Jou nal o Indus ial Enginee ing and Managemen
JIEM, 2013 – 6(3): 742-750 – Online ISSN: 2013-0953 – P in ISSN: 2013-8423
h p://dx.doi.o g/10.3926/jiem.554
Supply s a egy con igu a ion in agmen ed p oduc ion sys ems:
an empi ical s udy
Claudia Chackelson, Ande E as i, Sand a Ma inez, Ja ie San os
Tecnun - Uni e si y o Na a a (Spain)
cchack[email p o ec ed], ae [email p o ec ed], sma[email p o ec ed], [email p o ec ed]
Recei ed: Sep embe 2012
Accep ed: Ma ch 2013
Abs ac :
Pu pose:
Companies su i e in sa u a ed ma ke s ying o be mo e p oduc i e and mo e
e icien . In his con ex , i becomes c i ical o companies o manage he en i e supply ne wo k
o op imize o e all pe o mance. Hence, he supply s a egy plays an impo an ole because i
in luences he way in which p oduc ion and logis ics ne wo k has o be con igu ed and
managed. This pape explo es he bene i s ob ained con igu ing di e en supply s a egies
adap ed o cus ome needs.
Design/me hodology/app oach:
Fo his pu pose a case esea ch om a Tie 2 poin o iew o he
supply chain has been conduc ed.
Findings:
The case esea ch demons a es ha a highe se ice le el, less holding cos s and
inc ease u no e s can be ob ained implemen ing he adequa e supply s a egy.
O iginali y/ alue:
The e is a sca ci y o esea ch speci ically ocused on applied Supply Chain
P inciples wi hin ne wo k con igu a ion p ocesses. Mo eo e , he e a e ew empi ical s udies o
global Tie 2 wi h mul iple decoupling poin s in o i s supply chain ne wo k.
Keywo ds:
supply chain managemen , supply s a egy, Tie 2, case s udy
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1. In oduc ion
In he wen y- i s cen u y landscape, i ms mus compe e in a complex and challenging
con ex ha is being ans o med by many ac o s, om globaliza ion, echnology
de elopmen , and inc easingly apid di usion o new echnology, o he de elopmen and use
o knowledge (Jackson, Hi & Denisi, 2003).The need o accomplish in e na ional ma ke s
de elopmen wi h sophis ica ed and di e se cus ome equi emen s and a he same ime pu
in o p ac ice global pu chasing s a egies exploi ing wo ldwide supplie ma ke oppo uni ies
a e in luencing he way p oduc ion and logis ics ne wo ks ha e o be con igu ed and managed.
Mo eo e , nowadays he agmen a ion o he p oduc i e p ocesses and mul i-loca ion o he
ac i i ies ha e acqui ed ele ancy. This implies ha agen s in eg a ing he global supply chain
(i.e. dis ibu o s, o iginal equipmen manu ac u e s, manu ac u e s, supplie s and logis ic
ope a o s, e c.) ha e o ca y ou new ope a ions and supply s a egies o e he na ional
bo de s o each op imal le els o quali y, lexibili y and cos . I a ec s in he design o he
p oduc i e and logis ic sys em, as well as he associa ed supplie ne wo k design.
The p oduc ion and logis ic sys em s a egy o Ope a ions S a egy has o be aligned wi h he
Business p oduc /ma ke S a egy (Monczka, Hand ield, Guinipe o & Pa e son, 2009). In his
con ex , he p oduc ion and logis ic sys em s a egy condi ions he decisions and eenginee ing
p ojec s o be ca ied ou in a company in he medium and sho e m o imp o e he
compe i i e ad an age o he supply chain. Ope a ions s a egy has o gain mo e e ec i eness
and e iciency o e ope a ions esou ces h ough de ining and implemen ing sui able supply
s a egy decisions, managing he angible esou ces, and de eloping ope a ions capabili ies in
o de o each he pe o mance objec i es o he ma ke equi emen s.
