Strategic Flexibility: A Model in supply chain

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Strategic Flexibility A Model in supply chain

• Wang Zhiqiang
• August 24,2005

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Outline

• Introduction
• Research questions
• Conceptual model
• Literature review Hypothesis
• Conceptualization Measurement
• Methodology
• Expected results
• QA

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Introduction

• Changes in market environment-from stable to
  dynamic
• Rapid technology change
• Global competition
• New patterns of product competition (Sanchez,
  1995)
• Real-time market research
• Rapid product proliferation
• Intensive market segmentation
• Rapid performance improvement

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Introduction

• These dynamic competitive forces call for firms
  to be efficient, innovative, and flexible.
  (Duncan, 1976)
• In SCM perspective, the company should integrate
  its activities into key supply chain processes
  other than managing individual functions (Lambert
  et al, 2000)

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Introduction

• Customer and supplier involvement in product
  development is beneficial to firms. (Handfield et
  al.,1999 Hartley et al., 1997 Campbell and
  Cooper, 1999 Koufteros et al.,2005 )
• From strategic fit to strategic flexibility
• strategy as commitment fades and strategy as
  strategic flexibility increase (Sanchez,1997)
• Strategic flexibility help firms to achieve
  sustained profitability in dynamic market
  conditions (Hitt et al.,1998Sanchez,1995Das
  Elango,1995)

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Research questions

• What is the indirect impact of customer and
  supplier involvement in NPD on strategic
  flexibility
• What factors will mediate the relationship
  between customer and supplier involvement in NPD
  and strategic flexibility
• What is the influence of strategic flexibility on
  firm performance
• How to define and measure strategic flexibility
  in the paradigm of NPD

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Conceptual model
SI supplier involvement in NPD CI customer
involvement in NPD TI technological innovation
adoption (manufacturer) MF manufacturing
flexibility (manufacturer) SF strategic
flexibility (manufacturer) FP financial
performance (manufacturer)
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Literature review

• Customer involvement is defined as the direct
  participation of the customer in the design and
  implementation phases of customization during
  which the customer organization engages in
  problem solving activities with the vendor, and
  co-creates the final product. (Sioukas,1995)
• Supplier involvement is defined as having one or
  more employees of a supplier as recognized
  members of the product development team, actively
  participating in team meetings and design
  activities. (Eisenhardt and Tabrizi,1995)
• Porter(1986) argue that partnerships and
  collaborations are a more rapid means of
  competitive repositioning than internal
  development, and are less costly and more
  flexible than mergers.

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Literature review

• In Gupta and Souder (1998), short cycle time
  companies were found to extensively involve
  customers in their RD process, test new product
  in the user facility during the development
• Mullins and Sutherland (1998) identified customer
  involvement is one of the six practices that help
  the firm address the uncertainty risk inherent in
  its rapidly changing markets.
• Dickson et al.(1995) found that the involvement
  of customer and supplier is an important skills
  for many successful, high-growth firms.
• Handfield et al.(1999) found that supplier
  participation would lead to greater technological
  improvements.

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Literature review

• Through comparison of most successful and least
  successful efforts of supplier integration in
  NPD, Ragatz et al.(1997) found linked information
  system is a significant factor to distinguish the
  difference.
• Koufteros et al.(2005) verified that involvement
  of customer and supplier would increase the
  ability of firms to introduce new products and
  features
• Tracy (2004) found that involvement of customer
  and supplier had a positive effect on
  manufacturing agility.

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Literature review

• Advanced manufacturing technology is looked as
  technological innovation in some research. It is
  divided into three dimensions design,
  manufacturing and administrative according to
  which area the innovative technology is applied.
  (Boyer Pagell,2000)
• Dixon et al.(1990) consider the flexibility as
  associated to quality, product, service and cost.
  The two flexibility dimensions related to product
  are new product flexibility and modification
  flexibility.

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Hypothesis I

• Hypothesis 1 The manufacturers are more likely
  to adopt AMT when there are more supplier
  involvement in NPD.
• Hypothesis 2 The manufacturers are more likely
  to adopt AMT when there are more customer
  involvement in NPD.
• Hypothesis 3 The manufacturers will have higher
  manufacturing flexibility when there are more
  supplier involvement in NPD.
• Hypothesis 4 The manufacturers will have higher
  manufacturing flexibility when there are more
  customer involvement in NPD.

