The relationships among supply chain characteristics logistics and manufacturing

UMI Number: 3093649 Copyright 2003 by Gillyard, Angelisa Elisabeth All rights reserved. ________________________________________________________ UMI Microform 3093649 Copyright 2003 ProQuest Information and Learning Company. All rights reserved. This microform edition is protected against unauthorized copying under Title 17, United States Code.

____________________________________________________________ ProQuest Information and Learning Company 300 North Zeeb Road PO Box 1346 Ann Arbor, MI 48106-1346 Copyright by Angelisa Elisabeth Gillyard 2003 ABSTRACT Supply Chain Management (SCM) offers the possibility of increased customer service while minimizing costs. Before choosing what type of supply chain strategy to pursue, a firm must first evaluate the type of supply chain(s) in which it participates. The type of functional strategies chosen should complement the type of supply chain(s) in which the firm is a member. Certain manufacturing and logistics strategies are more appropriate given the characteristics of the supply chain.

This thesis explores the relationships among supply chain characteristics, logistics and manufacturing strategies, and firm performance. In addition, this study proposes an alternative logistics strategy framework using the competitive priorities of cost, quality, delivery and flexibility. Multivariate analysis of variance (MANOVA) was used to test the hypotheses. Results indicate limited support for the notion that successful firms participating in agile supply chains choose to emphasize different logistics and manufacturing strategies than less successful firms in agile supply chains.

The same holds true for firms participating in lean supply chains. Results from the logistics strategy factor analysis demonstrated that the proposed framework is not only a feasible one, but one that is effective at describing the logistics strategy. ii Dedicated to my Mother and Father iii ACKNOWLEDGMENTS First and foremost, I would like to thank God for giving me the strength and courage to pursue this degree and to see it to completion. I thank my adviser, Martha Cooper, for her continued support and mentorship throughout my matriculation in the doctoral program.

Her encouragement has been invaluable throughout this entire process. I am grateful to my committee, Glenn Milligan and John Current, for their continued support and cooperation. Their comments and suggestions have contributed much to the improvement of this document. I also wish to thank my family.

Without their constant and unconditional love, support and encouragement, I would not be who and where I am today. Thanks are also extended to the other doctoral students who were by my side throughout this journey. Their intellectual discussions and words of encouragement made the doctoral program more enjoyable. This research was supported in part by a grant from The Ohio State University’s Alumni Grants for Graduate Research and Scholarship and the GE Faculty for the Future Fellowship.

iv VITA September 13, 1974 ………………………………Born - Atlanta, GA 1996 ………………………………………………B. Mathematics, Spelman College 1998 ………………………………………………M. Management, Georgia Institute of Technology 2002 ………………………………………………M. Business Administration, The Ohio State University 1998-2002 ……………………………………….Graduate Teaching and Research Associate, The Ohio State University PUBLICATIONS "Career Patterns of Women in Logistics: Emphasis on Mentoring," Martha C.

Cooper, Cuneyt Eroglu, Angelisa Gillyard, Priyatabh P. Sharma, Council of Logistics Management Conference Proceedings (CD-ROM), 2002. Cited in several trade publications, including Inventory Management Report, New York, New York: IOMA, December 1, 2002. "Career Patterns of Women in Logistics," Martha C.

Cooper, Angelisa Gillyard, and Antuza Sandu, Council of Logistics Management Conference Proceedings, 2001. Cited in several trade publications, including Inventory Reduction Report, New York, New York: IOMA, December 2001, p. 10, and Managing Logistics, Issue 12-01, p. v "Career Patterns of Women in Logistics," Martha C.

Cooper and Angelisa Gillyard, Council of Logistics Management Conference Proceedings, 2000, pp. Cited in several trade publicatio ns, including Inventory Reduction Report, New York, New York: IOMA, December 2000, pp. FIELDS OF STUDY Major Field: Business Administration Studies in Supply Chain Management Minor: Logistics Management vi the.performance TABLE OF CONTENTS Page Abstract ………………………………………………………………… ii Dedication ……………………………………………………………… iii Acknowledgments ……………………………………………………… iv Vita ……………………………………………………………………. v List of Tables ………………………………………………………….

ix List of Figures …………………………………………………………. xi Chapters: 1 Introduction …………………………………… 1 2 Literature Review ……………………………. 10 Supply Chain Management …………………… 10 Hypotheses 1 – 4 ……………………… 19 Manufacturing Strategy ………………………. 21 Hypotheses 5 – 8 ……………………… 24 Logistics Strategy …………………….

