Presentation on theme: "Supply Chain Design Thomas Y. Choi Bebbling Professor in Business Professor of Supply Chain Management W. P. Carey School of Business Arizona State University."— Presentation transcript:
1 Supply Chain DesignThomas Y. Choi Bebbling Professor in Business Professor of Supply Chain Management W. P. Carey School of Business Arizona State University Prepared for Laurier Center for Supply Chain Management Wilfrid Laurier University October 2007
2 Overview Supply Chain As Complex Adaptive System Snap Shot of Supply NetworksSupply Base As Visible Portion of SNBasic Relational UnitsBuyer-Supplier DyadsSupplier-Supplier DyadsBuyer-Supplier-Supplier Triads
3 (A manager from a leading automaker) “A few years ago, our engineers mapped a supply chain of a small assembly [by] tracing it all the way back to the mine. From that exercise, we demonstrated the benefits of supply chain management, and we set out to manage the supply chain as a system. Frankly, we have not been able to do it. The problem was, as soon as we came up with a strategy for managing the chain, the chain changed on us—we got new suppliers and new relationship configurations. It took a lot of effort to map one supply chain, and we could not possibly map it every time something changed.”(A manager from a leading automaker)
4 Initial ObservationsSupply chains or networks were there before we tried to manage them.No one company can possibly orchestrate the whole supply networks.Supply networks are a self-organizing and emergent system.CAS is a system that emerges over time into a coherent form, and adapts and organizes itself without any singular entity deliberately managing its totality.
5 Supply Network as Complex Adaptive System Co-EvolutionHow the internal mechanisms and theenvironment interact and evolve togetherInternal MechanismsEnvironmentHow a system operatesDynamics outside a system
6 Key Lessons: Control and Emergence Deterministic approachReduction of dimensionalityDeviation correcting modeProactiveEmergenceWholistic approachIncreasing dimensionalityDeviation amplifying modeReactive/Adaptive
7 What might a supply network look like in the real world?
8 First Attempt at an Empirical Study The goal was to map the complete supply network and to study the structure therein—what’s controlled and what emerges?Honda Accord, Acura CL/TL, and Chrysler Grand CherokeeData collection done over three yearsFunded by the National Science Foundation
9 Supply Chain MappingSelect focus of the study—the center console assemblyBOM’s and identification of suppliersFrom final assemblerFrom top-tier supplierReconciliation of differencesInterviews with select second- and third-tier suppliers
13 Comparison of Honda and Chrysler Manages more suppliers in second- and third-tiersSupply network more complexExpends more corporate resourcesTakes less risk in supply chain stabilityChryslerManages less suppliers in tertiary levelSupply network less complexSpends less corporate resources on supplier managementTakes more risk in supply chain stability
14 What would you call the suppliers that are being "controlled" by the focal company?
15 Supply BaseA group of suppliers within the reach of the “visible hand” of the focal companyThe portion of the supply network within the purview of the focal companySuppliers actively managed by the focal companyNot all suppliers in the supply base are top-tier suppliers.
16 Focal Company and Its Supply Base The Focal CompanySupply Base
17 And Beyond…. Story of a man looking for his key…. Story of Toyota and its Phoenix supplier…
18 Supply Base Management Number of SuppliersNumber of current suppliers with enduring business relationsDifferentiation of SuppliersDegree of different characteristics among suppliers (e.g., culture, operating practices, etc.)Links among SuppliersSupplier-supplier relationships
19 Supply Base Management and Performance Implications Transactioncost+Supply base managementSupplyriskNumber of SuppliersDifferentiationsInter-Relationships-Supplier responsivenessSupplierinnovation
20 What might be the basic relational building blocks within a supply base?
21 Basic Building Blocks Buyer-Supplier Dyads Supplier-Supplier Dyads Buyer-Supplier-Supplier Triads
22 Buyer-Supplier Dyads Competitive Cooperative Deep Adversarial New AdversarialCooperativeInformation and resource sharingCommon goalsDeepUnderstandingTough love
24 Competitive Supplier-Supplier Dyads: From the Buyer’s Perspective ProsMaintaining leverage powerControl of information exchange between suppliersConsLack of supplier synergyHigh administrative and transaction cost
25 Cooperative Supplier-Supplier Dyads: From the Buyer’s Perspective ProsInformation and knowledge sharingCapacity flexibilityConsPotential for supplier collusionForward integration by suppliers
26 Co-Opetitive Supplier-Supplier Dyads: From the Buyer’s Perspective ProsOpportunity to gain advantage of both competitive and cooperative relationshipsLow supplier switching costConsRelationship uncertaintyRisk of suppliers’ opportunistic behaviors
27 What do we get if we put buyer-supplier and supplier-supplier dyads together?
28 Triads The “Real” Fundamental Building Block Three States of Buyer-Supplier-Supplier TriadsBalanced StatesUnbalanced StatesStructural Hole States
29 Balanced States and Unbalanced States All positive relationshipsOne positive and two negative relationshipsUnbalanced StatesAll negative relationshipsTwo positive and one negative relationships
30 Balanced States and Unbalanced States Buyer+S2S1Balanced State 1S1S2-+BuyerBalanced State 2S2S1+-BuyerBalanced State 3+-S2S1BuyerUnbalanced State 1S2S1+-BuyerUnbalanced State 2S2S1-BuyerUnbalanced State 3
31 Future ResearchControl and emergence—supplier-supplier relationship as the interface between control and emergence; positive feedback or deviation amplifying loopOther triads beyond B-S-S triads such as B-S-B’s customer or B-B-STetradsB-S relationship as embedded in larger networkTriads in service outsourcing—Bridge transfer and bridge decaySocial network analysis of Supply NetworksSimulation of supply base as CAS using cellular automataEconometric studies of CAS using archival data
34 The presentation slides have been built based on following published/unpublished articles “Supply Networks and Complex Adaptive Systems: Control Versus Emergence,” Journal of Operations Management 19 (2001) , Thomas Choi, Kevin Dooley, and Manus Rungtusanatham“Unveiling the Structure of Supply Networks: Case Studies in Honda, Acura, and DaimlerChrysler,” Journal of Operations Management 20 (2002) , Thomas Choi and Yunsook Hong“Supplier-Supplier Relationships and Their Implications on Buyer-Supplier Relationships,” IEEE Transactions on Engineering Management, 49, 2, May (2002), Thomas Choi, Zhaohui Wu, Lisa Ellram, and Balaji Koka“Building Deep Supplier Relationships,” Harvard Business Review December (2004), Jeffrey Liker and Thomas Choi (Reprint R0412G)“Supplier-Supplier Relationships in the Buyer-Supplier Triad: Building Theories from Eight Case Studies,” Journal of Operations Management 24 (2005) 27-52, Zhaohui Wu and Thomas Choi“On the Dark Side of Strategic Sourcing: Experiences from the Aerospace Industry,” Academy of Management Executive, (2005) 19, 1, Christian Rossetti and Thomas Choi“The Supply Base and Its Complexity: Implications for Transaction Costs, Risks, Responsiveness, and Innovation,” Journal of Operations Management 24 (2006) , Thomas Choi and Daniel Krause“Triads in Supply Networks: Interpretation through Balance Theory and Structural-Hole Concept,” Under review, Thomas Choi and Zhaohui Wu