This pape p esen s an empi ical s udy de eloped in a global Tie 2 wi h mul iple O.E.M
equi emen s. Fi s ly, in he li e a u e e iew he supply chain managemen , supply s a egies
and supply chain agen s’ classi ica ion a e exposed, as well as he esea ch ques ion. Secondly,
he esea che s desc ibe he case s udy and inally he conclusions a e s a ed.
2. Li e a u e Re iew
The APICS Dic iona y (Blacks one & Cox, 2004) desc ibes he supply chain as he p ocesses
om he ini ial aw ma e ials o he ul ima e consump ion o he inished p oduc , ia di e en
agen s (supplie s, manu ac u ing plan s, wa ehouses, cus ome s, e c.). Supply Chain
Managemen coo dina es and in eg a es all ac i i ies o planning, sou cing, manu ac u ing and
deli e y. O e he pas ew decades, supply chain in eg a ion e o s ha e been os e ed by
ools and concep s which, while he names ha e changed, a e all designed o educe a iance
and was e wi hin he o ganiza ion as well as he in e -o ganiza ional ne wo k (Bi ou, Ge main
& Ch is ensen, 2011). S e ens (1989) p oposed a model o in eg a e he ma e ial low. The
model p oposes ha companies should in eg a e in e nally hei logis ics ac i i ies wi h he
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ac i i ies o o he unc ional uni s, such as Pu chasing, P oduc ion and Dis ibu ion. Once his
in e nal in eg a ion is achie ed, i is ex ended o o he supply chain membe s, such as
cus ome s and supplie s. The ex e nal in eg a ion among o ganiza ions aims o achie e
compe i i e en e p ises, because compe i ion in he u u e will be be ween global supply
chains, and no longe be ween single companies as has been he case (Ch is ophe & Towill,
2001; Cox, 1999). Ne e heless, i needs changing adi ional o ganiza ional s uc u es and
a i ude among o ganiza ions (Alpande & Ca oll, 1995).
In ela ion o he company’s posi ion in he supply chain, supply chain e ical disin eg a ion
gene a es he exis ence o mul iple agen s whose alue p oposi ion o cus ome s is di e en .
The numbe o supplie companies and he alue added in each link in he supply chain is
di e en . In he li e a u e, unde he supply chain app oach, he ollowing agen s could be
di e en ia ed:
•(O iginal equipmen manu ac u e ): I is he leading manu ac u e o a p oduc , good o
se ice and which usually leads he sho and long wa e o he alue chain, especially
om he demand gene a ion, design and p oduc de elopmen o he o al
manu ac u e.
•Tie 1 (Sys ems in eg a o s supplie s): I is a sys ems o modules supplie ’s which
usually equi es a sys em p oduc enginee ing and he in eg a ion o a second and hi d
ie ne wo k supplie (Tie 2 and Tie 3) bo h no only o i s de elopmen bu also o
i s manu ac u e and supply.
•Tie 2 (Value added componen supplie s): I is a componen o aw ma e ials supplie
whose supply equi es an inpu pa ial in he p oduc enginee ing and highe in he
enginee ing p ocess o ul ill he cus ome equi emen s.
•Tie 3 (Raw ma e ials and non c i ical componen supplie s): I is he aw ma e ials and
componen s supplie whose speci ica ion is s anda d o is closed by he clien .
Facili ies a e c i ical nodes o a global manu ac u ing ne wo k om he supply chain sys em
pe spec i e. The e o e, o implemen he mos e icien p inciples such as demand d i en
supply chain (Ch is ophe & Towill, 2001), he design o acili ies should conside he
in eg a ion o he Logis ic Chain o ien ed o inc ease cus ome sa is ac ion, educe o al cos
and inc ease e u n o capi als (see Figu e 1).
The low sys ems in a acili y is he low o ma e ials in o he manu ac u ing plan dock o
dock, bu also he low o in o ma ion and logis ic unc ions which condi ions hese ac i i ies. In
o de o apply he supply chain p inciples, i is necessa y o in eg a e he logis ic unc ions
such as demand planning, se ice planning, p oduc ion planning and scheduling, and
p ocu emen planning.
