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Logist. Res. (2009) 1:15–25 DOI 10.1007/s12159-008-0001-6 OR IGINAL PAPER How to improve supply chain ﬂexibility using strategic supply chain networks Herwig Winkler Received: 2 January 2008 / Accepted: 16 July 2008 / Published online: 8 August 2008 Springer-Verlag 2008 Abstract In many industries supply chain ﬂexibility is simultaneously control costs, quality and speed [27,p. becoming a more and more important concept for gaining 141]. Apart from that, in many sectors in which the cus- competitive advantages. By the design and use of strategic tomers require wide-ranging product variety, the demand supply chain networks signiﬁcant improvements of supply for goods is difﬁcult to predict [10, p. 171]. According to chain ﬂexibility can be achieved. The article identiﬁes the specialization of enterprise, robust concentration on resources, objects and parameters of supply chain ﬂexi- core competencies is essential. Enterprises are forced to bility and highlights the potentials of a strategic supply streamline their efforts in order to achieve signiﬁcant, chain network to realize high supply chain ﬂexibility. The comprehensive cost reductions; reduce their utilization of ﬁndings are relevant for both scientists and practitioners, resources, shorten the cycle times and reduce inventories who are interested in supply chain management. It is all while improving their service simultaneously . demonstrated how to manage the structural, technological These tasks translate into immense challenges for corporate and human potentials of the strategic supply chain network management, which requires the optimization of frictions to gain outstanding supply chain ﬂexibility. in the production and logistics processes, as well as the establishment of continuous materials and information Keywords Supply chain management ﬂows along the value-added process. A single company Supply chain ﬂexibility Strategic supply chain networks cannot meet these requirements alone [40, p. 40]. Flexibility potentials Supply chain management (SCM) is a suitable concept to meet these difﬁcult requirements [22, p. 65]. The objective of supply chain management is the strategic and 1 Problem description operative planning and controlling of materials and service ﬂows, including the associated information and money In the current market, business is characterized by a great ﬂows along the entire supply chain. In SCM, not only the division of labor. Manufacturing depths in enterprises are ﬁrst tier suppliers, but also second and third tier suppliers, often lower than 25%. Furthermore, globalization and along with the second and third tier customers—up to the competition require international distribution and/or pro- ﬁnal consumer––all have to be integrated [7, p. 1]. The curement of products and services in less time. This leads whole value-added process has to be planned and realized to intense competition, which forces enterprises to by all of the companies in the supply chain and has to be directly generated based upon the customers’ demands. In doing this, an improvement in customer orientation can be achieved, as can the alignment of supply with demand, the H. Winkler (&) Department of Production/Operations Management, reduction of stocks along the value chain, and a ﬂexible Business Logistics and Environmental Management, and appropriate production level . The single enterprise Alpen-Adria-Universitat Klagenfurt, is no longer at the centre of considerations, because an Universitaetsstr. 65-67, 9020 Klagenfurt, Austria integrated view of the value chain is now taken. Accord- e-mail: firstname.lastname@example.org ingly, the aspiration of achieving the optima in single URL: http://www.uni-klu.ac.at/plum 123 16 Logist. Res. (2009) 1:15–25 enterprises, in which a total optimum in the supply chain is ﬂexibility itself––and the ﬂexibility of the supply chain in desired, has to be put aside. Suboptimal occurrences within particular––are signiﬁcant turnkeys to the company’s single enterprises must be compensated for using suitable ﬁnancial performance. equilibrium mechanisms. The main drivers for the importance of SCF are the The basic target of SCM consists in the effective design increasing complexity of the value-added processes and the and efﬁcient optimization of the entire supply chain. For shortening of response times to demand changes [44,p. this purpose, strategic and long-term cooperation and/or 599]. The complexity of business processes is increasing as networks have to be established between the companies companies attempt to respond to their customers’ needs involved in the value-added processes [34, p. 495]. All of with an increasing number of highly customized products. the enterprises involved have to concentrate on their core At the same time, the offered products themselves are competencies, and they have to incorporate them in a becoming increasingly complex. This complexity results cooperative manner with the network participants. For this from the different embedded technologies. A single com- purpose, every enterprise must be willing to open its pany can no longer produce or handle these technologies boundaries to its partners. Furthermore, the cooperation is alone. The general trend of outsourcing and decreasing the not automatically based on long-term contracts; however, vertical range of manufacturers intensiﬁes this phenome- trusting agreements are very important. In order to achieve non. Thus, complexity is driven by the strong need for common competitive advantages a high level of integration coordination in the value-added processes [37, p. 177]. of all partners is imperative. The actions of integration Another point that contributes to this is that service is involve, for example, the design of inter-organizational becoming increasingly important in the customers’ eyes. planning and controlling systems, the product design pro- Products sold are no longer just the physical objects, but cess, stock management, the cooperative design of are now a bundle that includes the product itself and the packages, the integration of common logistics service attendant services. For example, the customers’ needs for providers, as well as the synchronization of transports [41, pre- and post-sales information or the disposal of products p. 1034]. after their lifetime is becoming a critical factor for com- Up to now, it has been the cost, time, quality and service panies. These product services often cannot be supported aspects that have been discussed in the context of SCM. In alone by an original equipment manufacturer and have to addition, ﬂexibility in the vital success factors is a critical be provided in cooperation with two or more companies. turnkey in the actual business environment . It is Coordination is a necessity that drives complexity, and thus important to consider that it is insufﬁcient to improve underlines the importance of SCF. ﬂexibility in only one single company of a supply chain. A fast response to changing demands is the second critical driver of competitive advantage in today’s markets. An improvement in the ﬂexibility of an entire supply chain is necessary to achieve remarkable performance results. Customers expect their needs to be satisﬁed at the time of We call this ﬂexibility of supply chains, or supply chain their expression. Companies therefore must have quick ﬂexibility (SCF) [8, p. 235]. response times to changing needs, in order to gain or hold In this contribution we will investigate the actual sci- market-shares [39, p. 62]. However, this requirement is entiﬁc literature that addresses the topic of supply chain difﬁcult to accomplish because it runs into the problem of management and supply chain ﬂexibility to ﬁnd out the complexity that we mentioned previously. basic deﬁnitions, assumptions and possibilities for the re- Vickery et al. [43, p. 16] deﬁne supply chain ﬂexibility alisation of supply chain ﬂexibility. Adapted on a literature as encompassing those ﬂexibility dimensions that directly review we will present some conceptual considerations as impact ﬁrms’ customers and that are the shared responsi- to how to improve SCF using strategic supply chain bility of two or more functions along the supply chain, networks. whether internal or external to the company. We classify this deﬁnition as a very general one. Duclos et al. deﬁne SCF more precisely as the ﬂexibility within and between 2 Basics of ﬂexibility and supply chain all of the partners in the chain, including departments ﬂexibility––a literature review within and between an organization, and the external partners, including suppliers, carriers, third-party compa- We deﬁne ﬂexibility as the ability of a system to perform nies, and information systems providers. These authors proactive and reactive adaptations of its conﬁguration in underline the idea that SCF includes the ﬂexibility to gather order to cope with internal and external uncertainties. information on market demands and the exchange of The great importance of ﬂexibility is evident [19, p. 1]. It information between organizations [13, p. 450]. We agree has been proven for different industries by Vickery et al. with this deﬁnition, but emphasise that we regard SCF to be [43, p. 16] and Ma ´rtinez and Pe ´rez [29, p. 681] that based on the embedded resources and on the designed 123 Logist. Res. (2009) 1:15–25 17 network structure of the supply chain [46, p. 75]. Table 1 members participate in a high level of communication and provides an overview of important works dealing with arrange common strategic and operative measurements to SCF. improve performance in logistics, production and cus- Supply Chain Flexibility can be seen as an ability of a tomer services. Consequently, the strategic supply chain supply chain that helps to gain competitive advantage and network can act as if it were one independent enterprise. improve success. To improve the ﬂexibility of a supply This new organizational point of view opens a wide range chain we suggest building up and using certain supply of possibilities to accomplish the integration of SCM [9, chain networks. By conﬁguring supply chain networks it is p. 206]. The possible structure of a strategic supply chain possible to design and manage an important part of an network is depicted in Fig. 1. entire supply chain. Within supply chain networks speciﬁc To design and manage a strategic supply chain network, ﬂexibility potentials can be developed to realize a high the SCM has the task of ﬁrst establishing an effective degree of supply chain ﬂexibility. structure within the supply chain, and secondly, to guar- antee on an efﬁcient performance. The tasks of an SCM can be assigned to the life cycle. It is here that we differ- 3 Creating strategic supply chain networks to improve entiate between the stage of design, performance, supply chain performance development and termination. Furthermore, regarding the management tasks, we have to distinguish between strate- 3.1 Basic assumptions for the creation of strategic gic and operative tasks . supply chain networks In the design stage, exemplary important strategic tasks are the selection of the appropriate partner enterprises, the A strategic supply chain network is characterised