39 Supply Chain Type…………………….performance Manufacturing Strategy ………………. 46 4 Results ………………………………………… 51 Description of the Sample ……………………. 57 Supply Chain Characteristics …………. 59 Review and Tests of the Hypotheses ….

69 Summary of the Results ………. 77 5 Summary and Conclusions ……………………. 78 Conclusions Drawn from the Research ………. 78 Implications for Logistics and Supply Chain Theory ………………………………… 79 Implications for Logistics and Supply Chain Managers ……………………………… 80 Limitations of the Research …………………… 81 Suggestions for Future Research ……………… 82 Concluding Note ……………………………… 83 References ……………………………………………………………… 85 Appendices …………………………………………………………….

89 Appendix A Email Sent to Subjects ………………………… 90 Appendix B Instructions for Internet Survey ………………. 93 Appendix C Internet Version of Survey ……………………. 98 Appendix D Microsoft Word Version of Survey …………… 117 viii the.performance LIST OF TABLES Table Page 2.1 Eight Supply Chain Processes Proposed by Lambert and Cooper (2000) ………………………………………………… 12 2.2 Definitions of Supply Chain Management …………………… 14 2.3 Characteristics of Lean and Agile Supply Chains …………….4 Description of Logistics Strategies …………………………… 27 2.5 Proposed Logistics Strategy Framework ……………………… 30 3.1 Scales for Supply Chain Type ………………………………… 39 3.2 Logistics Strategy Scales for the Cost Priority ……………….3 Logistics Strategy Scales for the Quality Priority …………….4 Logistics Strategy Scales for the Delivery Priority …………… 44 3.5 Logistics Strategy Scales for the Flexibility Priority ………… 45 3.6 Sample MANOVA Table for Manufacturing Strategy ……….7 Sample MANOVA Table for Logistics Strategy …………….2 Logistics Strategy Factors and Factor Loadings ……………… 54 4.3 Logistics Factors and Cronbach Alphas ……………………….4 Manufacturing Strategy Factors and Factor Loadings ……….5 Manufacturing Factors and Cronbach Alphas ………………… 59 4.6 Significant Correlations Among Supply Chain Characteristics .7 MANOVA Results – Emphasis on Manufacturing Cost Effectiveness as a Competitive Priority ……………………….8 MANOVA Results – Emphasis on Logistics Cost Effectiveness as a Competitive Priority ……………………….9 Average Emphasis on Competitive Priorities Across All Performance Levels …………………………………………… 72 4.10 MANOVA Results – Hypotheses 5-8 ………………………… 73 4.11 Average Emphasis on Manufacturing Priorities ……………… 74 4.12 MANOVA Results – Hypotheses 9-12 ……………………….13 Average Emphasis on Logistics Competitive Priorities ……….performance LIST OF FIGURES Figure Page 1.2 Examples of Hypothesized Differences ………………………….2 Relationships Previously Tested in the Literature ………………… 32 2.4 Components of Constructs in Model ……………………………… 35 2.5 Components of Performance Construct in Model ………………… 36 3.1 Expected Interaction Effects ……………………………………… 50 xi the.performance CHAPTER 1 INTRODUCTION Reduced prices, superior product quality, excellent customer service, expanded variety, and exceptional value are examples of the ever- increasing demands being placed on businesses by their customers. How will companies satisfy the increasing number of customer requirements? Many believe that the answer lies in supply chain management.

Supply chain management (SCM) has become an important topic of discussion among managers and academicians alike. One definition for SCM is “the integration of key business processes from end user through original suppliers that provides products, services and information that add value for customers and other stakeholders” (Lambert and Cooper 2000). Improved SCM can enhance customer service while maintaining low costs. Having recognized these benefits of SCM, many successful firms are implementing SCM principles to create and sustain their competitive advantage.

