Real options approach to evaluate postponement as supply chain disruptions mitigation strategy

The purpose of this paper is to assess the value of postponement as strategy for mitigating supply chain disruptions. To accomplish this objective, we develop a real option computational model that quantifies the value of postponement in mitigating both supply and demand disruptions by taking into account the value of managerial flexibility to decide whether exploiting or not the strategy, if and when disruptions occur, and whenever product differentiation proves valuable based on information available at that time. Numerical experiments show the importance of incorporating an option valuation method when pricing the value of postponement. This ensures managers implement postponement only when it is valuable, thus avoiding burdening the company with its initial sunk costs. By modelling the postponement implementation under different conditions, we identify the situations in which postponement performs better as supply chain disruptions mitigation strategy. We derive the operational configurations, in terms of decoupling point position, and external conditions, in terms of riskiness of the environment, which make the postponement an effective mitigation strategy.     

Implications of form postponement to manufacturing a customized product

Postponement is an approach that helps to deliver more responsive supply chains. Form postponement (FPp) involves the delay of final manufacturing until a customer order is received and is commonly regarded as an approach to mass customization. However, while much is written in the literature about the benefits and strategic impact of FPp, little is still known about its application. The paper presents the second in a series of three studies, using a common research methodology, that address ‘how’ FPp is applied in terms of its operational implications within a manufacturing facility. It is a retrospective study of the application of FPp in a manufacturer of industrial electric motors referred to here as ‘Motorco’. Operational measures for products selected for FPp are compared with those for products that continued to be made under engineer-to-order and make-to-stock regimes. Propositions were tested that address operational implications of FPp within the manufacturing facility, as well as the impact of FPp on selected performance metrics and the demand profile for which FPp was the preferred regime. Multiple data collection methods were used whereby documentary, archival and database evidence were used to measure operational characteristics across a broad front. The findings show that FPp improved responsiveness of manufacturing, but it is involved in the removal of components and often time-consuming invasive modifications. This suggested that the Customer Order Decoupling Point (CODP) would be better located further up stream in the manufacturing process. Two alternative CODP locations are evaluated that prevent the removal of components, provide the same level of responsiveness and potentially improve delivery reliability. The production planning system was sufficiently responsive to support FPp. However, the bills of materials were inflexible, preventing the system from being used to process FPp orders. This case illustrates many of the operational implications of applying FPp to a complex (i.e. many part numbers) and truly customized product. A third and final study of a FPp application in a different production context has been completed that will provide further evidence of its operational implications.     

Implications of form postponement to manufacturing: a case study

Postponement is an approach that helps to deliver more responsive supply chains. Form postponement involves the delay of final manufacturing until a customer order is received and is commonly regarded as an approach to mass customization. However, while much is written in the literature about the benefits and strategic impact of form postponement, little is still known about its application. This paper addresses how form postponement was applied in terms of its operational implications within a manufacturing facility through a retrospective study that tracked implementation of form postponement in a manufacturer of specialist high-voltage cabling equipment, called here ‘ElectriCo’. The operational measures for products selected for form postponement were compared with those for products that continued to be made under make-to-order and make-to-stock regimes. Propositions were tested that addressed the operational implications of form postponement within the manufacturing facility, the impact of form postponement on selected performance metrics, and the demand profile for which form postponement was the preferred regime. Multiple data collection methods were used whereby documentary, archival and database evidence were used to measure operational characteristics across a broad front. The findings show that form postponement improved responsiveness but did not necessarily improve delivery reliability. The extent to which the order lead time can be reduced is dependent not only on the responsiveness of the postponed process, but also crucially on the responsiveness of the planning system. It was found that the problem of adapting the manufacturing planning and production scheduling systems at ElectriCo had been underestimated. This and other problems subsequently undermined the form postponement application and led to its eventual abandonment. The authors are undertaking further research of form postponement applications in different production contexts to provide further evidence for its operational implications.     

