Contents
Part I Introduction and Basic Framework
1 What Is a Supply Chain? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.1 Internal Supply Chain . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.2 External Supply Chain . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.3 Case: Strategic Partnership of UNIQLO and Toray . . . . . . . . . . 12
1.3.1 Before the Strategic Partnership . . . . . . . . . . . . . . . . . . 12
1.3.2 Forming the Strategic Partnership . . . . . . . . . . . . . . . . 14
1.3.3 Second and Third Five-Year Plan Under the Strategic
Partnership . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
1.3.4 Learn from the Strategic Partnership Between
UNIQLO and Toray . . . . . . . . . . . . . . . . . . . . . . . . . . 15
References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
2 The Strategy-Structure-Process-Performance Framework. . . . . . . . 19
2.1 Why Is the SSPP Framework Used? . . . . . . . . . . . . . . . . . . . . 19
2.2 What Is the SSPP Framework? . . . . . . . . . . . . . . . . . . . . . . . . 21
2.2.1 External Environment . . . . . . . . . . . . . . . . . . . . . . . . . 21
2.2.2 Strategy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
2.2.3 Structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
2.2.4 Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
2.2.5 Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
2.2.6 Relationships Among Management Elements . . . . . . . . 26
2.2.7 Other Elements? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
2.3 Case: Supply Chain Processes in Fujitsu’s Laptop Computer . . . 28
2.3.1 Products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
2.3.2 Business Meetings and Receiving Orders . . . . . . . . . . . 29
2.3.3 Forecasting and Planning . . . . . . . . . . . . . . . . . . . . . . 30
2.3.4 Procurement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
2.3.5 Manufacturing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
2.3.6 Shipment and Delivery . . . . . . . . . . . . . . . . . . . . . . . . 33
2.3.7 Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Part II Static Theory of Supply Chain Management
3 Performance Trade-Offs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
3.1 Performance Indicators . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
3.1.1 Efficiency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
3.1.2 Responsiveness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
3.1.3 Firm Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
3.2 Trade-Offs of Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
3.3 Case: Comparison of Inventory Performance
Between Toyota and Nissan . . . . . . . . . . . . . . . . . . . . . . . . . . 49
3.3.1 Inventory Turnover Days . . . . . . . . . . . . . . . . . . . . . . 50
3.3.2 Raw Materials Inventory Turnover Days . . . . . . . . . . . 52
3.3.3 Work-in-Process and Finished Goods Inventory
Turnover Days . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
3.3.4 Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
4 Supply Chain Strategies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
4.1 A Typology of Supply Chain Strategies . . . . . . . . . . . . . . . . . . 59
4.2 Efficiency-Oriented Supply Chain . . . . . . . . . . . . . . . . . . . . . . 61
4.3 Responsiveness-Oriented Supply Chain . . . . . . . . . . . . . . . . . . 63
4.4 Both Efficiency- and Responsiveness-Oriented Supply Chain. . . 66
4.5 Ideal and Real Supply Chain Strategies . . . . . . . . . . . . . . . . . . 70
4.6 Case: Zara’s Hybrid Strategy . . . . . . . . . . . . . . . . . . . . . . . . . . 71
4.6.1 Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
4.6.2 Zara’s Supply Chain Processes . . . . . . . . . . . . . . . . . . 72
4.6.3 Zara’s Supply Chain Strategy . . . . . . . . . . . . . . . . . . . 76
References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
5 Efficiency-Oriented Strategy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
5.1 Internal Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
5.2 Internal Structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
5.3 External Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85
5.4 VMI/CRP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87
5.5 External Structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89
5.5.1 General Theories . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89
5.5.2 Upstream Structure . . . . . . . . . . . . . . . . . . . . . . . . . . . 93
5.5.3 Downstream Structure . . . . . . . . . . . . . . . . . . . . . . . . . 94
5.6 Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97
5.7 Case: Japan Tobacco Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99
5.7.1 Company Profile . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99
5.7.2 Product Characteristics/External Environments . . . . . . . 99
5.7.3 Internal Supply Chain . . . . . . . . . . . . . . . . . . . . . . . . . 100
5.7.4 Upstream Supply Chain . . . . . . . . . . . . . . . . . . . . . . . 101
5.7.5 Downstream Supply Chain . . . . . . . . . . . . . . . . . . . . . 102
5.7.6 Comparison with the Theory . . . . . . . . . . . . . . . . . . . . 102
References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 106
