the relationships among supply chain characteristics logistics and manufacturing strategies and performance

UMI Number: 3093649













Copyright 2003 by
Gillyard, Angelisa Elisabeth


All rights reserved.

________________________________________________________

UMI Microform 3093649
Copyright 2003 ProQuest Information and Learning Company.
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Copyright by
Angelisa Elisabeth Gillyard
2003



ii







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.

iii










Dedicated to my Mother and Father
iv



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.

v



VITA

September 13, 1974 ………………………………Born - Atlanta, GA

1996 ………………………………………………B.S. Mathematics, Spelman College

1998 ………………………………………………M.S. Management, Georgia Institute of
Technology

2002 ………………………………………………M.A. 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.12.


vi
"Career Patterns of Women in Logistics," Martha C. Cooper and Angelisa Gillyard,
Council of Logistics Management Conference Proceedings, 2000, pp.75-97.
Cited in several trade publications, including Inventory Reduction Report, New
York, New York: IOMA, December 2000, pp.3, 5.



FIELDS OF STUDY

Major Field: Business Administration
Studies in Supply Chain Management
Minor: Logistics Management
vii



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 …………………….……… 25
Hypotheses 9 – 12 …………………… 30
The Model …………………………………… 34
Contributions ………………………………… 36


3 Methodology ………………………………… 38

Subjects ……………………………………… 38
Instrumentation ……………………….………

39
Supply Chain Type……………………. 39
viii
Manufacturing Strategy ………………

40
Logistics Strategy …….……………… 43
Performance ………….……………… 45
Procedures …………………………………… 46
Data Analysis …………………………………. 46

4 Results ………………………………………… 51

Description of the Sample …………………… 51
Preliminary Analysis ………………………… 52
Logistics Strategy …….……………… 52
Manufacturing Strategy ………………

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

ix



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 ……………

17

2.4 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 ………………

43

3.3 Logistics Strategy Scales for the Quality Priority …………… 44

3.4 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 ……… 48

3.7 Sample MANOVA Table for Logistics Strategy …………… 49

4.1 Industries Represented ……………………………………… 52

4.2 Logistics Strategy Factors and Factor Loadings ……………… 54

4.3 Logistics Factors and Cronbach Alphas ……………………….

56

4.4 Manufacturing Strategy Factors and Factor Loadings ……… 58
x

4.5 Manufacturing Factors and Cronbach Alphas …………………

59

4.6 Significant Correlations Among Supply Chain Characteristics . 61

4.7 MANOVA Results – Emphasis on Manufacturing Cost
Effectiveness as a Competitive Priority ………………………. 71

4.8 MANOVA Results – Emphasis on Logistics Cost
Effectiveness as a Competitive Priority ……………………….
71

4.9 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 ……………………… 76

4.13 Average Emphasis on Logistics Competitive Priorities ……….

76

xi



LIST OF FIGURES

Figure Page

1.1 Conceptual Model ………………………………………………… 8

1.2 Examples of Hypothesized Differences ………………………… 9

2.1 Strategy Formulation ………………………………………………

22

2.2 Relationships Previously Tested in the Literature …………………

32

2.3 Proposed Model ……………………………………………………

34

2.4 Components of Constructs in Model ………………………………

35

2.5 Components of Performance Construct in Model …………………

36

3.1 Expected Interaction Effects ……………………………………… 50



1



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
2
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
3
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. 108). They
define leanness as “developing a value stream to eliminate all waste, including time, and
to ensure a level schedule” (pg. 108).
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.
4

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.
1. Are there distinct supply chain types?
2. What characteristics contribute most to supply chain type determination?
5
3. 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. This diagram is

