a multi-tier study on supply chain flexibility in the automotive industry

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A multi-tier study on supply chain flexibility in theautomotive industry

Antonio Márcio T. Thomé a, Luiz Felipe Scavarda a, Sílvio R.I. Pires b, Paula Ceryno a,c,n,Katja Klingebiel d,e

a Industrial Engineering Department, Pontifícia Universidade Católica do Rio de Janeiro, Rio de Janeiro, Brazilb Methodist University of Piracicaba, São Paulo, Brazilc Production Engineering Department, Universidade Federal do Estado do Rio de Janeiro, Brazild Fachhochschule Dortmund University of Applied Sciences and Arts, Germanye Fraunhofer IML, Dortmund, Germany

a r t i c l e i n f o

Article history:Received 8 December 2013Accepted 22 July 2014Available online 1 August 2014

Keywords:Supply chain managementSupply chain constraintsAutomotive industryEmpirical studyBrazil

a b s t r a c t

Over the past two decades, the scope of some key subjects in operations management has extendedbeyond the single company to include supply chain (SC) partners and their interactions. One example ofsuch an extension is the contemporary concept of supply chain flexibility (SCF). Although there has beenconsiderable academic progress on SCF, most of the previous studies on this topic have been confined toa single firm, thereby neglecting other important aspects of a supply chain. Therefore, the developmentof empirical multi-tier studies capable of investigating the inter-organisational components of SCF isrequired. Within this context, this paper has the purpose of exploring the main effects of flexible SCcapabilities or their lack at various tiers that limit the SC's ability to provide products to end-customers.The research design was a multiple case study with internal and external validity checks, within-caseanalysis and cross-case comparisons, based on a research framework that scrutinises the relationshipsbetween SC contextual constraints and flexibility types. The study took place in three representative SCsof the Brazilian automotive industry and sought mainly to identify and compare SC contextualconstraints that hinder product delivery to end-customers. Constraints such as suppliers´ capacity,diversity of suppliers, suppliers´ cooperation, trust and commitment, tariffs, exchange rates andinventory were identified in different supplier tiers of the OEMs as the main factors influencing theobserved volume and mix flexibilities. Additionally, SCF types such as sourcing, relational, delivery,postponement, new product and responsiveness influenced the SC's flexibility provided to the end-customers.

& 2014 Elsevier B.V. All rights reserved.

1. Introduction

Over the past two decades, the scope of some key subjects inoperations management has extended beyond the single company toinclude supply chain (SC) partners and their interactions. Oneexample of such an extension is the current concept of supply chainflexibility (SCF) (Vickery et al., 1999; Lummus et al., 2003; Sawhney,2006; Winkler, 2008; Stevenson and Spring, 2009; Esmaeilikia et al.,2014). SCF broadens the existing debate on manufacturing flexibility

(Slack, 1987; Sethi and Sethi, 1990; Gerwin, 1993) by “looking atthose components that make an organisation flexible and [extend-ing] them beyond the organisation's boundaries to other nodes in thesupply chain” (Lummus et al., 2003, p. 3).

Given the importance of flexibility for achieving a competitiveadvantage (Stalk, 1988; De Meyer et al., 1989; Kekre andSrinivasan, 1990), it is unsurprising that researchers increasinglystudy how entire SCs can deliver flexibility to their customers.Although there has been considerable progress on this topic, thecurrent debate is still in its infancy. One major limitation of theliterature is that most of the previous studies in SCF are confinedto a single firm, thereby neglecting other important aspects of a SC(Moon et al., 2012). Various avenues exist for future research inSCF, and the development of empirical multi-tier studies capableof investigating the inter-organisational components of SCF is oneof them (Stevenson and Spring, 2007; Chandra and Grabis, 2009;Fatemi, 2010).

Contents lists available at ScienceDirect

journal homepage: www.elsevier.com/locate/ijpe

Int. J. Production Economics

http://dx.doi.org/10.1016/j.ijpe.2014.07.0240925-5273/& 2014 Elsevier B.V. All rights reserved.

n Correspondence to: Rua Marquês de São Vicente, 225 sala: 950L, 22453-900Gávea, Rio de Janeiro (RJ), Brazil. Tel.: þ55 21 3527 1285x1286;fax: þ55 21 3527 1288.

E-mail addresses: marcio.thome1@gmail.com (A.M.T. Thomé),lf.scavarda@puc-rio.br (L.F. Scavarda), sripires@unimep.br (S.R.I. Pires),paulaceryno@hotmail.com (P. Ceryno),katja.klingebiel@fh-dortmund.de (K. Klingebiel).

Int. J. Production Economics 158 (2014) 91–105

During the XX century, the automotive industry developed andbecame a reference for practically all other industrial sectors in anincreasingly global market. The accelerated global process ofproductive restructuring is at the origin of new factories withinnovative productive arrangements in emerging countries, espe-cially in terms of supply chain management (SCM). Therefore,interest in investigating supply chains in the automotive industryin these countries is growing (Pires and Sacomano Neto, 2008;Scavarda et al., 2010).

Within this context, this paper's purpose is to explore theeffects of flexible SC capabilities or the lack thereof at various tiersin three SCs of the Brazilian automotive industry, which limit theSC's ability to provide products to end-customers. The researchdesign was a multiple case study with internal and externalvalidity checks, within-case analysis and cross-case comparisons,based on a research framework that scrutinises the relationshipsbetween SC contextual constraints and flexibility types. In aneffort to study connected systems (rather than individual compa-nies and dyads), this research employs an approach similar toprevious multi-tier case studies (e.g., Holweg and Pil, 2008),aiming for representation of several tiers rather than a compre-hensive picture of any particular tier.