Sustainable supply chains for supply chain sustainability: impact of sustainability efforts on supply chain risk

Supply chain managers across the globe are finding it difficult to manage the increasingly complex supply chains despite adopting a variety of risk mitigation strategies. Firms on the other hand have also been adopting various kinds of environmental and social sustainability practices in recent times to reduce carbon footprint and improve their image on the social front. However, very few studies in the extant literature have examined the impact of sustainability practices on supply chain risk. We address this important gap in literature by empirically testing this relationship, using primary data from six manufacturing sectors and 21 different countries including developed as well as emerging markets across the globe. Our findings indicate that risk mitigation strategies do not always reduce the actual supply chain risk experienced by firms, whereas sustainability efforts help reduce supply chain risk, especially in emerging market contexts. In addition, we find that, while reactive risk mitigation strategies on their own fail to reduce supply chain risk, they are effective when used in conjunction with sustainability efforts. We also find that preventive risk mitigation efforts are only effective in mature supply chains such as the OECD countries.     

Implications of form postponement to manufacturing: a cross case comparison

While much is written in the literature about the benefits and strategic impact of form postponement (FPp), little is still known about its application. We address ‘how’ FPp is applied in terms of its operational and logistics implications within manufacturing facilities. This paper is a retrospective study of the application of FPp in three diverse manufacturing environments: a manufacturer of specialist high voltage cabling equipment we call Electrico; a manufacturer of industrial electric motors we call Motorco; and a manufacturer of control systems and components mainly for automated telling machines we call Controlco. Our findings show that FPp improved responsiveness of manufacturing in all cases, but that none of the applications of FPp was ideal from a theoretical perspective. The production planning system must be both responsive and flexible to support the application. For highly customised products, the customer order decoupling point (CODP) must be located sufficiently upstream in the manufacturing process to avoid removal of components and time-consuming modifications. We present conclusions from all three studies, including an inventory management decision framework for FPp and a framework for the application of FPp which encompasses a number of practical considerations.     

Dynamic allocation of uncertain supply for the perishable commodity supply chain

Dynamic logistics control of a perishable commodity is especially crucial due to the difficulties in preservation of freshness, disposal of deteriorated commodities, and uncertainty of supply caused by seasonal fluctuation or abrupt variation of the weather. First, this paper formally presents the Dynamic Allocation Problem with Uncertain Supply (DAP/US) for the perishable commodity supply chain (PC-SC). The objectives of the DAP/US problem are to maximize the total net profit of the strategic alliance of the PC-SC and to determine the optimal orders placed to suppliers and the resultant amount of perishable commodities allocated to retailers. Secondly, a two-stage extended-Genetic Algorithm (eGA) is developed to control the dynamic orders and allocation quantities to prioritized suppliers and retailers, respectively. Thirdly, simulation experiments are conducted and it is shown that eGA demonstrates promising performance under various sizes of problem domains and different statuses of supply uncertainty. Lastly, analytical simulations are also conducted to compare eGA with the traditional approach that ignores the differences among suppliers' supply uncertainties. The simulation results show that eGA achieves great improvement in both the net profit and shortage rates for all sizes of the PC-SCs, with half of their suppliers and retailers having high supply capabilities and fast turnover demands, respectively.     

Metrics for supply chain sustainability

Most interpretations of sustainable development recognise that there are constraints on long-term human activities imposed by material and energy availability and by the capacity of the planet to accommodate wastes and emissions; inter- and intra-generational equity within these constraints is then an ethical principle underlying sustainability. This leads to identifying three dimensions of sustainable development: techno-economic, ecological and social. This paper reviews the development of indicators to reflect these three dimensions, applicable to industrial sectors, companies and broad groups of products or services. Indicators of environmental and economic performance are relatively well established. They can be combined to indicate the sustainability of products, services and supply chains. Indicators of social performance are more problematic, particularly indicators to describe the social value of products and services. Cases from the process, petroleum and petrochemicals, electronics and fast moving consumer goods sectors are reviewed, showing that social indicators must be developed through public participation.     

