Influence of organizational elements on manufacturing firms' service-enhancement: An empirical study based on Chinese ICT industry

Despite the growing awareness of the importance of servitization of manufacturing, relatively little study has been performed on how organizational elements may or may not enhance the value creation of manufacturing, and even less in the developing countries. The present study aims to bridge this gap by examining the impact of a set of organizational elements on the service-enhancement in a sample of ICT manufacturing enterprises in China. The results of a multivariate analysis indicate that the degree of service-enhancement (measured by product, customer and financial performance) can be well explained by five organizational elements (service technological capability, strategic orientation (including market and innovation orientation), organization design, and resources endowment). Therefore, it is necessary for firms to consider organizational elements in implementing servitization in manufacturing firms.     

Investigating risks of outcome-based service contracts from a provider’s perspective

Outcome-based contracts (OBC) refer to agreements between providers and customers where providers are paid based on the outcomes they deliver to customers. OBCs have become common for manufacturing firms that are servitising, especially those firms providing advanced services focusing on availability and capability. Whilst many authors acknowledge the importance of understanding risks in OBCs from a provider’s perspective, there are relatively few in depth extant studies. To address this gap in the literature, we conducted 24 interviews with 11 companies to explore risks and risk factors in OBCs from the provider’s perspective. The case studies reveal that the two major risk categories in OBCs are commercial risk regarding the contract negotiations and contract decisions at the contracting stage, and operational risk regarding the implementation and the delivery of OBCs. Our study identifies 23 risk factors that can lead to commercial risk and operational risk in five dimensions: (i) complexity and (ii) dynamism regarding the context of OBCs, (iii) capability, (iv) alignment and (v) dependency regarding the stakeholders of OBCs. The paper explores the links between these risk factors and commercial and operational risk. In doing so, the paper provides a framework for understanding risk in OBCs.     

Modelling joint outsourcing and offshoring decisions

Offshoring and outsourcing have emerged as two most essential and important strategies for the manufacturing firms globally. This has happened due to the relentless forces of competition and globalisation, which has forced modern manufacturing firms to disaggregate themselves and reach for foreign investments, technological inputs through collaboration and cooperation among markets and partners. Outsourcing and offshoring simultaneously has potential to help the firm to meet three strategic goals i.e. ‘efficiency’ through cost minimisation; ‘exploration’ through an access to the right and technologically capable firm vendors/ Suppliers/ players; and ‘exploitation’ from development of global markets. Both outsourcing and offshoring have grown to a great extent either by the number of companies involved or by the number of multiple nations are involved. Hence, addressing both offshoring and outsourcing strategies together can provides value to the supply chain in economical and efficient way. Therefore, this paper is an attempt to model joint outsourcing and offshoring decision integrated with fuzzy-MCDM approaches using fuzzy data to optimise total cost through right selection of suppliers to meet demand of global markets, thus, achieving efficiency, exploration and exploitation. The model addresses qualitative and quantitative criteria in joint decisions and is also illustrated to show the cost effectiveness.     

The effect of supply and demand uncertainties on the optimal production and sales plans for new products

When introducing a new product, firms face a hierarchy of decisions at the strategic and operational levels including capacity sizing, time to market or starting sales, initial inventory required by the product’s release time and production management in response to changes in the demand (hereafter referred to as production-sales policies). The goal of this paper was to show the importance of considering both supply and demand uncertainties in the determination of the production-sales policy which has been overlooked in the existing literature. More specifically, we test two main hypotheses: (1) ignoring supply and demand uncertainties may lead to potentially incorrect decisions; and, (2) the decision could be different if risk is used as the primary performance measure instead of the commonly used expected (mean) profit. We perform extensive experimentation with a Monte Carlo simulation model of the stochastic supply-restricted new product diffusion and use different statistical procedures, namely, the Welch’s t-test and a nonparametric double-bootstrap method to compare the average and percentiles of the profit for different policies, respectively. The results indicate that the correctness of the two hypotheses depends on the diffusion speed, consumers’ backlogging behaviour, production capacity, price and variable production and inventory costs. The findings also have important implications for managers regarding market entry time, parameter estimation, production strategy and the implementation of the proposed model.     

Effect of firm characteristics,supplier relationships and techniques used on Supply Chain Risk Management (SCRM): an empirical investigation on French industrial firms

Recent years have witnessed a focus on managing risks in supply chains. On the one hand, there are many cases where events like natural disasters, strikes and terrorism have significantly influenced the performance of organisational supply chains and in turn their competitiveness. And on the other hand, operational activities and strategic decisions of the firms (concerning, for e.g. supply, procurement, production, delivery, commercialisation, demand management, planning, etc.) can be different than expected and so create uncertainties. Uncertainties, whether they are external or internal, impact organisations leading to increased supply chain risk. Realising the potential implications of these situations on supply chain competitiveness, an attempt has been made to define risks and their sources and to identify the management that can help reduce the negative impact of risks on supply chains. In this paper, a framework for supply chain risk management (SCRM) is proposed and is applied using the data collected from 164 French companies, in manufacturing sector. The literature review, theoretical framework and empirical research undertaken in this work have led to identifying critical success management for SCRM. The focus of this paper is the inter-organisational management of supply chain risk: the collaborative relationship (with industrial and supply partners) can be considered as an efficient way to make SCRM. The paper finishes with a summary of the findings and conclusions, along with suggestions for future research projects.     