What should companies do to maximize the benefits offered by SCM? One answer lies in choosing the appropriate supply chain strategy. The appropriate supply chain strategy should match the corporate strategy in order to “fit” within the company. In addition, the supply chain strategy should complement the logistics and manufacturing 1 the.performance strategies in order to achieve superior performance. A dissonance among these strategies could lead to building conflicting capabilities.

As a result, companies will not realize the complete benefits of SCM. Strategic alignment between the corporate and supply chain strategies is essential for the success of a company. A survey conducted by Ernst and Young LLP and Stevens Institute of Technology revealed that only 13% of the respondents believed that their supply chain practices were fully aligned with their business unit strategy. Only 47% said that they were "somewhat" aligned with their business unit strategy (Tamas, 2000).

There are many reasons as to why a company might fail. One important reason according Chopra and Meindl (2001) is: “A company may fail either because of a lack of strategic fit or because its processes and resources do not provide the capabilities to support the desired strategic fit.” What exactly is meant by strategic fit? Chopra and Meindl (2001) give the following definition: “Strategic fit means that both the competitive and supply chain strategies have the same goal. It refers to consistency between the customer priorities that competitive strategy is designed to satisfy and the supply chain capabilities that the supply chain strategy aims to build.” The above definition of strategic fit can be expanded to include the manufacturing and logistics strategies. The logistics and manufacturing strategies should be aligned with the supply chain strategy in order to build the necessary capabilities to address 2 the.performance customer priorities.

Thus, a lack of strategic fit can mean that a company wastes time and valuable resources developing capabilities that will not satisfy current customers nor win new customers. Before choosing what type of supply chain strategy to pursue, a firm must first evaluate the type of supply chain(s) in which it participates. One paradigm that has evolved over the years consists of two types of supply chains: the lean and the agile. Naylor, Naim and Berry (1999) define agility as “using market knowledge and a virtual corporation to exploit profitable opportunities in a volatile market place” (pg.

They define leanness as “developing a value stream to eliminate all waste, including time, and to ensure a level schedule” (pg. Manufacturing strategy has been defined as the pattern of decisions that, over time, enables a business unit to achieve a desired manufacturing structure, infrastructure and set of specific capabilities. Typical manufacturing competitive priorities or strategies are low cost, delivery, flexibility and quality (Hayes and Wheelwright 1984). Unlike manufacturing strategy, logistics strategy literature has varying views on what constitutes the typical logistics strategies.

Bowersox and Daugherty (1987) proposed a framework for logistics strategy classification. The three strategies they articulated were the process, market, and channel strategies. McGinnis and Kohn (1990) performed a factor analysis of logistics strategy where they identified four strategies: (1) intensive logistics strategy; (2) integrated logistics strategy; (3) low integration strategy; (4) low effectiveness logistics strategy.performance The research presented in this dissertation suggests a logistics strategy framework that parallels that of manufacturing strategy – cost, quality, delivery and flexibility – and incorporates several of the scales previously developed by logistics researchers. This framework attempts to designate the competitive priorities and capabilities that a firm attempts to build through their logistics operations.

Providing such a framework for logistics strategy is an expected contribution of this research. Research Design Given the previously mentioned functional strategies and supply chain characteristics, it follows that certain manufacturing and logistics strategies are more appropriately used within certain supply chains. For example, it can be hypothesized that given a lean supply chain, cost leadership manufacturing and logistics strategies are more appropriate. Aimed at minimizing costs, the cost leadership strategies result in the same efficiency capabilities that are valued in a lean supply chain.

Firms exhibiting consistency among the logistics strategy, manufacturing strategy and the type of supply chain should experience higher levels of performance and competitive advantage than firms whose strategies are not consistent with supply chain type. Improved performance should result from the three entities guiding the firm’s actions toward the same objectives and goals instead of toward conflicting goals. Therefore, the following research questions are posed. Are there distinct supply chain types? 2.

What characteristics contribute most to supply chain type determination? 4 the. Among the supply chain types, do firms differ in the competitive priorities that they choose to emphasize in their logistics and manufacturing operations? 4. Given a specific supply chain type, do higher performing companies emphasize different competitive priorities than lower performing companies? A conceptual model is shown for illustrative purposes only in Figure 1.