Agile supply chain strategy and supply chain performance: complementary roles of supply chain practices and information systems capability for agility

The paper examines the mediating effect of supply chain (SC) practices on the relationship between agile supply chain (ASC) strategy and SC performance. It further examines the moderating effect of information systems (IS) capability for agility on this mediated relationship. Using the theoretical lenses of complementarity and the information processing view of the supply chain, we hypothesise that strategic supplier partnership, customer relationship, postponement and lean practices, mediate the relationship between ASC strategy and SC performance. We further hypothesise that IS capability for agility moderates each of these mediated relationships. We empirically test the hypotheses using survey data from members of senior and executive management in the logistics/supply chain functions of 205 firms. The paper contributes to the literature on ASCs by theoretically explaining and empirically demonstrating how SC practices and IS capability for agility act together to effect a positive relationship between ASC strategy and supply chain performance.     

Policy mechanisms for supply chain coordination

The problem is to determine a review period and stocking policy that are mutually beneficial to a producer and a retailer. In our model, the retailer uses a periodic review, base stock policy for ordering the item from the producer's Distribution Center (DC). Excess customer demand is assumed to be lost. A make-to-order production system supplies to the DC. We show that given a review period, unless the manufacturer agrees to share the cost of carrying a fraction of the safety stocks at the retailer, the two will not agree upon the level of stocks to be carried in the store. We prove that there is an equilibrium value for this fraction, such that the retailer and the manufacturer are always in agreement with regard to the stocking level. We then show that complete coordination on the stocking level as well as the review period can be achieved solely through carrying out negotiations on credit terms. These theoretical results are used to construct an algorithm for calculating the optimal policy parameters for a supply chain. As part of the analysis we suggest a modification of the base stock policy for the positive lag lost sales case of periodic review inventory models that consistently outperforms the base stock policy in our numerical studies.     

Examining the interrelationships between supply chain integration scope and supply chain management efforts

In this article, we study the concept of supply chain integration scope by comparing firms that involve immediate supply chain partners in their strategic efforts (narrow supply chain scope) versus firms that involve supply chain partners beyond the immediate level, for example second tier suppliers and end customers (broad supply chain scope). By relying on Coordination Theory and expanding upon Frohlich and Westbrook's (2001 Frohlich, MT and Westbrook, R. 2001. Arcs of integration: an international study of supply chain strategies. Journal of Operations Management, 19(5): 185–200.  [Google Scholar]) ‘arcs of integration’ principle, we propose that supply chain integration scope and the type of supply chain management efforts deployed by firms are correlated. We use data from a large sample of US and European firms to explore the association between supply chain integration scope and supply chain management efforts. The results show that supply chain integration scope can be predicted by a firm's supply chain management efforts. The implications of our results for practising managers are also offered. Our results suggest that supply chain managers should consider the practices identified in this study while deciding on the appropriate level of supply chain integration scope, i.e., which extended supply chain members to include in their strategic planning efforts.     

Optimal pricing strategy for the perishable food supply chain

This research investigates the optimal pricing strategy for the perishable food supply chain. Using the setting of a two-echelon supply chain including a supplier and a retailer, we apply the game theory approach to derive the equilibriums for both a single pricing strategy and a two-stage pricing strategy. Through a comparison of the equilibriums, we explore how the two pricing strategies affect the supply chain’s decisions and supplier’s and retailer’s performance individually and collectively. The results of the analysis show that the optimal choice of pricing strategy depends on the price markdown cost and its relationship with the two critical thresholds that are determined by a combination of factors including the potential market size, the price and quality sensitivity factors, the initial quality, the unit product cost, and the quality deterioration rate.     