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Figu e 1. Supply chain p inciples (E as i, 2006)
Ne e heless, in a mul isi e and agmen ed p oduc ion sys em, whe e he supplie ne wo k is
composed o local o domes ic supplie s and o sho e supplie s and manu ac u ing acili ies,
hese o sho e supplie s and acili ies need he coo dina ion o he supply ne wo k wi h
di e en deli e y imes and p ocu emen eliabili y. The gap be ween cus ome deli e y ime
and supply chain lead ime needs o ecas d i en manu ac u ing, supplying and pu chasing
decisions.
The lead ime gap be ween he p oduc ion lead ime, i.e., how long i akes o plan, sou ce,
manu ac u e and deli e a p oduc (P), and he deli e y ime, i.e., how long cus ome s a e
willing o wai o he o de o be comple ed (D), is key elemen o he supply chain
(Simchi-Le i, Kaminsky & Simchi-Le i, 2000). Compa ing P and D, a company has se e al
basic s a egic o de ul ilmen op ions: Enginee o O de (ETO) – (D >> P), Make o O de
(MTO) – (D > P), Assemble o O de (ATO) – (D < P) and Make o S ock (MTS) o Build o
Fo ecas (BTF) – (D = 0) (Wikne & Rudbe g, 2005). E en hough he e a e se e al supply
s a egies, his esea ch is ocused on MTO and MTS.
Gi en he inhe en di e ences in hese manu ac u ing s a egies; MTO i ms a e cha ac e ized
by low olume, cus omiza ion, p ocess lexibili y, highe wo k-in-p ocess in en o y, lowe
inished goods in en o ies, and longe lead- imes; and MTS i ms a e cha ac e ized by high
olume, s anda diza ion, dedica ed equipmen , lowe wo k-in p ocess and highe inished
goods in en o ies, and sho e lead- imes (Bi ou e al.,2011).
Ne e heless, he implemen a ion o he igh supply s a egy in global and agmen ed
p oduc ion sys ems becomes mo e di icul because he e is a need o se ling down mo e han
a decoupling poin . Mul iple Decoupling Poin s and he O de Pene a ion Poin (OPP) ha e o
be ixed o assu e he supply s a egy. The OPP di ides he manu ac u ing s ages ha a e
o ecas -d i en (ups eam o he OPP) om hose ha a e cus ome -o de -d i en ( he OPP and
downs eam). The OPP is de ined as he poin in he manu ac u ing Value Chain whe e a
p oduc is linked o a speci ic cus ome o de . Some imes he OPP is called he Cus ome O de
Decoupling Poin (CODP) o highligh he in ol emen o a cus ome o de . Ne e heless, i is
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no he same because in a agmen ed in e na ional ma e ial low he e could be a ious
CODPs, bu he e is only one OPP. The eby, he OPP is one o he s a egic decisions because o
i s impac on he supply chain pe o mance in e ms o se ice and cos .
In spi e o he impo ance o conside ing he Supply Chain P inciples o ien ed o inc ease
cus ome sa is ac ion, educe o al cos and inc ease e u n o capi als, he e is a sca ci y o
esea ch speci ically ocused on applied hem wi hin he con igu a ion and implemen a ion o
he supply chain. Mo eo e , he e a e also ew empi ical s udies abou a global Tie 2 which
has go mul iple decoupling poin s in i s supply chain ne wo k. Hence, his gi es ise o he
ollowing esea ch ques ion:
•How could he Supply Chain P inciples be applied in a global Tie 2 company wi h
mul iple O.E.M.s equi emen s?
3. Case s udy
A Case s udy app oach is selec ed because i has been poin ed as a use ul ool o heo y
building as well as o explo a o y, desc ip i e o explana o y esea ch (Rowley, 2002).