The structure of the paper follows the purpose of the study.Section 2 is a review of the literature and serves as the basis toelaborate the conceptual framework for the analysis of SCF. Theframework guides the research design and the choice of methodsdescribed in Section 3. The presentation of results is found inSection 4, followed by a discussion of the main findings in Section 5.Final remarks, conclusions and suggestion for future research closethe paper.

2. Theoretical background

Flexibility is a multi-dimensional concept with various facets(Slack, 1987; De Toni and Tonchia, 1998; Sánchez and Pérez, 2005;Stevenson and Spring, 2007; Gosling et al., 2010; Fatemi, 2010;Christopher and Holweg, 2011; Esmaeilikia et al., 2014). To under-stand which aspects of flexibility are within the scope of thecurrent investigation, this section begins by reviewing the keycontributions of the concept of manufacturing and SC flexibilities.Subsequently, previous contributions on empirical SCF researchrelevant to our case study are discussed. A discussion of contextualSC constraints that might hinder SC flexibility follows. The resul-tant conceptual framework used for the case analysis is introducedat the end of the section.

2.1. Manufacturing flexibility concept

The subject of flexibility is the focus of several contributions inrecent decades, including important contributions to the conceptitself. Five key aspects of manufacturing flexibility have beensuggested: (1) its types (e.g., Slack, 1987; Upton, 1994), (2) itsdimensions (e.g., Slack, 1987; Upton, 1994; Koste et al., 2004),(3) its timeframe (e.g., Zelenović, 1982; Carlsson, 1989; Upton,1994), (4) its hierarchy of capability (e.g., Koste and Malhotra,1999) and (5) its uses (e.g., Gerwin, 1993; Sawhney, 2006; Hallgrenand Olhager, 2009).

Because flexibility is commonly associated with the ability tochange or react (Upton, 1994; De Toni and Tonchia, 1998), a centralaspect of flexibility is the object of change (e.g., “What is it thatchanges?”). This aspect is commonly referred to as the flexibilitytype (Slack, 1987; Suarez et al., 1996). According to Slack (1987),there are four types of flexibility in a manufacturing system:product, mix, volume and delivery. Product flexibility refers tothe system's ability to introduce new products or make

modifications to existing ones. Mix flexibility denotes the abilityof a system to alter its product mix (keeping overall output stable),while volume flexibility refers to a system's ability to change itsoverall production volume. Finally, delivery flexibility denotes asystem's ability to change planned delivery times (or sequences)for existing orders. Upton (1994) suggested a distinctionbetween “external” and “internal” flexibility. External flexibilityrefers to the flexibility types that matter to the system's customers(e.g., “What the customer sees”, Upton, 1994, p. 75), while internalflexibility comprises all types that are internal to the system andare used to deliver external flexibility (e.g., “What can we do”,Upton, 1994, p. 75). Internal flexibility is also referred as compe-tency (machine, labour, material handling, and routing flexibil-ities) and external flexibility as capability (volume flexibility andmix flexibility) (Upton, 1995). External flexibility is commonlyunderstood to include the four types originally suggested by Slack(e.g., Suarez et al., 1996; Pagell and Krause, 2004; Sawhney, 2006),while the number of internal flexibility types appears to dependon the specific operational setting. Zhang et al. (2003) foundstrong, positive, and direct relationships between flexible manu-facturing competence and flexible capability, and customersatisfaction.

In addition to different types, flexibility has three differentmeanings (or dimensions): range, response (cf. Slack, 1987) anduniformity (cf. Upton, 1994). Flexibility range denotes the spec-trum of states that a system can take, such as the total number ofproducts a manufacturing system can produce (e.g., its productvariety) or the range of output volumes at which it can operate.Flexibility response refers to the ease (in terms of time and/orcost) with which the system can adjust within its given range (e.g.,how long it takes to switch production from product A to product B).Finally, flexibility uniformity measures the performance distributionof the system over its range (e.g., the ability of the system toproduce similar unit costs at different output levels). Koste et al.(2004) have suggested dividing the range dimension into range-number and range-heterogeneity to account for the degree ofdifferences between the states a system can take. While range-number continues to be a measure for the absolute number ofstates (e.g., the absolute product variants a system can produce),range-heterogeneity denotes the differences between these states(e.g., a system that produces 100 different variants of the sameproduct may be less flexible than a system that produces fivecompletely different single-variant products).

Another key characteristic is the timeframe (Zelenović, 1982;Carlsson, 1989; Upton, 1994). For example, a system may be veryflexible in the long term but shows almost no flexibility within anoperational time horizon of a few days. Carlsson (1989) provides agood discussion of three key timeframes, operational, tactical andstrategic flexibility.

Koste and Malhotra (1999) classify flexibility dimensions in ahierarchy of flexibility capability comprised of the levels ofstrategy (business unit), functional (R&D, marketing, manufactur-ing, organisational and system), plant (new product, volume, mix,modification and expansion), shop floor (operations and routing)and individual resource (labour, machine and material handling).The levels of flexibility in the hierarchy are viewed as a cone fromindividual resource to strategy, suggesting that firms gain inflexibility scope as they progress from bottom-up in the cone.

Furthermore, some authors have noted the difference betweena proactive and reactive use of flexibility (Gerwin, 1993; Upton,1994; Sawhney, 2006; Stevenson and Spring, 2007).