6 Responsiveness-Oriented Strategy . . . . . . . . . . . . . . . . . . . . . . . . . . 109
6.1 Responsiveness-Oriented Supply Chain for Low-Innovation
Mass-Produced Products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 109
6.1.1 Internal Structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . 109
6.1.2 Internal Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 111
6.1.3 Upstream Structure . . . . . . . . . . . . . . . . . . . . . . . . . . . 112
6.1.4 Downstream Structure . . . . . . . . . . . . . . . . . . . . . . . . . 113
6.1.5 External Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 114
6.2 Responsiveness-Oriented Supply Chain for High-Innovation
Mass-Produced Products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 115
6.2.1 Internal Structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . 116
6.2.2 Internal Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 118
6.2.3 Upstream Structure . . . . . . . . . . . . . . . . . . . . . . . . . . . 119
6.2.4 Downstream Structure . . . . . . . . . . . . . . . . . . . . . . . . . 121
6.2.5 External Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 121
6.3 Responsiveness-Oriented Supply Chain for Customized
Products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 122
6.3.1 Internal Structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . 123
6.3.2 Internal Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 124
6.3.3 Upstream Structure . . . . . . . . . . . . . . . . . . . . . . . . . . . 125
6.3.4 Downstream Structure . . . . . . . . . . . . . . . . . . . . . . . . . 126
6.3.5 External Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 126
6.4 Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 127
6.5 Case: Nagano Tomato Co., Ltd.. . . . . . . . . . . . . . . . . . . . . . . . 129
6.5.1 Company Profile . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 129
6.5.2 Product Characteristics/External Environments . . . . . . . 130
6.5.3 Internal Supply Chain . . . . . . . . . . . . . . . . . . . . . . . . . 130
6.5.4 Upstream Supply Chain . . . . . . . . . . . . . . . . . . . . . . . 131
6.5.5 Downstream Supply Chain . . . . . . . . . . . . . . . . . . . . . 131
6.5.6 Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 132
6.5.7 Comparison with the Theory . . . . . . . . . . . . . . . . . . . . 133
6.6 Case: Daikin Industries, Ltd. . . . . . . . . . . . . . . . . . . . . . . . . . . 137
6.6.1 Company Profile . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 137
6.6.2 Product Characteristics/External Environments . . . . . . . 137
6.6.3 Internal Supply Chain . . . . . . . . . . . . . . . . . . . . . . . . . 138
6.6.4 Upstream Supply Chain . . . . . . . . . . . . . . . . . . . . . . . 139
6.6.5 Downstream Supply Chain . . . . . . . . . . . . . . . . . . . . . 139
6.6.6 Comparison with the Theory . . . . . . . . . . . . . . . . . . . . 140
6.7 Case: Toclas Corporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . 143
6.7.1 Company Profile . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 143
6.7.2 Product Characteristics/External Environments . . . . . . . 143
6.7.3 Internal Supply Chain . . . . . . . . . . . . . . . . . . . . . . . . . 144
6.7.4 Upstream Supply Chain . . . . . . . . . . . . . . . . . . . . . . . 145
6.7.5 Downstream Supply Chain . . . . . . . . . . . . . . . . . . . . . 145
6.7.6 Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 146
6.7.7 Comparison with the Theory . . . . . . . . . . . . . . . . . . . . 147
References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 151
7 Hybrid Strategy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 153
7.1 Internal Structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 153
7.2 Internal Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 155
7.3 Upstream Structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 156
7.4 Downstream Structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 157
7.5 External Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 159
7.6 Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 162
7.7 Case: Ricoh Company, Ltd.. . . . . . . . . . . . . . . . . . . . . . . . . . . 165
7.7.1 Company Profile . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 165
7.7.2 Product Characteristics/External Environments . . . . . . . 166
7.7.3 Internal Supply Chain . . . . . . . . . . . . . . . . . . . . . . . . . 166
7.7.4 Upstream Supply Chain . . . . . . . . . . . . . . . . . . . . . . . 168
7.7.5 Downstream Supply Chain . . . . . . . . . . . . . . . . . . . . . 170
7.7.6 Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 170
7.7.7 Comparison with the Theory . . . . . . . . . . . . . . . . . . . . 171
References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 176
Part III Dynamic Theory of Supply Chain Management
8 Overcoming Performance Trade-Offs . . . . . . . . . . . . . . . . . . . . . . . 181
8.1 The Principle for Overcoming Performance Trade-Offs . . . . . . . 181
8.1.1 The Base-Pivot-Function Model . . . . . . . . . . . . . . . . . 182
8.1.2 The Theory of Performance Frontiers . . . . . . . . . . . . . . 184
8.2 The Focus for Overcoming Performance Trade-Offs . . . . . . . . . 186
References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 187