International relocation and production geography in the European automobile components sector: the case of Spain

This article, based on the various approaches to location theory, analyses relocation processes in the Spanish automobile components industry in order to explain the importance of internal factors at both corporate and production plant levels. While acknowledging that location advantages play a relevant role, we show that changes in production geography can, to a great extent, be explained by corporate strategies, other decision-making mechanisms and firms’ characteristics. The results obtained from an empirical study during the period 2001–2008 show that the search for lower labour costs and corporate restructuring in order to achieve global production efficiency are the main factors determining relocation in the Spanish sector. These processes are facilitated by the operational flexibility of the multinational firms that dominate the sector. Lean supply and technological requirements are the main barriers to such processes of production plant mobility. From the point of view of practical relevance, the article shows that these logistic and technological determinants should be considered by managers in their relocation decisions not only in terms of cost efficiency but also in terms of the risks involved in relocation processes. Any relocation project must include measures to mitigate such risks.     

A strategic decision framework for a value added supply chain

Supply chains are becoming increasingly complex. The structure of the supply chain and the suppliers who participate in it are critical decisions for managers. The supply chain is no longer simply a source of inputs or services but an integral source of value added. It is clear that in some cases strategic supply chain objectives may require trade-offs, for example, between cost and innovation capability or between managing risk and maximising flexibility. These decisions balancing trade-offs between desirable partner characteristics are critical and can make a significant contribution to business performance. A framework is outlined, based on the foundation of extant literature, within which firms can make strategic decisions on supply chain structure by categorising the characteristics they prioritise in their supply chain strategy. There is also a strong foundation in the literature on developing mathematical models that provide insight into the decision-making process. A mixed integer programming model is specified that incorporates the opportunity for diversification and provides a demand allocation decision. The model is robust enough to allow for single or diversified supplier strategies based not only on capacity constraints but also on risk pooling and minimum performance requirements for key characteristics that form the basis of the strategy. A Lagrangian relaxation is proposed and satisfactory performance results are provided.     

Modelling default dependence in automotive supply networks using vine-copula

This paper presents an intuitive model for default dependencies in supply networks and its application in firms’ capital management. Modern supply chain networks are characterised by horizontal ties between firms within a particular industry or group, which are sequentially arranged based on vertical ties between firms in different layers. The recognition and accounting of these simultaneous interdependencies is crucial for a more advanced understanding of complex inter-organisational relations. Using the state-of-the art vine-copulae, we model these multidimensional interdependencies in the automotive industry, and capture the default tail dependency between alliance partners. Further, we apply our model to determine the optimal economic capital, such that companies can absorb unexpected losses from defaults in supply chain, while avoiding over-capitalisation. Our findings should spur managers to analyse their supplier networks with respect to default dependencies and to take this phenomenon into consideration when making sourcing decisions.     

Adoption readiness in service innovation: the case of digital money

One challenge for firms seeking to develop new services is to understand the conditions likely to affect the rates of adoption. Understanding relative degrees of ‘adoption readiness’ provides innovators with information to choose market segments and indicates opportunities to influence adoption environments. However, there is a little research into the adoption readiness of countries upon which firms can base their new service development decisions. This paper considers these issues through the case of digital money, a service innovation some claim to have the potential to provide major economic and social benefits. Defined as ‘currency exchange by electronic means’, we conceptualise digital money as a socio-technical system, and propose a Digital Money Readiness Index. This composite index integrates institutional, financial, technological, economic, industrial and social attributes to measure adoption readiness. We identify four stages of readiness and systematically analyse the factors that drive under or over adoption of digital money technologies.     

Contingent sourcing under supply disruption and competition

With the increasing awareness of the serious consequences of supply disruption risk, firms adopt various kinds of strategies to mitigate it. We consider a supply chain in which two suppliers sell components to two competing manufacturers producing and selling substitutable products. Supplier U is unreliable and cheap, while Supplier R is reliable and expensive. Firm C uses a contingent dual-sourcing strategy and Firm S uses a single-sourcing strategy. We study the implications of the contingent sourcing strategy under competition and in the presence of a possible supply disruption. The time of the occurrence of the supply disruption is uncertain and exogenous, but the procurement time of components is in the control of the firms. We show that supply disruption and procurement times jointly impact the firms’ buying decisions. We characterise the firms’ optimal order quantities and their expected profits under different cases. Subsequently, through numerical computations, we obtain additional managerial insights. Finally, as extensions, we study the impact endogenizing equilibrium sourcing strategies of asymmetric and symmetric firms, and of capacity reservation by Firm C with Supplier R to mitigate disruption.     