by a evolution of a common target system as well as the selected circle of supply chain members, a collective evolution of a common strategy. Constructing a strategic identity, an internal role differentiation and power divi- supply chain network normally begins on the initiative of sion, the delegation of responsibility, its’ limited an original equipment manufacturer (OEM). In these permanence, the possibility to transpose members, and a beginning stages, it is essential for the OEM to ﬁnd eligible rational procedure for the realization of common targets partners that ﬁt into the scope of the strategic concept for a executed by all of the participating companies. The stra- strategic supply chain network [23, p. 1]. These partners tegic supply chain network is a virtual organization must have complementary competence proﬁles, along with because every embedded member remains independent the ability and intent to cooperate intensively with other while participating in the network [45, p. 45]. A distinc- companies. Selected managers of the OEM and the partner companies form the lead committee of the strategic supply tion of the strategic supply chain network is that the T Tiie er r 1 1 IIn niit tiia all T Tiie er r 3 3 T Tiie er r 2 2 T Tiie er r 1 1 T Tiie er r 2 2 T Tiie er r 3 3 E En nd d Fig. 1 Possible structure and S Su up pp plliie er rs s S Su up pp plliie er rs s S Su up pp plliie er rs s S Su up pp plliie er rs s C Cu us st to om me er rs s C Cu us st to om me er rs s C Cu us st to om me er rs s C Cu us st to om me er rs s members of a strategic supply chain network 1 1 1 1 2 2 2 2 1 1 1 1 n n n n 1 1 2 2 1 1 n n 1 1 2 2 n n 1 1 2 2 3 3 1 1 n n 1 1 3 3 n n 2 2 n n n n n n 1 1 1 1 n n n n Members of the Strategic Supply Chain Network Designed and optimized relations Hub firm of the supply chain Monitored and controlled relations Members of hub firms supply chain Further relations 123 18 Logist. Res. (2009) 1:15–25 Table 1 Literature review on supply chain ﬂexibility Authors Deﬁnition of supply chain ﬂexibility Described dimensions of Findings supply chain ﬂexibility Vickery et al.  ‘‘Those ﬂexibilities, that directly impact a Product ﬂexibility Superior performance in ﬂexibility ﬁrm’s customers (i.e., ﬂexibilities that capabilities impacts a ﬁrm’s bottom Volume ﬂexibility add value in the customers’ eyes) and are line the shared responsibility of two or more Launch ﬂexibility Not all dimensions of supply chain functions along the supply chain, ﬂexibility have same impact on Access ﬂexibility whether internal (e.g., marketing, performance manufacturing) or external (e.g., Responsiveness to target Different functional areas within the suppliers, channel members) to the ﬁrm’’ markets company inﬂuence different dimensions of supply chain ﬂexibility Duclos et al.  ‘‘Flexibility in the supply chain adds the Operations system Conceptual model of supply chain requirement of ﬂexibility within and ﬂexibility ﬂexibility between all partners in the chain, Market ﬂexibility The authors underline the importance of including departments within an inter-company dimensions of supply Logistical ﬂexibility organization, and the external partners, chain ﬂexibility Supply ﬂexibility including suppliers, carriers, third party companies, and information systems Organizational ﬂexibility providers. It includes the ﬂexibility to Information systems gather information a market demands ﬂexibility and exchange information between organizations’’ Garavelli  ‘‘Ability of a supply chain to properly and Process ﬂexibility Supply chain ﬂexibility must be realized rapidly respond to changes, coming from by coordinated arrangements Logistical ﬂexibility inside as well as outside the system’’ throughout the entire supply chain (synchronization) Supply chain conﬁgurations with limited ﬂexibility provide relatively better performance than conﬁguration with no or total ﬂexibility considering the trade-off between costs and ﬂexibility Improvements in a supply chains’ upstream ﬂexibility capabilities tend to lead to better results than downstream activities Das/Abdel-Malek ‘‘Supply chain ﬂexibility is the elasticity of Delivery lead time Measure to estimate supply chain  the buyer-supplier relationship under ﬂexibility ﬂexibility within the buyer-supplier changing supply conditions’’ relationship as a function of constraints Order quantity ﬂexibility on delivery lead times and order quantities Supply chain ﬂexibility arises when there is Flexibility potentials of supply chain only little deterioration in the partners can be estimated and used as procurement price and penalties under criteria in supplier selection processes different supply chain conditions Barad/sapir  The authors discuss ﬂexibility in logistics Basic ﬂexibility (product Positive correlation between a superior systems as those capabilities that enable ﬂexibility, requirements performance in ﬂexibility capabilities stable performance under changing ﬂexibility) (esp. trans-routing ﬂexibility) and ﬁrm conditions like changes in demand or performance interference in demand or supply System ﬂexibility (trans- Measurement of ﬂexibility possible via activities routing ﬂexibility, the measures range and response product postponement dimensions ﬂexibility) The higher the uncertainty the more Aggregate ﬂexibility important are the ﬂexibility dimensions (ﬂexibility to change long term decisions) 123 Logist. Res. (2009) 1:15–25 19 Table 1 continued Authors Deﬁnition of supply chain ﬂexibility Described dimensions of Findings supply chain ﬂexibility Lummus et al.  ‘‘Supply chain ﬂexibility is deﬁned as the Refer to the conceptual Theoretical discussion of possible beneﬁts supply chain’s promptness and the model and proposed from ﬂexible supply chains, e.g., degree to which it can adjust its supply ﬂexibility dimensions improved customer satisfaction, lower chain speed, destinations and volumes in from Duclos et al.  inventories, positive relationship response to changes in customer between each node of the supply chain demand’’ and supply chain ﬂexibility, positive relationship between IT-systems and supply chain ﬂexibility,… Martı ´nez/Pe ´rez Use the deﬁnition for supply chain Basic ﬂexibility/shop ﬂoor Positive relation between a superior  ﬂexibility from Vickery et al.  level performance in ﬂexibility capabilities and ﬁrm performance Product ﬂexibility Greater uncertainty as perceived by volume ﬂexibility managers is associated with greater Routing ﬂexibility emphasis on supply chain ﬂexibility Systems ﬂexibility/ Aggregate ﬂexibility capabilities are more company level positively related to ﬁrm performance than basic ﬂexibility capabilities, but Delivery ﬂexibility companies tend to enhance mostly basic ﬂexibility capabilities Transshipment ﬂexibility Not all characteristics that enhance supply chain ﬂexibility can be inﬂuenced by a single companies’ strategy or policy Postponement ﬂexibility Higher interdependence between companies or use of information technologies can reduce the need for ﬂexibility capabilities Aggregate ﬂexibility/supply Environmental uncertainty increases the chain level need for ﬂexibility capabilities Launch ﬂexibility Sourcing ﬂexibility Response ﬂexibility Access ﬂexibility chain network. This committee assigns the management level of the ‘‘individual actors.’’ Goal conﬂicts frequently team for the strategic supply chain network. The manage- exist between these two levels. The management team of ment team develops a common target system for the the strategic supply chain network must resolve these goal evolution and the administration. According to the targets, conﬂicts [36, p. 1]. special competition strategies should be elaborated. It is In the performance stage, mostly operative tasks are necessary to analyze at ﬁrst which success factors could be carried out. These include the planning, controlling and used in order to generate competitive advantages. coordination of the value-added processes and the service Regarding the attained success factors, the potential to activities along the entire supply chain. For the purpose of achieve the success factors, such as information and achieving the common targets speciﬁc inter-organizational communication technologies (ICT), R&D, production planning, controlling and coordination systems are technologies, logistics systems, and human potentials, all required. In this context, we propose to resort to advanced have to be considered. In order for crucial competitive planning systems (APS), which enable the planning and factors in a branch to be realized, these potentials must be controlling of production and logistical processes along the exploited (e.g. low costs, high ﬂexibility, a great service supply chain. The emphasis of the advanced planning level, as well as short cycle times and high product qual- systems is the optimization of cycle times, stocks and ity). The analysis of the success and competition factors capacities [42, p. 179]. and the strengths and weaknesses of potential partners is Due to the constantly changing conditions of competi- vital for the conﬁguration of the strategic supply chain tion and/or ﬂuctuating interests of the partners in the network. In order to determine the targets and strategies we strategic supply chain network, special adaptations are have to differentiate between the ‘‘network level’’ and the sometimes necessary. This phase is called the developing 123 20 Logist. Res. (2009) 1:15–25 Fig. 2 Resources, objects and Parameters of Resources Objects Results supply chain parameters of supply chain flexibility ﬂexibility Transparency Structure Processes Higher degree of Manufacturing/ Simplicity supply chain Logistics flexibility Technology Products/ and Services better performance Responsive- Information in various ness/Agility Technology areas Information Human Security/ Potentials Reliability The embedded resources in a strategic supply chain stage which cannot be separated from the performance stage because the processes in the strategic supply chain network offer great potentials for the improvement of SCF. network continue working. Changes in the structures and To utilize existing and new potentials in structure, manu- the resource bases have to be managed in order to avoid facturing/logistics technologies, information technologies negative inﬂuences on performance. Some business rela- and human resources different measures have to be tions will be terminated while others will be established. In implemented by the SCM. However, this general recom- the case of the termination of individual relations, disso- mendation implies an essential problem. Decision makers lution processes have to be undertaken [45, p. 40]. have no indication which measures would drive SCF. This existing information lag regarding the ﬂexibility-increasing 3.2 Using strategic supply chain networks for raising effects of SCM-invoked measures needs to be resolved. supply chain ﬂexibility Therefore, to improve SCF, a framework has to be devel- oped that assesses alternate SCM measures concerning The resources of a strategic supply chain network offer their effects on SCF. potentials for the improvement of SCF. We differentiate The initial point for the desired framework that enables between structural potentials, potentials of