9 Supply Chain Process Change . . . . . . . . . . . . . . . . . . . . . . . . . . . . 189
9.1 Viewpoints from Organizational Change Theory . . . . . . . . . . . . 189
9.1.1 Three Phases of Organizational Change . . . . . . . . . . . . 189
9.1.2 Organizational Problems and Solutions . . . . . . . . . . . . 190
9.2 Viewpoints from Process Change Theory . . . . . . . . . . . . . . . . . 193
9.3 What Is Supply Chain Process Change? . . . . . . . . . . . . . . . . . . 196
9.4 Modeling Supply Chain Process Change . . . . . . . . . . . . . . . . . 198
9.4.1 SCOR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 198
9.4.2 A Model Based on the Theory of Dynamic
Capabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 199
9.5 Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 204
9.6 Case: Kao’s Process Change . . . . . . . . . . . . . . . . . . . . . . . . . . 204
9.6.1 Company Profile . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 204
9.6.2 Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 204
9.6.3 Process Change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 206
9.6.4 Theoretical Interpretation: Theory of Performance
Frontiers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 211
9.6.5 Theoretical Interpretation: Supply Chain Process
Change Model . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 212
References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 213
10 Roles of the SCM Steering Department . . . . . . . . . . . . . . . . . . . . . 215
10.1 Viewpoints on the SCM Steering Department’s Roles . . . . . . . . 215
10.1.1 Is the SCM Steering Department in Charge
of Staff Role Only?. . . . . . . . . . . . . . . . . . . . . . . . . . . 215
10.1.2 What Kind of Staff Role Does the SCM Steering
Department Have? . . . . . . . . . . . . . . . . . . . . . . . . . . . 216
10.1.3 Is the SCM Steering Department Ongoing
or Ad Hoc? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 216
10.2 Before Transition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 217
10.3 In Transition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 220
10.4 After Transition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 222
10.5 Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 224
10.6 Case: Ricoh’s SCM Steering Department . . . . . . . . . . . . . . . . . 225
10.6.1 Starting the SCM Reforms . . . . . . . . . . . . . . . . . . . . . 225
10.6.2 Progressing the SCM Reforms . . . . . . . . . . . . . . . . . . . 226
10.6.3 Restarting the SCM Reforms . . . . . . . . . . . . . . . . . . . . 227
10.6.4 Continuing the SCM Reforms . . . . . . . . . . . . . . . . . . . 228
10.6.5 Comparison with the Theory . . . . . . . . . . . . . . . . . . . . 229
10.6.6 Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 232
References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 233
Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 235
Preface
This book about supply chain management (SCM) uses the strategy–structure– process–performance (SSPP) framework as a theoretical underpinning. The SSPP is a well-known framework of contingency theory in the areas of strategic management and organizational design. By utilizing this framework, the theory of SCM is positioned as one of the theories of management. Specifically, this book proposes a theoretical foundation for SCM that is shared among people with various backgrounds, such as operations management, logistics management, procurement management, and marketing.
This book treats both the static and dynamic sides of SCM. On the static side, supply chain strategies are divided into three types: efficiency-oriented, responsiveness-oriented, and both efficiency- and responsiveness-oriented (hybrid). The responsiveness-oriented strategy is further divided into three subtypes. For each strategy, suitable internal and external supply chain structures and processes are proposed.
On the dynamic side, the primary issue is overcoming performance trade-offs. Based on theories of organizational change, process change, and dynamic capabilities, this book presents a model of supply chain process change. The roles of the SCM steering department are discussed in the context of organizational structure. Referring to the theories in each chapter, cases from various industries are presented, including Fast Retailing (casual clothes), Fujitsu (personal computers), Toyota and Nissan (automobiles), Inditex (fast fashion), Japan Tobacco (tobacco), Nagano Tomato (juice and ketchup products), Daikin (air conditioners), Toclas (housing equipment), Ricoh (office imaging equipment), and Kao (cosmetic and household products). Some cases will facilitate an understanding of how to analyze the success and failure factors of SCM using the SSPP framework. The reader will systematically learn the strategy and organization of SCM based on the SSPP framework. More specifically, the relationships among the three management elements of strategy, structure, and process are identified in the SCM context. In addition, the reader will learn not only the static side of SCM, such as process operation, but also the dynamic side such as radical process innovation and incremental process improvement.