EFFECTS OF FIRM PERFORMANCE, ORGANIZATIONAL SLACK, AND DEBT ON ENTRY TIMING: A STUDY OF TEN EMERGING PRODUCT MARKETS IN USA

As technologies change and market environments evolve, firms introduce new products to create or satisfy new market demands or to substitute for existing products. A key strategic decision for firms contemplating entry into emerging product markets is the timing of their entry. Firms may choose to enter earlier and hope to preempt critical strategic resources, but they take the risk of premature entry. On the other hand, firms may prefer to enter later and wait for technical and market uncertainties to subside, but they face the potential problem of being frozen out of a profitable market by participants who risked earlier entry (Lieberman and Montgomery 1988; Mitchell 1989, 1991; Lilien and Yoon 1990; Robinson et al . 1992). This study examines three organizational factors that are hypothesized to affect a firm's strategic decision regarding timing of entry into an emerging product market: performance, organizational slack, and debt position. We begin with an overview of entry-timing research followed by some background on research in performance, organizational slack, and debt. We then develop hypotheses concerned with these three organizational factors and entry timing. We test these hypotheses in a multiindustry sample of firms in USA, and control for the influence of industry and firm variables that could be expected to affect entry-timing decisions.     

Spatial Dependence of the FDI Entry Mode Decision: Empirical Evidence From Emerging Market Enterprises

The entry mode and location choices are two fundamental decisions made by firms after they decide to proceed with foreign direct investment (FDI). In previous studies, these two strategic concerns have usually been studied separately as independent decisions. Following recent claims, we extend beyond the macro-environment of the host country or geographical space to study the interdependence between these two decisions by comparing the effects of two different colocation strategies on the establishment mode and ownership structure of investors in FDI. We tested our hypotheses based on a sample of 162 Chinese-owned subsidiaries in Germany and found spatial dependence in the entry mode strategies, where the existing theories regarding ownership structure prediction for the sampled firms had limited explanatory power. We also observed that the experience of investors had a negative moderating effect on these interactions. Our results suggest the following: (1) the FDI strategies of foreign investors consider conditions that vary among countries as well as within the host economy and place; (2) the entry mode and location choices can be alternative strategies for overcoming barriers to entry in FDIs where a trade-off between both is required; and (3) more efforts are still needed to interpret the FDI behaviors of investors from emerging economies.     

Modeling strategic semiconductor assembly outsourcing decisions based on empirical settings

In semiconductor supply chains, most chip makers focus on core competence of wafer fabrication and utilize assembly outsourcing to reduce operational costs, enhance capital-effectiveness of investments, and diversify the risks among the vendors. Assembly outsourcing decisions involve strategic partnerships with vendors and operational excellence for order allocations subject to production constraints, cost, delivery, and quality. This study aims to develop a decision framework in which preference over vendors at strategic level and order allocations at operational level can be integrated. Focusing on real setting in a semiconductor company, a decision support system embedded with proposed models was developed to evaluate vendor performance, allocate the orders, and generate the associated material requirement planning reports. The results showed practical viability of the proposed framework for modeling manufacturing strategy with the integration of optimized operational decisions.     

What hampers green product innovation: the effect of experience

ABSTRACT

Based on representative firm-level survey data for Austria, Germany, and Switzerland, this study systematically analyses the relevance and drivers of barriers to green product innovation using the example of green energy technologies. ‘Low willingness to pay’, ‘high development costs’, ‘high commercial uncertainty’, and ‘lack of favourable political framework’ are identified as the most important barriers. Moreover, we find that the firms’ innovation experience is an important driver of the level of green innovation barriers. Green innovation barriers are more accentuated for firms with green innovation activity than for firms with no green innovation activity. However, experience from different fields of green innovation and experience from non-green innovation activities help to limit these barriers.     

Industry 4.0 and resilience in the supply chain: a driver of capability enhancement or capability loss?

The purpose of this research is to develop a better understanding of smart systems and autonomous processes of the Industry 4.0 era. Does the implementation of Industry 4.0 processes and systems expose firms to higher levels of risk in the supply chain through capability loss or does Industry 4.0 spur capability enhancement and thereby increase supply chain resilience? Industry 4.0 is centred on the idea that certain tasks and decisions can be automated through smart systems and autonomous processes. However, is there a risk of losing critical capabilities and the ability to be flexible, agile and resilient to unexpected disruptions in the supply chain? In order to address these questions, this research presents results from semi-structured interviews across multiple industries to provide findings on firms’ uses of smart systems and capability development associated with these systems. Results from this exploratory study may be classified into two primary insights. First, although Industry 4.0 systems are new and, in many cases untested, firms are eager regarding the potential of smart systems to positively impact firm performance and to leverage Industry 4.0 processes for a competitive supply chain advantage. Second, companies did not claim any human capability loss associated with Industry 4.0. In fact, these smart systems may lead to increased supply chain resilience because of capability enhancement and new skill development.     