not designed to imply causality but to conceptually link the areas of interest in this study.
Figure 2 shows the hypothesized differences between supply chain types and their
relative emphasis on two of the four competitive priorities for both logistics and
manufacturing strategies. For example, it is hypothesized that successful firms
participating in lean supply chains will emphasize the cost priority in their manufacturing
and logistics functions more than firms in lean supply chains experiencing poorer
performance. Similarly, successful firms in agile supply chains will emphasize flexibility
more than less successful firms in agile supply chains.
A web survey of logistics and supply chain executives who are members of the
Council of Logistics Management (CLM) and employed manufacturing firms was used to
gather the needed data. Because CLM is often considered to be the premier logistics
organization, it is believed that members have sufficient working knowledge of supply
chain, logistics and manufacturing issues within their organization to accurately complete
the survey. In addition, executives (possessing the title manager or above) were chosen
because their high-ranking position should afford them a fairly comprehensive view of
6
the firm and its functional priorities. The sampling frame includes manufacturing firms
from multiple industries. Scales from previous studies and articles were used to compose
the survey.
The respondents were divided into two initial groups, those participating in lean
supply chains and those participating in agile supply chains. Once the supply chain type
was determined, members of each type of supply chain were divided into high and low
performers. Multivariate analysis of variance (MANOVA) was performed to detect
differences in relative emphasis for the competitive priorities among the groups.

Contributions
This study makes several contributions to the literature. First, the characteristics
of lean and agile supply chains can be empirically supported to further the development
of supply chain management theory. Much of the literature to date is conceptual with
little empirical support. Secondly, an alternative framework for logistics strategy is

presented. The framework parallels that of manufacturing strategy and encourages
integrative research using the two strategies. In addition, the framework will enable
advanced understanding of logistics strategy and priorities. Lastly, the relationships
among the type of supply chain, logistics and manufacturing strategies and their relation
to perceived performance can be empirically examined, thereby advancing supply chain
theory development as well.
This study imparts several managerial implications as well. First, the financial impact
of choosing logistics and manufacturing priorities that complement their type of supply
7
chain is more clearly demonstrated. In addition, practitioners are able to better identify
what types of priorities they possess, the type of supply chain in which they participate
and the most complementary combinations of those priorities given their strategic intent
and resources.
8

Figure 1.1: Conceptual Model
Supply Chain
Type
Logistics
Strategy
Manufacturing
Strategy
Performance

9

Figure 1.2: Examples of Hypothesized Differences

Manufacturing/Logistics Cost

Performance
Low High
Lean

Agile
Average
Cost
Emphasis

Manufacturing/Logistics Flexibility

Performance
Low High
Agile
Lean
Average
Flexibility

Emphasis

10

CHAPTER 2

LITERATURE REVIEW

The following chapter will discuss the relevant literature concerning supply chain
management, manufacturing strategy and logistics strategy.

Supply Chain Management
Researchers and managers have debated for approximately the last 15 years about
the definition of supply chain management. Some believe that SCM is just integrated
logistics properly implemented. Others view SCM as the integration of more functions
than just logistics (e.g. manufacturing with marketing and R&D, etc.). Cooper, et al.
(1997) point out the need for “the integration of business operations in the supply chain
that goes beyond logistics.” Discussion with members of the Global Supply Chain
Forum (GSCF) resulted in the following definition of SCM:

“Supply Chain Management 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).

11
The eight key processes identified are shown in Table 2.1. Each process is customer-
focused and aims to achieve superior product flows through the efficient use of
information along the supply chain.

12
Process Description of Process
Customer relationship
management

In the customer relationship management process, key customers are
identified and worked with closely to establish product and service
agreements that specify the levels of expected performance. Also,
customer service teams work with customers to further identify and
eliminate sources of demand variability.

Customer service
management

A single source of customer information is provided in this process. A
key point of contact for administering the product/service agreement is
established.

Demand management

Point-of-sale and “key” customer data is used to reduce uncertainty and
provide efficient flows throughout the supply chain.

Order fulfillment

Integration of the firm’s manufacturing, distribution and transportation
plans is performed in this process in order to guarantee timely and

accurately filled orders.

Manufacturing flow
management

Ideally, orders are processed on a just-in-time (JIT) basis where required
delivery dates drive production priorities. Furthermore, manufacturing
processes must be flexible enough to respond quickly to market changes.

Procurement

Long-term strategic alliances with a small core group of suppliers are
utilized in conjunction with rapid communication mechanisms (e.g. EDI,
Internet, etc.).

Product development
and commercialization

Customer Relationship Management is coordinated with this process to
identify customer-articulated and –unarticulated needs. Procurement is
involved in this process as well to select materials and suppliers.
Coordination with Manufacturing Flow Management is needed to
develop production technology and integrate into the best supply chain
flow for the product/market combination.

Returns

The Returns process enables identification of productivity improvement
opportunities.

Table 2.1: Eight Supply Chain Processes Proposed by Lambert and Cooper (2000).