Global supply chain adaptations to improve financial performance

Abstract

PurposeThe purpose of this paper is to understand and describe the conditions that compel and underscore global supply chain (SC) adaptations.Design/methodology/approachInsights from contingency theory, Porter's economic cluster theory and international factory mapping are used to analyze the SC adaptations that follow when an automotive firm moves from a domestic to a global SC.FindingsAn automotive global SC adaptation includes market entry considerations, the establishment of a three‐stage flexible time‐ and production‐based supplier network plan, and the integration of logistics partners.Research limitations/implicationsSC adaptations are an important consideration for any manufacturing expansion effort, especially international ones. Varying production levels impact supplier relationships and decisions and may result in varied supplier perspectives. Government regulations influence entry and routine decisions, while logistics issues and costs play an integral role in supplier perceptions and reactions.Practical implicationsWith the rapid expansion of the Chinese auto market, entering manufacturing firms need more information about how to strategically locate, and develop and support supplier networks. A stepped supplier network establishment approach optimizes benefits for both manufacturing firm and suppliers. Evaluating and integrating logistics issues also sets the stage for future expansion efforts at optimal cost and supplier support.Originality/valueThe internationalization of the automotive SC involves adaptations that can only be successful through advance planning, strategic supplier networking, and systematic logistics integration.

A structured procedure for materials planning during production transfer

“…In business cases, the advantages of a new, local, low-cost second tier supplier are often included. However, second-tier supplier performance can affect the start-up (Almgren 1999;Narasimhan and Das 1999), especially if new second-tier suppliers are involved, because they must also start-up production (Liao et al 2011). Thus, there may be a greater risk of quality problems if the second tier suppliers are new, as well.…”

“…Activities for taking preventive actions: depending on the product transferred, the preventive actions may aim at the inventory of raw materials, components or finished products. The level of supply chain uncertainty in combination with the materials planning methods used should determine the magnitude and types of preventive actions (Liao et al 2011). From a materials planning point of view, it is necessary to estimate the physical transfer and start-up times, the lead-times, the capacity levels during the transfer and the new quality levels in order to take the right preventive actions.…”

Global organizations and supply chain

“…Dolan, 2003), Automotive by 4.6% (e.g. Liao et al, 2011) and Food Industries by 3.4% of the cases (e.g. Wagner and Young, 2009).…”

A framework for aligning the supply chain throughout a radical product innovation life cycle

“…Focusing on tapping the potential of a growing market leads to a decreased priority on cost and asset efficiency, as companies need to build up capacities. Coordinating supplier bases is also critical for the establishment of reliability and sustainability (Liao et al, 2011;Rungtusanathlam and Forza, 2005). The shift over to an agile strategy reduces the costs and asset efficiency of the supply chain but essentially increases the agility without compromising much reliability (Naim and Gosling, 2011).…”