2.2. Supply chain flexibility concept

Research into the flexibility of SCs is relatively new, with thefirst contributions in this field appearing in the late 1990s (Fisher,

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1997; Lowson et al., 1999; Vickery et al., 1999). Fatemi (2010)describes the basic idea behind the extension of the flexibility intoSCs: “Now-a-days researchers emphasise that it is important tolook beyond the flexible factory to the flexible SC(…). As the SCextends beyond the enterprise, SCF must also extend beyond onefirm's internal flexibility (p. 140)”. According to Moon et al. (2012),SCF involves the application of SC resources according to marketdynamics, and requires firms to develop cross-functional andcross-company strategies that eliminate bottlenecks and create alevel of performance that allows firms to strengthen their compe-titive advantage in an uncertain market.

The current literature on SCF covers a range of foci (forcomprehensive literature reviews in SCF, see Stevenson andSpring (2007) and Fatemi (2010); and for SCF planning models,see Esmaeilikia et al. (2014)). For example, Fisher (1997), Randalland Ulrich (2001), Lee (2002) and Qi et al. (2009) study therelationship between SC structure, product structure and externalenvironment. Similar to the literature on manufacturing flexibility(e.g., Swamidass and Newell, 1987; Berry and Cooper, 1999), theseauthors conclude that flexibility does not always lead to higherprofitability; the level of flexibility needs to be aligned or fit withthe requirements placed upon the SC. Another focus of SCF is thedesign of SCs. Chandra and Grabis (2009) present potential toolsand techniques for designing and modelling flexibility in SCs,Graves and Tomlin (2003) study how SCs can cost efficientlydeliver mix flexibility based on a mathematical model and sub-sequent simulation. Tsay and Lovejoy (1999) and Liao et al. (2010)have contributed to the topic of SCF measurement by studyinghow to quantify flexibility and its impact in the SC performance.Kumar and Deshmukh (2006) present a model of manufacturingwith attempts to enhance the SCF through a volume multipleassembly line to fulfil the objectives of customisation alongwith timely delivery. Gosling et al. (2010) have examined howbuying organisations can configure their supply networks toachieve SCF, while Lee et al. (2009) have studied supplier alliancesin environmental uncertainty, showing their impact on flexibilityand suggesting that firms should avoid close supplier relationshipsin uncertain environments to gain flexibility in switchingsuppliers.

A range of inter-organisational flexibility types complementsthe flexibility concept. According to Lummus et al. (2003) andStevenson and Spring (2007), these include re-configuration flex-ibility as the potential to re-align or re-invent the SC, relationshipflexibility as the ability to build collaborative relationships both upand downstream, and logistics flexibility as the potential to rapidlysend and receive products cost efficiently. For Duclos et al. (2003)logistics flexibility is the ability to cost effectively receive anddeliver products as sources of supply and customers change.Fatemi (2010) proposes postponement flexibility as the ability tokeep products in their generic form as long as possible down-stream in the SC to incorporate the customer's product require-ments in later stages and sourcing flexibility as the ability to findanother supplier for each specific component or raw material.Esmaeilikia et al. (2014) offers a three-dimensional frameworkquantifying SCF measures that can be used for tactical SC planningand optimisation based on supply flexibility (e.g., flexibility inprocurement and sourcing processes), manufacturing flexibility(e.g., flexibility in manufacturing and assembly processes), anddistribution/logistics flexibility (e.g., flexibility in transportationand warehousing processes).

While these new flexibility types are relevant for the inter-organisational discussion within the SC, we argue that these typesconstitute internal types of flexibility because the end-customerdoes not care how the SC manages to be flexible (e.g., by addingnew partners when required or by linking existing partners byflexible logistics). The customer's concern is with the four external

types, such as whether the SC can introduce novel products orchange its product mix, volume or delivery arrangements accord-ing to the customer's requirements. As previously highlighted,these external types have been considered in the manufacturingflexibility context (Slack, 1987). However, the debate shouldencompass the SC beyond a single manufacturing system. Fromthis perspective, volume flexibility requires close coordinationbetween a firm and its suppliers, especially in the face of increas-ing demand. This external flexibility type directly affects supplychains' performance by preventing out-of-stock conditions forproducts that are suddenly in high demand or by preventing highinventory levels (Fatemi, 2010). The ability to rapidly introducenew products and product variety and to adapt lead times tocustomers' requirements (delivery) are external flexibility typesthat require the integration of numerous value activities across theSC (Fatemi, 2010).

2.3. Supply chain flexibility empirical studies

Despite the increasing importance of the topic, few empiricalcontributions investigate the structure of SCs from a flexibilityviewpoint. Chang et al. (2006) extend the knowledge of manufactur-ing flexibility regarding its integration with SC activities, focusing onsupplier involvement in the motherboard industry in Taiwan. Theyfind that supplier involvement plays a major role in the developmentand performance of a firm's manufacturing flexibility. However,although they consider part of the supply chain, their focus isrestricted to manufacturing flexibility. Sawhney (2006) investigatesthe interplay between uncertainty and flexibility in the SC anddiscusses how the processes in a SC interact to deliver flexibility.This author proposes a transformation framework that articulateshow managers can configure flexibility simultaneously between theproactive and the reactive uses that coexist in a firm's day-to-dayoperations. However, a key shortcoming of Swahney's study is alsoshared by other authors (see Vickery et al., 1999; Swafford et al.,2006; Hua et al., 2009; Merschmann and Thonemann, 2011; and theconclusions reached by Stevenson and Spring (2007) on theirliterature review on SCF): it does not study the companies (tiers) inan interconnected way. It treats the flexibility of SC partners as asecondary input and not as it actually occurs.