Mo eo e , Miles and Hube man (1994) s a ed ha a ypical o ep esen a i e single case is an
ins ance ha ha e g a e payo in case esea ch. When he goal is o cap u e he condi ions o
a commonplace si ua ion, a single-case design is app op ia e (Yin, 2009). The lessons lea ned
om hese cases a e assumed o gi e in o ma ion abou expe iences a he a e age
ins i u ion. Thus, a single case can con i m, challenge, o ex end he heo y.
The selec ed company is an Elec onic Manu ac u e ha has loca ed h ee p oduc ion plan s in
Ame ica, Asia, and Eu ope espec i ely o mee he demand o global ma ke . I could be
classi ied as a Tie 2 ha se es se e al O.E.M.s o di e se sec o s: equipmen goods,
household appliances, au omo i e, and wind sec o , among o he s. This in e na ional s a egy
and he he e ogenei y o i s clien s make he selec ed company he ideal place o pe o m he
single-case s udy and answe he esea ch ques ion p e iously o mula ed
The esea che s ha e been ac i ely in ol ed analysing he Logis ic Func ions (demand
planning, se ice planning, o de managemen , p oduc ion planning and scheduling, and
p ocu emen planning) o achie e be e se ice, cos o u no e pe o mance. The wo main
supply s a egies a e: (1) MTS, deli e y o cus ome om inished p oduc s and a CODP o aw
ma e ials and pa s; (2) MTO, deli e o o de wi h CODP o aw ma e ials and pa s.
Bo h inish p oduc s managemen and aw ma e ials managemen we e imp o ed by applying
he In eg al Logis ic Chain P inciples and in eg a ing he Logis ic Func ions (s ock and aw
ma e ials planning, demand planning, and p oduc ion planning and scheduling) (see Figu e 2).
The analysis has been done by-clien aking in o accoun he singula cha ac e is ics o each
O.E.M., bu also ha ing in mind he big pic u e in o de o a oid subsys em imp o emen s ha
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nega i ely a ec he pe o mance o he en i e sys em. The me hodology ollowed du ing his
p ojec will be illus a ed wi h one o he Tie 2 clien s, an Equipmen goods O.E.M., om now
on called Clien X.
Figu e 2. Logis ic unc ions (E as i, 2011)
3.1. Al e na i es and oppo uni ies o he O.P.P
Fi s ly, he esea che s analysed he O.P.P wi h he aim o imp o ing he inish p oduc . The
company manu ac u es and deli e s mo e han 60 inished p oduc s o Clien X acco ding o
MTS supply s a egy. All o hem ha e been clus e ed acco ding o bo h a alue ABC analysis
and a olume ABC analysis. The main objec i e o his classi ica ion is o selec he mos
sui able p oduc ion/supply s a egy o each p oduc , inc emen ing s ock u no e s and
a oiding o e s ock ( educing he isk o obsolescence). Mo eo e , in o de o ca y ou a mo e
p ecise analysis, bo h ABC ca ego isa ions we e subdi ided gene a ing i e subclassi ica ions:
AAA (20%), AA (20%), A (40%), B (15%), and C (5%).
As a esul , di e en p oduc ion/supply s a egies and p oduc ion planning and scheduling
al e na i es we e sugges ed o each one o he expose classi ica ions, achie ing g ea esul s.
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P oduc ca ego y Sugges ed supply s a egies o
planning/scheduling al e na i es
Bene i s
S a egic I ems: ex eme olume
(AAA, AA, and A) expensi e (AAA,
AA, A, and B)
P oduc ion ba ch educ ion1A oiding excessi e holding cos s and
keeping high se ice le el
Medium olume (B) Join and inished p oduc s g ouping
ba ch s a egy
Keeping e iciency and keeping high
se ice le el
Low olume (C) Low p ice (C) (a) P oduc ion ba ch educ ion
(b) Adop ing a MTO s a egy2 wi h a
CODP o aw ma e ials
A oiding excessi e holding cos s and
keeping high se ice le el
1 This decision mus no be made isola ed, bu conside ing he espec i e inc emen o p oduc ion cos s. The e o e, a p oduc ion ba ch
educ ion was inally implemen ed o hose p oduc s ha holding cos educ ion signi ican ly compensa es p oduc ion cos inc emen .