Ontology-based interoperability solutions for textile supply chain

Existence of interoperability within the enterprises is essential for textile supply chain to efficiently face the challenges from contemporary competitors,to find new business opportunities and to render better customer service.Exchange of business documents,being semantically consistent,is the way to achieve interoperability.However,heterogeneity of the structures of the enterprises poses challenges for establishing interoperability.Ontology based semantic interoperability framework has now been proven as an effective solution for enterprise interoperability.In this paper,the existing ontology-based interoperability solutions in the context of textile supply chain have been compiled and research gaps have been identified.The ontological methods,such as unified process for ontology(UPON) and methontology have been analyzed,and UPON have been shown as a suitable ontology development method for textile supply chain.     

A real-options-based analysis for supply chain decisions

Flexibility allows firms to compete more effectively in a world of short product life cycles, rapid product development, and substantial demand and/or price uncertainty. We develop a supply chain model in which a manufacturing firm can have the flexibility to select different suppliers, plant locations, and market regions and there can be an implementation time lag for the supply chain operations. We use a real options approach to estimate the value of flexibility and to determine the optimum strategy to manage the flexibility under uncertainty in the currency exchange rate. To price the operational flexibility, we develop a Monte Carlo simulation technique that is able to incorporate a large number of variables into the valuation. We show that without considering time lag impact, the value of the operational flexibility can be significantly overestimated.     

Disruptive technologies for advancing supply chain resilience

Disruptive technologies provide a new paradigm for supply chain risk management and bring opportunities and challenges for the improvement of supply chain resilience (SCRes). This study summarizes the application cases of some disruptive technologies in the SCRes and analyzes the benefits and damages brought by disruptive technologies to the SCRes. The results show that disruptive technologies can provide the supply chain with flexibility, visibility, agility, and other capabilities at various stages of risk management. Hence, technology advancements greatly increase the level of the SCRes. Although disruptive technologies undermine the construction of SCRes, these damages can be eliminated through technology iteration or other disruptive technologies. Furthermore, disruptive technologies will provide better stability for the SCRes. The study also makes several suggestions for the use of disruptive technologies in the construction of the SCRes.     

Analysing the interaction of factors for resilient humanitarian supply chain

Emergencies and disasters place an exceptional demand on the managerial skills of the humanitarian aid community. Most of the developing countries lack in such kind of resilience and effective humanitarian supply chain. Therefore, the purpose of this paper is to identify and analyse the factors to develop the resilience in the humanitarian supply chain. Based on the literature review, total 12 factors related to resilient humanitarian supply chain have been identified. Some of these factors are process oriented and some are result oriented. Interpretive structural modelling with Fuzzy MICMAC analysis is used to develop structural relationships among these factors and to find the driving and the dependence power of these factors. Government support, strategy and capacity planning; and continuous assessment of project progress have emerged as the major drivers for the development of resilient humanitarian supply chain. By managing these driving factors, humanitarian aid programme can be made resilient and agile. The findings will be useful for the humanitarian aid agencies to develop effective and sustainable aid relief programme.     

Comprehensive framework for the development of a supply chain strategy

Current competition among companies is fought through their supply chains. As the performance of the supply chain depends not only on manufacturing and marketing attributes, it becomes necessary to establish a framework upon which to develop a supply chain strategy. The paper presents the rationale and principles of a customer–product–process–resource (CPPR) framework for the simultaneous analysis of the business, supplier, manufacturing, planning, marketing and customer dimensions of a supply chain strategy. The originality of the CPPR framework is that it establishes a set of supply chain structural elements, that when put together determine the degree of alignment of a supply chain strategy. As the main objective of a supply chain strategy is to achieve customer satisfaction as an output of the supply chain operations, the CPPR framework becomes a realignment tool when used in combination with a realignment methodology, which is also presented in the paper.     