Sánchez and Pérez (2005) also do not consider connected firms,but they treat the flexibility of SC partners as a primary input toexplore the relationship between the dimensions of SCF and firmperformance in Spanish automotive suppliers. They show that com-panies enhance more the basic flexibility capabilities (at the shop floorlevel) than aggregate flexibility capabilities (at the customer–supplierlevel). More recently, Moon et al. (2012) develop a multifaceted scalefor SCF through an empirical study among firms. These authorsdetermine how an instrument with a set of multi-item measurementscales representing the SCF construct could be developed and vali-dated. Although they have included many firms within the textile andclothing industry in China, they also do not focus on connected firmswithin a given SC. The empirical study of Avittathur and Swamidass(2007) embrace connected firms within the SC to investigate the effectof the match between buyer and supplier flexibilities on the perfor-mance of U.S. manufacturing plants located in India. Nevertheless,their study is limited to multi-tier pairs (manufacturer/supplier).Stevenson and Spring (2009) investigate the specific inter-firm prac-tices that are used to achieve increased flexibility in multi-tier pairsand in the wider SC and how these practices and effects interact.To date, their study is the closest to the objectives of this currentinvestigation. However, a key shortcoming of their study, also sharedby Avittathur and Swamidass (2007) and the other empirical studieson SCF, is that they did not examine the constraints in a SC that limitits ability to deliver products to end-customers.

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2.4. Supply chain constraints

At this point, it is important to define the use of the termconstraint in this paper. Goldratt and Cox (1984) initially used theterm bottleneck to describe a physically limiting element, such as amachine or a worker. Later, these authors acknowledged thatproduction is a complex system that involves elements such asresources and capabilities, making the identification of real bottle-necks difficult. Hence, Goldratt and Cox (1992) used the termconstraint to describe the elements that restrict the throughputand goal. Thus, the term constraint is used in this paper foreverything that restricts the SC throughput and goal. Whenapplied to the SC, constraints can be internal (e.g., raw material,capacity and distribution) or external (e.g., market and supply).In addition, the main sources of SC constraints can be physical(raw material shortages, limited capacity resources, limited dis-tribution capacity, and lack of customer demand) and non-physical(obsolete rules, procedures, measures, training, and operatingpolicies) (Simatupang et al., 2004). The SC constraints can beclassified in network, institutional and infrastructure contextualdimensions and their impact on SCM may be felt on an operationalor strategic level (Lorentz et al., 2012).

Table 1 exhibits different SC constraints offered in the literatureclassified within the contextual dimensions.

The use of the terms “capacity” (e.g., output) and capability(e.g., quality or technological state of the system) in this study isconsistent with Sethi and Sethi (1990). The lack of manufacturingcapacity at different tiers of the SC hinders sourcing and volumeflexibility. It might hinder the ability of a system to expand, in thesense of the expansion flexibility in Koste and Malhotra's (1999)framework. It can equally hinder the ability to expand or contractproduction without laying off workers, as in the original meaningof Bylinsky's_(1983) classic example of a volume flexible auto-mated machine tool plant of 215 workers, which was equivalent toa conventional factory employing 2500 people (Sethi and Sethi,1990; Koste and Malhotra, 1999). From a Theory of Constraints(TOC) standing point, the flexibility as well as speed and punctu-ality are strictly related to the presence of capacity slack (excess)or “protective capacity”. In this sense, the points of supply chainsthat do not have capacity slack are considered constraints. Ideally,the constraints should be closer to customers and market demand.Hence, all resources (of manufacturing or not) throughout the SC,should have a capacity slack, which is seeing as a necessity toobtain a quick, balanced and predictable material flow. In thissense, flexibility ends up being a common feature in companiesadopting TOC (Cox and Schleier, 2010). The distinction among thethree dimensions of SC constraints of infrastructure, institutionsand network (Lorentz, 2009; Lorentz et al., 2012) is of paramountimportance for the research framework, as it regroups constraintsin a logical set. Barriers to flexibility and actions to overcome themwill vary according to the locus of the SC constraints dimensionsand flexibility types. The cross-reference of contextual constraintsto flexibility types guided field observation, as described furtherunder Section 3.4 and Appendix Table A2.

In closing this review, it is worth reinforcing that one majorlimitation of the literature is that most previous studies in SCF areconfined to a single firm or dyads and they do not investigate SCconstraints to flexibility. This opens important avenues for multi-tier studies investigating the inter-organisational components ofSCF, in light of SC constraints.

2.5. A SCF conceptual framework

A summary with the key flexibility concepts provided herein isoffered in Table 2.

The conceptual framework of this study is presented in Fig. 1.It is based on the SCF literature review summarised in Table 2 andwas adapted from Kumar et al. (2006), who reviewed andintegrated 12 SCF frameworks, including those quoted in ourliterature review. The framework of Fig. 1 incorporates the SCconstraints contextual dimensions from Lorentz et al. (2012) aswell, and serves as the basis for the within and cross-case analysis.

The framework of Fig. 1 embraces the strategic, tactic andoperational levels of the Koste and Malhotra (1999) typology ofmanufacturing flexibility. From top-down, the framework depictsthe overarching influence of the environment, business missionand manufacturing and marketing strategies over the types anddimensions of SCF. The environment, business mission and strat-egy directly interact with new product and modification/respon-siveness flexibilities. Flexibility types such as sourcing, product,delivery, relationship and postponement, as well as SC constraints,are situated in this framework in the interplay of SC members,from the 2nd and 1st tier suppliers to manufacturers, distributorsand end-customers. The interaction of SCF and SC constraintsresults in implemented and observed levels of flexibility types,which might or might not fit the SC structure and the environ-ment. Flexibility implementation and fit will affect SC perfor-mance, which in-turn interacts with the environment, mission andstrategies in the SC.