manufacturing/ an indication of SCF is a system of ﬂexibility relevant logistics technologies, potentials of information technolo- parameters. These parameters are inﬂuenced by the exist- gies and human potentials. These resources act on certain ing system elements of a strategic supply chain network. ﬂexibility objects. Here, we understand that those objects in As already mentioned and displayed in Fig. 2, some of the strategic supply chain network have to be modiﬁed to those elements are the network objects like processes, increase SCF. Flexibility objects in the strategic supply chain products/services and information. Additional also resour- network are the processes, the products or services and the ces and partners are elements of a strategic supply chain information. As a consequence of the modiﬁcation of the network. To ensure that only relevant and susceptible ﬂexibility objects by the previously mentioned resources, elements are considered, the research range has to be ﬂexibility parameters will be optimised. The important clearly delimited. In our contribution, we deﬁned four ﬂexibility parameters are transparency, simplicity, respon- parameters that are based on these network elements in siveness/agility and security/reliability . Flexibility the delimited research range: transparency, simplicity, parameters generally determine the level of achievable responsiveness/agility and security/reliability. Through SCF in the strategic supply chain network. The ﬂexibility identifying and displaying occurrences, correlations and parameters are connected in a multiplicative manner. This behaviours of and between the elements, those parameters means that if one parameter goes to zero, the SCF also tends enable conclusions to SCF. It is important to mention that to shift to zero. Generally, an improvement in SCF results in strategic supply chain networks in different industries have superior ﬁnancial performance for each partner in the stra- speciﬁc problems and characteristics. To plan improvement tegic supply chain network [4, 16]. Either higher revenues measures, we suggest that analyses should be performed are generated with the same costs, or existing revenues can to identify which measures would be most effective to be achieved with lower costs. Figure 2 depicts this. realize a high SCF. Therefore, transparency, simplicity, 123 Logist. Res. (2009) 1:15–25 21 responsiveness/agility and security/reliability should be for efﬁcient and effective planning and steering. High evaluated. quality of all system elements enables the consistent high The transparency (T) of a system is determined by the performance of the supply chain in changing conditions. degree of knowledge of the system elements. A high level Therefore, security/reliability is a fundamental prerequisite of opacity hampers SCF. Therefore, to achieve a higher for a high degree of SCF. level of transparency and higher SCF, it is of the utmost SR ¼ f ðquality of SC elementsÞ importance that process owners possess a unique knowl- edge of the elements in the SC. The assessment parameter transparency is deﬁned through the comparison of known 3.3 How a strategic supply chain network could system elements and the entirety of elements. inﬂuence supply chain ﬂexibility known SC elements j¼1 T ¼ 100 To attain a high level of SCF, a strategic supply chain SC elements i¼1 network has to be used to build up speciﬁc ﬂexibility Additionally, it is necessary to mention that a high level potentials. We distinguish here between structural, tech- of transparency can only be reached if elements in all the nological and human potentials. All kind of ﬂexibility categories (information, products/services, processes, potentials must be strategically planned as well as conﬁg- resources and partners) are well known. If the degree of ured and coordinated in common to provide a high degree knowledge in one of those categories is limited, the whole of supply chain ﬂexibility at adequate costs. Figure 3 system opacity rises. Thus, a balanced knowledge across shows the context of designing ﬂexibility potentials to all categories generates the best results in terms of realize high supply chain ﬂexibility. transparency and SCF. All relevant ﬂexibility potential will now be investigated Simplicity (S) is the opposite of complexity. Complexity and solutions will be elaborated to provide a high degree of results from a high number of elements and their behav- supply chain ﬂexibility. iours in a certain system. In a system with fewer elements and traceable behaviour, simplicity is high and complexity 3.3.1 Structural ﬂexibility potentials is low. A complex network hampers fast alignments of the embedded system elements due to potential environmental Supply chain complexity can be reduced in the strategic changes. To improve SCF, it is useful to diminish the supply chain network, because the speciﬁc design of this relevant system elements in a strategic supply chain virtual organization enables a broad modularisation of network. customer orders [11, p. 316]. Thus, orders can be produced S ¼ 100 SC elements i¼1 Configuration and The parameter responsiveness/agility (RA) enables an Co-ordination inference of the strategic supply chain network’s ability to adjust its output in order to response to changed market Structural Technological requirement. The prerequisite for a high responsiveness/ flexibility flexibility agility of a strategic supply chain network is the potentials potentials High standardization of the network elements and their exact degree of deﬁnition. Thus, the responsiveness/agility refers to the supply chain comparison of deﬁned