Reconfigurable supply chain: the X-network

Research on supply chain (SC) digitalization, resilience, sustainability and leagility has remarkably progressed, most of it focused on the individual contributions of these four major frameworks. However, a lack of integration spanning these individual frameworks can be observed. In this conceptual paper, we hypothesize that reconfigurability can be considered such an integral perspective that consolidates the research in SC adaptation to ever changing environments. We theorize a new notion – a Reconfigurable SC or the X-network – that exhibits some crucial design and control characteristics for complex value-adding systems in highly vulnerable environments. We support our argumentation and conceptual viewpoints by a literature analysis along with tertiary studies to review and structure contextual factors of designing the X-networks. We propose respective frameworks and discuss the implementation principles and technologies at the macro and micro levels. Two novel concepts – dynamic SC meta-structures and dynamic autonomous services – are introduced. Distinctively, we go beyond the existing knowledge to predict proactively the future directions in the reconfigurable SCs. Our results can be of value for decision-makers to decipher chances and barriers in contemporary SC transformations.     

Counterfeit capacitors in the supply chain

Counterfeit electronic components have become a significant concern in the electronic parts supply chain. Original equipment manufacturers in particular are concerned about counterfeit components as there have been several recent reports of counterfeit parts entering the supply chain of the US military. This paper presents a case study of multilayer ceramic capacitors for use in a printed circuit assembly in an electronic system on a military aircraft. The capacitors failed during a high temperature screening test. Upon failure analysis it was revealed that the capacitors were not made to the correct specifications and were suspected to be counterfeit and not the authentic military grade capacitors manufactured by Kemet. Further investigation revealed that the suspect multilayered ceramic capacitors had entered into the electronics parts supply chain and were sold as authentic Kemet capacitors that met the higher military-specified requirements. The manufacturing and distribution of the counterfeit capacitors were traced to locations where, according to Kemet, its authentic capacitors are neither manufactured nor distributed.     

Optimisation of the broiler production supply chain

In this paper, we propose a mixed integer programming (MIP) model for the Chicken Flock Sizing, Allocation and Scheduling Problem (CFSASP), which is an important planning problem in the broiler production supply chain. To solve the CFSASP efficiently, two variants of rolling horizon heuristics (RHHs) have been developed and applied on the case of a Norwegian broiler production company. Computational results show that the RHHs successfully obtain high-quality solutions within a reasonable time. The value of optimisation is verified through comparison with the case company's plans, where the solutions from optimisation outperforms the current solutions. Sensitivity analyses are also conducted to provide managerial insights regarding certain strategic decisions, such as how many and which days to use for hatching of chickens. Due to the promising results, the case company is now implementing an optimisation-based decision support system based on the MIP model and solution methods shown in this paper.     

Equilibrium markup pricing strategies for the dominant retailers under supply chain to chain competition

Markup pricing policies have been widely employed in the retailing industry. Under such policies, a retailer requires a retail margin over the wholesale price charged by the supplier to guarantee her profitability. This paper investigates and compares the performance of two commonly used markup pricing policies, namely, fixed-dollar markup and percentage markup, for the dominant retailers facing chain-to-chain competition. Our results demonstrate that the equilibrium pricing strategy for the dominant retailers seeking to maximise their respective profits is [PP]-strategy (i.e. both retailers select the percentage markup pricing policy), no matter what the demand curve and the level of chain-to-chain competition are. Unfortunately, this equilibrium will get in the prisoner’s dilemma since the percentage markup pricing strategy might yield lower profits for the retailers and suppliers compared to its fixed-dollar counterpart when the level of chain-to-chain competition is high enough under the linear demand, which is contrast to the literature. If the criteria for the dominant retailers to select which markup pricing policy to offer is the whole channel’s profit obtained under the decentralised decision-making scenario instead of themselves, [PP]-strategy is the dominant strategy and the unique Nash equilibrium of the pricing policy choice game regardless of the competitive intensity under the iso-elastic demand. This result holds true for the linear demand only when the level of chain-to-chain competition is below certain threshold; otherwise, both [FF] (i.e. both retailers select the fixed-dollar markup pricing policy) and [PP] can be the equilibrium pricing strategy.