2 Adop ing a MTO s a egy wi h a CODP o aw ma e ials is he p e e ed op ion, bu i s implemen a ion implies g ea e eliance on
supplie s lead ime han he is al e na i e. In a mul isi e and agmen ed in e na ional p oduc ion sys em longe lead imes and lack
o eliabili y a e common scena ios. In each case, supplie eliabili y was aking in o accoun o making his decision.
Table 1. S a egies and bene i s o each inish p oduc ca ego y
3.2. Al e na i es and oppo uni ies o he C.O.D.P
Secondly, he esea che s analysed he C.O.D.P wi h he aim o imp o ing aw ma e ials
managemen . The Clien X p oduc ion p ocess equi es mo e han 800 aw ma e ial i ems
p ocu emen ; all o hem we e managed wi h a CODP wi h s ock and a eplenishmen sys ems
based on o ecas demand due o he long deli e y imes. These i ems we e classi ied
acco ding o amily g ouping s a egy. The e we e 79 di e en amilies, which only 5 o hem
ep esen ed 75% o o al pu chase. These 5 amilies we e conside ed s a egic, consequen ly
hey we e analysed in g ea e de ail. Fou impo an le e s we e ecommended o hese
s a egic i ems. Fo he es o he amilies wo al e na i es we e sugges ed acco ding o i s
olume and p ice.
P oduc ca ego y Sugges ed supply s a egies o planning/scheduling
al e na i es
Bene i s
S a egic I ems (a) The s ock is s o age a he company bu i
belongs o he supplie .
(b) The s ock is s o age a he supplie .
(c) Reducing MOQ (Minimum O de Quan i y)
(d) Supply o de adjus ed o a mul iple o he
packaging uni 1
Inc easing u no e s and
keeping high se ice le el
Medium olume / Medium p ice Keeping cu en eplenishmen s a egy based on
o ecas
Keeping e iciency and
high se ice le el
Low olume / Low p ice Adop ing a s ock policy based on posi ion s ock le el Inc easing e iciency and
keeping high se ice le el
1 This s a egy has been implemen ed i he MOQ could no be educed
Table 2. S a egies and bene i s o each aw ma e ial ca ego y
4. Conclusions
This case s udy has demons a ed ha he in eg a ion o Logis ic unc ions helps o achie e
highe se ice le el, educe holding cos and inc ease u no e s. The mos ou s anding esul s
a e:
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•Finish p oduc managemen :
−Excessi e holding cos in s a egic i ems could be a oided by educing p oduc ion
ba ches.
−In o de o keep e iciency and high se ice le el, a join an a inished p oduc
g ouping ba ch s a egy is ecommended o medium olume i ems.
−Excessi e holding cos in low olume and low p ice p oduc s could be a oided by
adop ing a MTO supply s a egy. I his s a egy canno be implemen ed due o lack
o supplie eliabili y, educing p oduc ion ba ches migh be app op ia ed.
•Raw ma e ial managemen :
−S a egic i ems u no e s may be inc eased by adop ing one o he ollowing
s a egies: supplie s ock kep a he company, supplie s ock kep a he supplie ,
MOQ educ ion o supply o de adjus ed o a mul iple o he packaging uni .
−In o de o keep e iciency and high se ice le el, a eplenishmen s a egy based
on cus ome o ecas demand is sui able o medium olume and p ice i ems.
−E iciency o low olume and p ice a icles could be inc eased by adop ing a s ock
policy based on posi ion s ock le el.
Acknowledgmen s
This wo k has been pa ially unded by Minis e io de Ciencia e Inno ación (DPI2011-26653).
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