elements relative to the entirety of flexibility the elements. Configuration und Configuration and standardized SC element j¼1 P Co-ordination Co-ordination RA ¼ 100 SC element i¼1 Human Security/reliability (SR) is based on the quality of the flexibility system elements. Therefore, we have to consider the potentials special criteria of the processes, products/services, necessary information and required resources/partners. Processes are of high quality if occurring changes do not disrupt material and information ﬂows. Regarding products and services, high quality is reached by diminishing Fig. 3 Flexibility potentials in strategic supply chain networks to technical failures. High information quality is the basis gain supply chain ﬂexibility 123 22 Logist. Res. (2009) 1:15–25 in alternative sequences and routings through the network this context that these actions have to be planned and of partners. We call that attribute of the strategic supply determined strategically by committee leading the strategic chain network, the liberality of orders. This means that supply chain network. selected partners can independently handle speciﬁc parts of a customer’s order, in which they are fully responsible for 3.3.2 Technological potentials the order’s fulﬁlment [26, p. 432]. Based on the core competencies of the partners, they coordinate all of the 184.108.40.206 Potentials of manufacturing and logistics technol- value-added processes upstream within their supply net- ogies The manufacturing resources in the strategic supply work: First, they conﬁgure their supply network on demand chain network have to provide a high level of versatility to by matching the characteristic requirements (capacity, ensure a high degree of qualitative and quantitative ﬂexi- technology etc.) of a speciﬁc order to their suppliers’ bility [25, p. 328]. Qualitative ﬂexibility connotes that performance proﬁles. This task can be executed very different customer orders should be produced on several quickly because the partners in the strategic supply chain manufacturing systems, not only in a single company, but network refer to a pool of pre-selected suppliers that they also by other partners. Thus, the capacity utilization within have strategically built in advance. Therefore, with their the strategic supply chain network can be harmonized, extensive knowledge regarding the capabilities of their which means the partners can enlarge their capacity by potential suppliers, they can select the best suppliers for resorting to a partner’s free capacity or providing their own each order with relatively little effort. In the next step the free capacity to partners. This contributes not only to the suppliers with the best matching performance proﬁles are SCF, but also to the economical performance of each activated to participate in the value-added process for the partner in the strategic supply chain network . speciﬁc order. From this point of time, the supply-demand- The management of the strategic supply chain network relationship is established and the technological ﬂexibility has to support the versatility of certain production and potentials inherent in the strategic supply chain network logistical resources. The partners have to decide whether to enable expeditious cooperation between the partners [31,p. use ﬂexible manufacturing systems or special devices for 330]. This course of action aids qualitative ﬂexibility the order processing. It is appropriate to use both in a because the pre-selected suppliers in the pool provide a balanced manner. Those partners who are responsible for wide range of heterogeneous resources and capabilities, standard components with fewer variants should mainly and therefore offer a high degree of preparation for varying use special devices to keep costs low. Additionally, they demands to the strategic supply chain network. Quantita- should partially invest in ﬂexible systems to have a tive ﬂexibility results from the access to additional capacity buffer. Other partners that produce different variants must have more ﬂexible production systems. capacities via the integration of two or more suppliers with homogenous capabilities in the value-added process These partners generally use ﬂexible manufacturing sys- [30, p. 54]. tems. The optimal percentage of ﬂexible manufacturing A very important enabler for this conﬁguration of the systems for a strategic supply chain network has to be strategic supply chain network based on demand is a high strategically evaluated and determined [38, p. 27]. From an degree of intrinsic logistical ﬂexibility. To ensure this economic perspective, it is very useful to cooperate with logistical ﬂexibility and to realize all of the possible some partners that hold the needed resources temporally potentials for optimising the logistical costs, we propose to [20, p. 466]. integrate fourth-party logistics providers (4PL) as partners With a high degree of versatility of the resources used, it into the strategic supply chain network. [32, p. 16] These is possible to build a pooling and sharing system in the logistics specialists have the capability to centrally coor- strategic supply chain network. Therefore, it is necessary to dinate and harmonize all of the logistical processes in the deﬁne standardised interfaces to enable a quick and easy on demand. [5, p. 41] The main tasks undertaken by the connection to the logistics and information systems of the fourth-party logistics providers are inventory management, partners. The management of the strategic supply chain tracking and tracing services, planning/organization of network has to deﬁne organizational ‘‘plug and produce’’ transports as well as the planning and optimization of elements for order processing. This means that partners can routings for the different orders within the strategic supply be connected swiftly if a different order fulﬁlment is nec- chain network [3, p. 28]. essary. Free capacities of the implemented resources at the In addition to the realization of these potentials to partners can be offered at an internal electronic market- increase the SCF, the strategic supply chain network can place. This makes it very simple to decide where also resort to traditional potentials such as the holding of alternative manufacturing possibilities exist. Those mea- inventories or the installation of redundant free capacities sures enable lower costs and a higher degree of ﬂexibility as the case arises. However, it is important to mention in . In addition to the qualitative ﬂexibility, the 123 Logist. Res. (2009) 1:15–25 23 quantitative ﬂexibility is also rather signiﬁcant. With a high supply chain network on demand, solutions such as desktop degree of quantitative ﬂexibility, the strategic supply chain purchasing systems, Web-based marketplaces or Web network should be able to handle variable lot sizes. This interfaces for downloads and uploads should be prepared as problem relates to the free capacities of the resources in the standard solutions in the partners’ IT systems. This will strategic supply chain network. contribute to SCF because long set-ups and programming Variable lot sizes can also be balanced with a pooling activities can be thereby avoided. In addition, these solu- system. Therefore, it is only necessary to deﬁne ‘‘ﬁrst and tions can be used as back-up systems, in case any second-class partners.’’ First-class partners are companies disturbances arise [14, p. 323]. that have a high strategic relevance in the supply chain What is important in this context is to mention that the network (e.g., for R&D, sourcing of rare materials, pro- information systems only contribute to ﬂexibility if the duction capabilities) and are permanently involved in most information ﬂows between and within the strategic supply of the business relations. Second-class partners are com- chain network systems can be controlled. Not all of the panies that are not permanent partners in the strategic partners need all of the information. Providing inexpedient supply chain network. These companies have competence information at the nodes in the network would lead to proﬁles that are similar to the ﬁrst-class partners of the higher complexity, increased probability of failures and strategic supply chain network. Second-class partners do thus undermine the SCF. Therefore, we propose to use not want to become a permanent partner because they also adequate workﬂow and groupware systems in order to work for competitors, or they desire to remain completely solve these problems. autonomous [31, p. 330] They build an important resource IT-service providers should be integrated as permanent base that can be used to handle order peaks. It is possible partners in the strategic supply chain network. These that over a speciﬁc timeframe second-class partners companies have the competencies to effectively manage all become ﬁrst-class partners of a strategic supply chain of the information systems. Their integration will assist in network. realizing the synergy effects for all of the partners and control the costs for IT systems, because frictions and 220.127.116.11 Potentials of information technologies The stra- asynchronous improvements can be avoided by a centrally tegic supply chain networks’ information systems are an managed IT [24, p. 128]. important prerequisite for the realization of its structural, As previously mentioned, advanced planning systems technological or human ﬂexibility potentials . With enable improvements of the SCF. These systems support their ability to quickly and cost- effectively process varying the quick and easy conﬁguration and controlling of net- amounts and qualities of data, and to provide a high level work orders and therefore help to realize the ﬂexibility potentials of the strategic supply chain network. Web- of visibility, the information systems support for example the integration of new partners or the liberality of orders in based information systems are used to quickly exchange the strategic supply chain network. The information sys- information between partners at low costs per transaction tems of the strategic supply chain network bear the [21, p. 49]. following characteristics: ability to share information To emphasise the ﬂexibility potential of the planning between all of the partners in the value-added processes, and scheduling systems in the strategic supply chain net- ability to pass information along in the network and the work, the speciﬁc planning processes in the network have ability to synchronize the partners’ information systems to be elucidated. The contribution of the planning and [28, p. 9]. scheduling processes in the strategic supply chain network To assure these characteristics of the information sys- to SCF results from the simultaneous planning approach. tems, they have to be planned strategically in the design Based on the information available in the advanced plan- stage of the strategic supply chain network. This means ning systems, bottlenecks or restrictions to the production that the interfaces of the systems have to be kept as ﬂexible and logistical plans can be widely anticipated and delays in as possible to enable the exchange of data from different the order fulﬁlment are therefore avoided. Another factor systems