Science and precaution in the appraisal of electricity supply options

The technological risks associated with electricity generating options are a crucial consideration in the governance of energy strategies. Conversely, many central issues in the broader social debate over the governance of environmental risk (such as acid gas emissions, radioactive waste management, nuclear safety and global climate change) relate very strongly to technology choice in the electricity supply sector. The particularities of this field, therefore, offer a topical and pertinent case with which to explore the relationship between science and precaution in the governance of technological risk. By reference to the electricity sector, the present paper examines the contrasts between 'risk-based' and 'precautionary' approaches to the governance of risk, paying particular attention to the problems of intractable uncertainties and divergent values. A number of theoretical and methodological issues in conventional risk-assessment and cost-benefit analysis are examined and their practical implications for appraisal explored. Attention then turns to the form that might be taken by approaches to the governance of energy risks that are at the same time scientifically well-founded and precautionary. Conclusions are drawn for decision and policy making in this area.     

Configuring Capabilities for Integrated Solutions: Evidence from the IT Sector

This paper investigates the way that firms' environmental context and organizational structure influence their strategic choices and lead to different capabilities configurations. Drawing on contingency theory and the resource‐based view, we explore integrated solutions—an emerging business model in which firms bundle products and services—in the IT sector, which is a particularly appropriate context due to its novelty, high‐technology characteristics and implications for capabilities development. This study contributes to research and practice by identifying how organizational and environmental/market factors co‐evolve with firms' strategy and how firms' distinct strategic decisions lead to differences in capabilities configurations.     

A supply chain network equilibrium model for operational and opportunism risk mitigation

Risk management holds a crucial role in ensuring efficiency, predictability, and coherency in supply chain operations of an enterprise. Risks are associated with every member of a supply chain network. Thus, an end-to-end risk management approach is essential to fortify the entire supply chain network. In this paper, we consider a supply chain network consisting of suppliers, manufacturers, distributors and retailers, as the representative stakeholders. In particular, we take supply chain operational, and opportunism risks into account, and investigate the roles of flexibility, and social relationship, respectively, as a mitigation approach. We develop a multi-period network equilibrium model by considering the stakeholders’ objectives of maximising profit and minimising risk. Further, the finite-dimensional variational inequality formulations are derived for the underlying network optimisation problem. An algorithm, with nice features for computations, is then applied to three simulated examples in order to illustrate the model and computational procedure as well as the types of interventions that can help the strategic decision-makers to explore quantitatively the associated profits and incurred risks in an entire supply chain network.     

Reconfiguring global pharmaceutical value networks through targeted technology interventions

Targeting a series of advanced manufacturing technology (AMT) ‘interventions’ provides the potential for significant step changes across the pharmaceutical value chain, from early stage ‘system discovery’ and clinical trials, through to novel service supply models. This research explores future value network configurations which, when aligned with disruptive shifts in technology (process and digital), may enable alternative routes to medicines production and the delivery of additional value to ‘end-users’, i.e. patients and health care providers. We draw on a categorisation of AMTs that may enable a shift from the traditional ‘batch’ and centralised manufacturing paradigm of ‘make-to-stock’, towards more re-distributed ‘continuous’ manufacturing and ‘make-to-order’ models. Despite reported benefits in the academic literature (e.g. reduced footprints, improved quality, enhanced flexibility and inventory savings), current adoption rates of continuous technologies in this sector remain low (c. 5%). This paper presents new data sources, in our study of AMT adoption in a global pharmaceutical context – assessing the barriers to implementation, and the pathways to delivering future continuous manufacturing scenarios. Our findings capture the high level of disparity in viewpoints, highlighting the uncertainties and transformational challenges ahead – in terms of opportunity areas, technological readiness and a future vision for the sector, as a whole.     

Optimisation of traceability and operations planning: an integrated model for perishable food production

The food industry has been under pressure regarding improving food safety, implementing efficient risk management, and managing quality ‘from farm to fork’. Individual parties in a food supply chain must make appropriate strategic and operational adjustments, enhance product quality and increase operational efficiency and profits. In this paper, an optimisation model is developed integrating traceability initiatives with operation factors to achieve desired product quality and minimum impact of product recall in an economic manner. A case study with numerical example is provided to illustrate the theory. Sensitivity analyses are conducted. A comparison between the proposed model and the existing model operating in the case company is also presented.