The dotted rectangle in Fig. 1 is the focus of the research andanalysis presented in this study: the types of flexibility imple-mented, observed and their fit or absence thereof with SCrequirements. Particular attention was devoted to the extensionof the types of manufacturing external flexibility of volume, mixand delivery to the SC through the analysis of inter-firm flexibilitytypes.

3. Research design and methodology

This section describes the methods used for data collection andanalysis, chosen based on the conceptual framework of sub-Section 2.4. After a brief explanation of the method, samplingselection, research propositions, within-case and cross case valid-ity checks, the protocol and observational guidelines adopted fordata collection and analysis are introduced.

3.1. The method

The research was conducted through a multiple case studyapproach (Yin, 2008). Case study is indicated especially for theinvestigation of contemporary phenomena in a real life context,when the boundaries between them are not clearly definedand where the researcher observes the facts and attemptsto understand, systematise and analyse them. It is prone toanswer questions about why and how, such as those addressedin the search for flexibility presence/absence in the SCstudied. Furthermore, it is the method of choice for exploratoryresearch in an emergent field such as SCF (Voss et al., 2002; Yin,2008).

3.2. Sampling

Conceptual representativeness governed case selection forsampling, as opposed to a statistical sampling searching forrepresentativeness of the population at-large. Cases that representthe concept domain under investigation were selected (e.g., flex-ibility types in the automotive industry in Brazil). An additionalconsideration in selecting the SC was the possibility of investigat-ing several tiers rather than a buyer–supplier dyad, in accordancewith the study objectives. Therefore, this study took place in three

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Table 1SC constraints: a review.

Supply chainconstraints

Contextualdimensions

Holt(1999)

Törnroos andNieminen(1999)

Holt andButton(2000)

Tan(2001)

Simatupanget al. (2004)

Meixell andGargeya(2005)

Arviset al.(2007)

Lorentz(2009)

Meloet al.(2009)

Tominoet al.(2009)

Kesenet al.(2010)

Souza andPires(2010)

Tynjälä(2011)

Amraniet al.(2011)

Costantinoet al.(2012)

Lorentzet al.(2013)

Limet al.(2014)

Inventory (storage,backorders, riskpooling)

N X X X X X X X X

BOM including spareparts

N X X X

Diversity of suppliers N X X XSuppliers´ capacity N X X X X XCapacity of local links N X XSales and operationsconstraints

N X X

Flexibility rates a N X X XDistribution channels N X X X XBudgets N X XFinancial incentives N XCustomer demand N X XCountry's logisticsperformance (LPI)

In X X

Country's logisticalInfrastructure (e.g.,roads, ports)

In X X X X

Cooperation, trust andcommitment

I X X X

Culture/Language I X XGovernment policies I X XTariffs and duties I XNon-tariffsinternational tradebarriers

I X X

Exchange rates I XWorkers skills/availability/training

I X X X

Commerciallegislation

I X X

Contextual dimensions – I: Institutional; In: Infrastructure; N: Network.a Flexibility rate is a percentage of the allowed modifications to known orders.

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.T.Thoméet

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95

supply chains, two of which are among the five supply chains withhigher sales volume of automobiles in Brazil in the last years. In aneffort to study connected systems, as opposed to individual

companies and dyads, this research adopted an approach similarto previous multi-tier case studies (e.g., Choi and Hong, 2002;Holweg and Pil, 2008), aiming for representing many tiers and

Table 2Manufacturing and SC flexibilities: a summary of key features.

Categories Characteristics References

Manufacturing flexibilityTypes External: product, mix, volume, delivery Slack (1987), Upton (1994), Upton (1995), Suarez et al. (1996),

De Toni and Tonchia, (1998), Pagell and Krause (2004), Sawhney (2006)Internal: context/operation specificDimensions Range (number and heterogeneity) Slack (1987), Koste and Malhotra (1999), Koste et al. (2004)

Response Slack (1987)Uniformity Upton (1994)

Time-frame Short-long term; strategic-tactic-operational Zelenović (1982), Carlsson (1989), Upton (1994)Hierarchy of flexibilitycapability

Strategy, functional, plant, shop floor and individualresource levels

Koste and Malhotra (1999)

Uses Proactive/reactive Gerwin (1993), Upton (1994), Sawhney (2006), Hallgren and Olhager (2009)

Supply chain flexibility (SCF)Foci Relationships between SC, product and the environment Fisher, (1997), Randall and Ulrich (2001), Lee (2002), Sawhney (2006),

Qi et al. (2009)SCF design Graves and Tomlin (2003), Chandra and Grabis (2009)SCF measurement and effect on SC performance Tsay and Lovejoy (1999), Liao et al. (2010)Customisation Kumar and Deshmukh (2006)Purchasing/suppliers Chang et al. (2006), Gosling et al. (2010), Lee et al. (2009)

Inter-firm flexibility types Re-configuration, relationship, Lummus et al. (2003), Stevenson and Spring (2007)Logistics Duclos et al. (2003), Lummus et al. (2003), Stevenson and Spring (2007),

Esmaeilikia et al. (2014)Postponement flexibility, sourcing Fatemi (2010), Esmaeilikia et al. (2014)

SCF empirical researchRelationships Early supplier involvement Chang et al. (2006)

SCF sourcing flexibility (buyers and suppliers) Avittathur and Swamidass (2007)Inter-firms relations Stevenson and Spring (2009)

Context-structure Uncertainty environment and flexibility in the SC Sawhney (2006), Lee et al. (2009)Impact SCF and firm performance Sánchez and Pérez (2005)Measurement Multi-item measurement scale development for SCF Moon et al. (2012)

Fig. 1. Supply chain flexibility conceptual framework (adapted from Kumar et al. (2006) and Lorentz et al. (2012)).