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Literature review

• Ittner and Larcker (1997) revealed that use of
  cross-functional teams and advanced design tools
  enhance the performance effect of accelerated
  product development.
• Manufacturing technology (CIM,FMS,CAD/CAM)
  provided the ability to implement flexible,
  modular production set ups and rapid changeover
  of tools used in production process. (Hitt et
  al.,1998)
• Das and Elango(1995) suggested that manufacturing
  flexibility was one of internal factors which
  would influence strategic flexibility. Also Toni
  and Tonchia (2005) found a cause-effect link
  between manufacturing flexibility and strategic
  flexibility.

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Literature review

• From conceptual analysis, Johnson et al. (2003)
  believed that operational flexibility did not
  necessarily result in market-focused strategic
  flexibility.
• Hitt et al. (1998) suggested that the effective
  use of new technology would have positive impact
  on strategic flexibility.
• New information technologies and modular product
  design methodology have positive impact on
  resources flexibility and four managerial
  innovations caused by them may increase a firms
  coordination flexibility (Sanchez,1995)

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Hypothesis II

• Hypothesis 5 The manufacturers will have higher
  manufacturing flexibility when they adopt more
  AMT in NPD.
• Hypothesis 6 The manufacturers will have higher
  strategic flexibility when they have higher
  manufacturing flexibility.
• Hypothesis 7 The manufacturers will have higher
  strategic flexibility when they adopt more AMT
  in NPD.

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Literature review

• Strategic flexibility have a positive influence
  on firm performance after the Asian crisis,
  especially in environments with high competitive
  intensity. (Grewal Tansuhaj,2001)
• In the research of strategic flexibility and
  supply chain management, firm performance is
  usually measured by firm financial performance.
  Johnson et al.(2003) use short-term and long-term
  financial performance in their strategic
  flexibility research.
• In Das Elango (1995)s case study, they
  suggested the disadvantage in cost of strategic
  flexibility.

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Hypothesis III

• Hypothesis 8a The manufacturers will have higher
  long-term financial performance when they have
  higher strategic flexibility.
• Hypothesis 8a The manufacturers will have lower
  short-term financial performance when they have
  higher strategic flexibility.

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Conceptualization

• Three types of flexibility in firm (strategic,
  tactical and operational)
• Defined by three types of environmental change
  (Eppink,1978)
• Defined by three level of decision level
  (Johnson et al.,2003)
• Defined by planning horizon (Fredericks,2005)
• Intentional dimensions (Evans 1991)
• Proactive and reactive

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Conceptualization

• Strategic flexibility is firms intent and
  capability to identify major changes in the
  external environments, to create option bundles
  of product development resources, and to ensure
  the sustained competitive advantage of the firm.
  (modified from Shimiza and Hitt,2004Johnson et
  al.,2003)

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Measurement
Raynor and Leroux,2004 (Deloitte Research)
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Measurement
investment
Core option
investment
Contingent option
firm level
investment
Core option
investment
Contingent option
Functional level
technology
Product development
production
distribution
.
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Measurement

• The number of firms investment in existing
  option bundles of core and contingent products
• The time firm need to change between existing
  option bundles of core and contingent products
• The cost firm need to change between existing
  option bundles of core and contingent products
• The extent to which the firms intent to invest
  on new option bundles of core and contingent
  products
• The extent to which the firms ability to balance
  well of the option bundles of core and contingent
  products

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Measurement
Sanchez,1995
Johnson et al.,2003
Managers intent and behavior to generate option
bundles Managers impressions of the extent to
which product development options exist in
various project,their various forms,and their
preference for projects,that generate
option Extent to which holding options are valued.
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Methodology

• SEM will be used.
• Population is manufacturing firm in high
  technology industry (computer, consumer
  electronics, communications)

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Expected results

• The involvement of supplier and customer will be
  beneficial to firms AMT adoption and
  flexibility.
• The involvement of supplier and customer will
  influence firms strategic flexibility through
  mediating effect of innovation and manufacturing
  flexibility.
• The improvement on firms strategic flexibility
  will lead to better long-term financial
  performance

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Thanks
Q A