING PRODUCT AND SUPPLY CHAIN CHARACTERISTICS A Literature Review on Theory, Models and the Implications of Coordination Mechanisms

by Student name: CPR. nr.: Eksamens nr.: Bastian Baisch 271186-3829 311348

Course:

Advanced Strategy and Organization Theory

ABSTRACT Supply chain management has become one of the most popular approaches to enhance the competitiveness of business corporations today. A critical aspect in this setting is finding the most suitable supply chain for a particular product. Fisher’s Framework, the DWV^3-Model and the Product-Life-Cycle Model are the three most widely accepted models used to match supply chain characteristics to product characteristics. The determining factor in all three models is the product’s demand pattern, which ultimately has to be matched by the supply chain’s characteristics. The match between the supply chain characteristics and the product characteristics is achieved through the appropriate placement of the order-penetration-point. Depending on the order-penetration-points placement distinct process interdependencies occur which have to be matched by particular coordination mechanisms. A causal chain and correlations between product characteristics, supply chain characteristics and the use of particular coordination mechanisms is visualized and demonstrated.

INTRODUCTION Corporations are seeking to accomplish the best possible performance from their supply chains through many different means such as outsourcing, off-shoring, replenishment and information sharing systems (Selldin and Olhager, 2007). Never before in history has so much technology and cognitive capacity been used to improve the performance of a corporations’ supply chains. Nevertheless, before any such concrete measures and actions can be taken, the design of the basic supply chain has to be scrutinized. The existing literature in the field of supply chain design & supply chain characteristics differentiates between three key determinants of the supply chain, of which each individual determinant represents an individual research stream. Ward et al. (1996), Ward and Duray (2000) and Morash (2001) argue that business strategy and corporate strategy are the major determinants of the supply chain design. They argue that the supply chain design should reflect the strategic decisions, such as the choice of a particular generic strategy as introduced by Porter (1980). Chow et al. (1995), Narasimhan and Kim (2002) and Yusuf and Adeleye (2002) support the research stream that the environmental uncertainty is a key determinant of the supply chain design. The third research stream follows the product and its characteristics as the key determinants for the supply chain design. Fisher (1997), Huang et al. (2002), Selldin and Olhanger (2007) and Qi (2009) are strong supporter of this particular research stream. This literature review focuses on the research stream arguing that a product and its characteristics are the key determinants for the supply chain design. Since the arrival of the Toyota Production System (TPS) in the “Western World” (Western Europe and North America) in the 1970s and 1980s the main focus in supply chain design has been on cost reduction. New concepts such as lean manufacturing, make-to-stock (Pull) production, Kanban systems and quick response offer ideas and models for applying the new technology to improve the firm’s performance, by reducing costs. Nonetheless, the performance of many supply chains has never been worse (Fisher, 1997). By having such a strong focus on cost reductions and efficiency gains, many corporations do not consider their final product, which the supply chain is ultimately supposed to produce later, when designing the supply chain. The key problem is that many corporations believe that they have to reduce the costs under all circumstances...
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