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their interactions rather than a comprehensive picture of anygiven tier. This is in line with the argument of Choi and Liker(2002, p. 202) that “it is certainly easier to get data on dyadicrelationships, but the more challenging and perhaps more inter-esting questions involve longer supply chains. This is where thekey system dynamics will be revealed.” The respondents of theOEMs' of each SC acted as key informants (Yin, 2008) and helpedthe researchers during the interviews to identify key first-tiersuppliers that could participate in the research. This procedurewas also conducted with these first tier suppliers towards identi-fying the second-tier suppliers to be included. The main goal wasto assemble a representative picture of actors across the main tiersof the supply chains.

3.3. Validity checks

Any finding or conclusion in a case study is likely to be muchmore convincing and accurate if they pass construct, internal,external and reliability checks (Yin, 2008). As a check forconstruct validity, this research used a multitude of data sources.Combining sources of evidence, while shifting between analysisand interpretation, usually denotes triangulation (Denzin,1978; Yin, 2008), as an attempt to guard against researcher biasand to establish a line of evidence during within-case analysis(Taylor and Bogdan, 1984). Triangulation has been sought bothwithin firms, by comparing the interview responses andfield visit observations, and between firms, by comparing theresponses of inter-related firms, similarly to the method used byStevenson and Spring (2009) in their multi-tier study. Internalvalidity was checked against the conceptual framework,scrutinising for pre-established flexibility types and SC contextualconstraints in each SC, through pattern matching by comparingflexibility types and constraints among SC and by checksfor rival explanations when discrepancies were encountered(Yin, 2008). The conceptual framework of Section 2.4 and areplication logic were used for an external validity check and toguard against undue generalisations. The adherence to the casestudy protocol was reinforced during data collection to strengthenthe reliability of findings. The field notes and meetings wereguided by the observational guidelines of Appendix Table A2. Theywere scrutinised by at least four researchers, using the dataanalysis strategy of replication and rival theories proposed byYin (2008). Internal and external validity checks guided theanalysis of results.

3.4. Field work protocol

The fieldwork protocol was guided by a single research question,based on theory and the conceptual framework of Section 2.4: howdo flexibility types observed fit with SC requirements and con-straints affect SC ability to provide products to end-customers?

Data were gathered during the second half of 2011. Sources ofevidence were literature search and documentary reviews, open-ended interviews with executives of different stakeholders andfield visits for direct observation.

The research team consisted of four members who jointlyconducted the interviews and plant visits. Interviews were con-ducted with 18 senior executives from three different SCs in theBrazilian automotive industry, covering three or four of their tiers.These interviews were based on a semi-structured questionnairedesigned for this purpose (Yin, 2008) respecting the interviewprotocol adapted from Manuj and Sahin (2011) and depicted inAppendix Table A1. Open-ended questions were sufficiently broadas to elicit non-induced answers from respondents at the focalpoint of retailers (dealers). A more focused set of questions aimingat corroboration of findings were addressed in the subsequentinterviews in a bottom-up, customer-centric approach as theinterviews moved up the focal point in the SC (for a distinctionbetween open-ended and focused questions, see Yin (2008); for asimilar type of general inquiring in exploratory case studies, seeVoss et al. (2002), Table 2, p. 200). The more focused questions areregrouped in the observational guideline provided in AppendixTable A2. The guidelines are based on the conceptual framework ofFig. 1 and intend to assist interviewers during field visits to mapthe three dimensions of SC contextual constraints of institutions,infrastructure and network (Lorentz, 2009; Lorentz et al., 2012) forthe flexibilities types of new product, responsiveness, sourcing,product, relational, delivery and postponement. It is worth notingthat the tiers (companies) investigated are connected and main-tain client–supplier relationships (or vice versa) in the supplychain. Furthermore, data collection began at the distributionchannel (car dealerships and OEMs' regional sales offices) of eachof the three SCs with the goal of identifying the main cases ofoperational volume, mix and delivery flexibility constraints toend-customers. Face-to-face interviews were conducted at thedealers, OEMs' regional sales offices, vehicle assembly plants andtier-1 suppliers. These interviews lasted between 2 and 4 h andwere followed by field visits to the plants for direct observation.The interviews with tier-2 suppliers lasted 1 h and were con-ducted by telephone. A member checking process was also

Table 3Number of interviews and position of interviewee in the studied companies.

SC Interviews conducted with

Tier 2 supplier Tier 1 supplier OEM Distributors

A – Director/electronic injection supplier– Director/engine blocks and crankshafts

supplier

– General manager/engine plant – Logistics general manager– Production planning manager

– Sales manager/car dealer– Sales manager/OEMs' regional

office

B – General manager/power steeringsupplier plant

– General manager/alloy wheelsupplier plant

– Production planning manager– Procurement manager

– Sales manager/car dealer– Sales manager/OEMs' regional

office

C – Production manager/seat supplier plant – Logistics general manager– Production planning manager

– Sales manager/Car Dealer– Sales manager/OEMs' regional

office

A.M.T. Thomé et al. / Int. J. Production Economics 158 (2014) 91–105 97

conducted with the same managers in order to validate theresearchers' results findings and analyses (Bloor, 1997). This wasaccomplished by showing the data analysis to the participants toallow them to evaluate and provide feedback about the accuracy ofthe researchers' understanding. This validation process was per-formed face to face in the executives' offices.