and via different technologies. This requires an that supports SCF is that the planning and simulation of inherent high degree of preparation to achieve the alternative scenarios for the entire supply chain network uncomplicated docking of a partner’s information system enables optimal reactions to unplanned changes. This is to the systems of the other partners without creating rigid especially true for the integration of additional partners and structures [17, p. 18]. The exchange of all business data via second-class partners with a high degree of preparation for the Internet, and the communication with modern open- the fulﬁlment of a speciﬁc contributes to ﬂexible reactions. standard protocols such as XML offer high potential to Additionally, reaction strategies to dissolve capacity fulﬁl these requirements. For the coupling of second-class restrictions, delays or other disturbances of the manufac- partners, who only temporarily participate in the strategic turing processes are deﬁned in the creation phase of the 123 24 Logist. Res. (2009) 1:15–25 strategic supply chain network. By referring back to these Apart from quantitative and qualitative human ﬂexibility strategies, a network planner can quickly align the supply potentials, we can identify further ﬂexibility potentials in network on—and with—low costs. This is an important human related areas. We call these the ‘‘hidden potentials’’ comparative advantage of the strategic supply chain net- because they are not obvious. These potentials have been work compared with traditional supply chains . discussed to some extent in the principal-agent theory and refer to trust and good business relationships between 3.3.3 Human potentials suppliers and buyers. If companies know each other well and appreciate their existing business relations, they per- Both the qualiﬁcations and motivation levels of the form at a higher level if the other partner requires it. For employees have a tremendous impact on SCF. This is not example, at peak order times partners would work harder to only true for the operating staff, but it is also especially for ﬁnish orders on time while still maintaining high quality. the coordination-managers in the strategic supply chain network. These managers have to disseminate extensive 4 Conclusion knowledge regarding all of the value-added processes. With the aid of these coordination-managers, it is possible In our contribution we claimed the ability to build a stra- to expeditiously interact with other important persons. This tegic supply chain network in order to reach a common leads to a faster and better response to unplanned events optimum in a supply chain. The kind of optimum to reach related to their manufacturing and logistics partners. depends on the critical success factors of a supply chain. In Coordination-managers contribute to a high security of some branches, costs present the main success factor that supply in the strategic supply chain network. To manage determines competition. However, today in many branches their job well, it is important that coordination-managers besides for costs, ﬂexibility is gaining a very important have special skills and knowledge regarding the structures, position within the realm of competition. By way of con- processes and relations in the strategic supply chain net- structing a strategic supply chain network it is possible to work. This is not only true for all duties and responsibilities simultaneously improve ﬂexibility and keep costs ade- on the shop ﬂoor, but also for strategic measures. With quately low. these competencies, it is possible to anticipate organiza- The term ﬂexibility has not been uniformly deﬁned. tional problems that relate to order processing. To train There are some contributions in the scientiﬁc literature that employees, it is expedient to organize common workshops address the ﬂexibility topic. In our contribution we deﬁned with people in different companies. In this way, personal SCF as the ability of the supply chain to react to internal contacts will be established and consolidated, which may and external effects within a short time. To improve SCF a also occasionally help to solve problems in more efﬁcient combination of different ﬂexibility parameters such as ways. If ﬁnding suitable locations and times to meet is transparency, simplicity, responsiveness/agility and secu- overly complicated, video conferences would be adequate rity/reliability all have to be managed. The strategic supply viable option. This is especially true in cases where sig- chain network with its managed potentials and resources niﬁcant physical distances exist between the members [20, makes it possible to improve all of the ﬂexibility parame- p. 466]. ters simultaneously. We deﬁned structural potentials, Another possibility to boost SCF is to build a pool of potentials in manufacturing/logistics technologies, poten- human resources that can be transferred to the different tials in information technologies and human potentials to companies of the strategic supply chain network on be used for the improvement of ﬂexibility parameters. The demand. To enable the exchange of employees between the target oriented management of these potentials leads to an partners’ companies on demand, complementary skills are extraordinary advancement of SCF. needed. This is because the partners own similar technol- Future research in this area must focus on the practical ogies in manufacturing and logistics. 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Logistics Research – Springer Journals
Published: Aug 8, 2008
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