Table 3 summarises the number of interviews and position ofinterviewee in the studied companies.

4. Supply chains studied

Hereafter, the three supply chains studied are described andanalysed under the perspective and purpose of the research. Thefirst sections cover the supply chains individually and the lastoffers the cross cases analysis. Fig. 2 presents an overview of thethree supply chains highlighting the SC members included.

4.1. Supply chain A

This SC is already well established and responsible for produ-cing and distributing vehicle models from a multinational OEM,including one of the best-selling passenger cars in South America.Most of these models belong to the low-cost subcompact marketsegment, and most of their sales include a 1.0 l engine.

In recent years, the Brazilian auto market has experiencedsignificant and beyond expected demand growth. As a result, dealersand OEM's regional sales departments increased their orders to OEMplants. However, during the interviews at the distribution channel, itwas evident that two external flexibility types regarding the mostpopular vehicle model limited end-customers' choice. The limitationswere volume, as the market demand for this model was higher thanthe dealers' offerings; and the mix of the available offer, as the engine

requested by the market was the 1.0 l, and the engine offered bymost dealers was the 1.6 l.

One significant constraint in the SC was the engine plantcapacity for both 1.0 and 1.6 l. Although this first-tier suppliercould enhance its overall output from 454,000 engines to 555,000(more than 20%) just by implementing flexible labour forcejourneys and contracts, this increase was not sufficient to meetthe end-customers' new demand. From this perspective, this first-tier supplier capacity creates a supply-chain constraint by restrict-ing volume flexibility, resulting in a loss of sales to end-customers.This supplier decided to invest US $50 million to increase its dailyproduction from 1964 to 2300 engines. In 1 year, the investmentshould conclude, and the plant should be able to meet thedemand. A potential constraint could then arise in second-tiersuppliers, especially those responsible for the engine blocks andcrankshafts. Both OEM and engine suppliers are aware of thispossibility and are negotiating capacity increases with thesesecond-tier suppliers, but this requires significant investmentand time for negotiations. The second-tier supplier has twoproblems increasing its volume capacity. The first is the highinvestment for the tools for machining crankshafts and the time tostart the new production (up to 2 years). Another problem is thatsecond-tier suppliers are afraid of a future demand decrease thatwould make them idle again, which happened in the late 1990safter a boom in demand and high investment in capacity in Brazil'sautomotive industry. These facts create a SC constraint due to alack of supplier capacity as well as cooperation, trust and commit-ment between SC members.

The engine case offers another interesting perspective andhighlights another SC constraint by a second-tier supplier thatlimits the chain's ability to provide flexibility to its end-customers.The aforementioned increase in demand was stronger for themodels and versions with a 1.0-litre engine, but the volume

Fig. 2. An overview of the three studied supply chains.

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production increase was limited at the vehicle assembly plantsdue to a lack of this specific engine. From this perspective, the SCconstraint was not the engine plant capacity itself, but its depen-dency on a sole source supplier of electronic injection. Thissecond-tier supplier could not meet the engine plant's demandfor the 1.0-litre engine because its production was designated foranother customer with priority (another OEM that was also thesupplier's owner), resulting in a lack of cooperation, trust andcommitment within SC A. Because this engine component was a“black box” developed under an early supplier involvement (ESI)approach and the development of a new supplier requires timeand investment, the engine plant increased the production ofanother engine type (1.6 l) with another electronic injectionsupplier that could increase its volume sales. The availability ofmore 1.6-litre engines made the OEM produce more models usingthese engines. As a result, these models were pushed to dealers,resulting in a mix flexibility limitation to end-customers thatabsorbed the 1.6-litre engine vehicles with discounts. In themeantime, the electronic injection supplier for the 1.6 l enginewas developed to supply the component for the 1.0 l engine.

During the interviews with the managers of the OEMs and theengine plants, it was possible to identify another case in whichconstraints in the SC at the second-tier supplier level limited thechain's overall ability to provide flexibility to its end-customers.This case resulted from an unexpected supply process breakdown.One second-tier supplier responsible for two key components ofthe diesel engines had to stop production due to financialproblems. Because it was a single sourcing operation, operatingunder the SC constraint of a lack of diversity of suppliers, theengine plant of SC A could not produce diesel engines to deliver tothe vehicle assembly plant, which led to cancellations of sales bythe OEM of vehicle models and versions with this fuel for severalmonths. A new second-tier supplier was developed, but in theshort term, there was a loss in sales and a high inventory level ofdiesel engine components that could not be used.

4.2. Supply chain B

This SC produces different vehicle models in Brazil. One ofthese is a highly valued compact model that is consideredsophisticated for the South American market. Therefore, its end-customers are more demanding of quality and product variety.Another significant model produced is a low-cost subcompactvehicle that is largely exported to other South American markets.The SC B also had shortcomings with component suppliers. Airconditioning, power steering and alloy wheels capacities wereidentified as the main constraints for the two vehicle models.

The first two components influenced the production mix of thevehicle assembly plants because these plants had to consider thesupply capacity constraints of the component suppliers' production.Thus, the OEM sales department could not offer dealers more carswith these components, resulting in a forced “push” to dealers witha mix that was not ordered. This was a significant issue for thehighly valued compact model, where only 60% of the dealers' orderscontaining air conditioning were delivered with the component bythe OEM. Again, the supply chain's ability to provide flexibility to itsend-customers was limited. In the case of these components, thelimitation for the end-customer was the mix caused by volumecapacity from the OEM plant's first-tier suppliers. End-customers ofthe low-cost subcompact model were not completely disappointedbecause dealers were able to configure some of the units at theirpoints of sales with these missing components. However, this actionwas not successful for the highly valued compact model becausethe customers were more demanding of product quality and wereconcerned about the late configuration service performed at thedealerships rather than at the vehicle assembly plants. The SC

reaction took 2 months. A new contract was developed with thepower steering supplier that involved a larger volume of procure-ment so that the first-tier supplier could contract and train newemployees. Meanwhile, flexible labour force journeys were used toincrease the production level. A second air conditioning supplierwas selected because the current supplier could not cover the gapin demand for this component.

The supplier capacity of alloy wheels offers another interestingconstraint. Depending on the vehicle model, the consequence toend-customers was different. For the cheap subcompact model,there was a mix flexibility limitation to end-customers because themodel was pushed downstream with steel wheels instead of alloywheels. For the highly valued compact model, there was a volumeflexibility limitation. Because this model could not be pusheddownstream with steel wheels due to its basic configuration, theOEM had to reduce its production at the vehicle assembly plant.The potential end-customers for this model were disappointedbecause the units delivered to dealers were insufficient to meetthe demand, resulting in lost sales. Within the next 6 months, theOEM resorted to its relational flexibility negotiating an increase inproduction capacity with the alloy wheel supplier because it didnot succeed in finding available capacity from other suppliers dueto a diversity of supplier-related constraint.

4.3. Supply chain C

In contrast to the other supply chains, where the respective OEMshad been producing in plants in Brazil from the 1960s, the OEM of SCC is a newcomer to the Brazilian market that established its first localvehicle assembly plant in the 1990s. Like many newcomers, this OEMbegan producing in a greenfield area, attracted by governmentincentives. Far from important auto-part suppliers and with poorroad and train connections, the new plant established a supplier parknearby to locate significant first-tier suppliers, mitigating the logisticsproblems associated with the greenfield location choice and increas-ing its logistics flexibility (the potential to receive products rapidlyand cost effectively). Another common characteristic of many new-comers is the initial production of only one vehicle model based onmany imported components but with an increasingly local contentprogramme. Because this vehicle model belonged to the premiumcompact segment, the offer to end-customers of a high productvariety level (high product mix) within each of its versions was animportant issue for the OEM.

The interviews at dealers and the OEM's regional office highlightedthe mix flexibility limitation to end-customers during the first year ofvehicle production in Brazil. During the launch of the new vehiclemodel, the cost/price of many vehicle components (e.g., engines andtransmissions) increased significantly partially due to exchange ratesfluctuations, resulting in a significant decrease in this vehicle model'ssales from the planned forecast. As a result, the vehicle assemblyefforts were concentrated in just two of the four versions originallyplanned for the vehicle model's offer on the Brazilian market, whichreduced the mix range available to end-customers. These two versionshad to use components that were already in the pipeline, furtherreducing the mix within these two versions. For instance, vehicleswere produced during the first year with doors and seat trims thatwere in stock (inventory SC constraint) or with orders already placed(purchased). This prevented end-customers from ordering availabletrims in the catalogue, restricting their choices to the available trim inthe SC pipeline.

4.4. Cross case analysis

Herein, the cross case analysis is presented. A summary of thesimilarities and discrepancies among the three supply chains ispresented in Table 4 and synthesised in Fig. 3.

A.M.T. Thomé et al. / Int. J. Production Economics 158 (2014) 91–105 99

Two SCs were traditional carmakers in South America, and onewas a new comer to the region, offering low-cost and mid-rangepriced vehicle models. While SC A and SC B were facing a marketexpansion, SC C was facing a market retraction. The main con-straints observed referred to the suppliers´ capacity, diversity,cooperation, trust and commitment in a growing market for SCA and SC B, as well as a high level of inventory of components for adecreasing market for SC C. SC A and SC B reacted to constraints bypostponing trivial configurations at the dealers' level and resortingto labour and sourcing flexibility upstream. For SC C, on the otherhand, logistics flexibility was deployed at the OEM supplier park.All three adopted order-to-delivery strategies of building to stock,with long order lead times (months) from OEM to dealers. The SCswere mainly reactive regarding flexibility use, but some proactiveexamples were observed in each of them (the use of postpone-ment and logistics flexibilities).

The OEMs from SCs A and B adopt a make-to-stock policy basedon sales forecast for their low-cost vehicle models, with fewsignificant vehicle sales built to customer orders (less than 1%).Accordingly, dealers must fully specify their orders (in terms ofvolume and mix) to the OEMmany weeks prior to production. Thisperiod is considerably longer than their parent companies' opera-tions, where accommodations to minor changes take place up to aweek prior to production. Because of this long order lead-time,dealers postpone some decisions about minor customisations of avehicle (e.g., including air-conditioning or leather covers on theseats) until they have a specific end-customer order for thembecause they find it difficult to match actual consumer preferencesaccurately. The customised options are fitted at the dealers invehicles already in stock at the manufacturer park or at the dealers

shop as soon as there is an end-customer order instead of beingfitted weeks before at the OEMs plants. The chains' ability toprovide flexibility to their end-customers is initially restrictedbecause dealers only order mainstream combinations to OEMs toavoid high inventory costs with undesirable combinations at thedistribution channel. However, late configuration is adoptedamong dealers (with a high mix response/short lead-time forend-customers because the inclusion of options is performedwithin 1 day at the dealer) in an attempt to increase the mixrange number output to end-customers. However, the heteroge-neity of individual product variants must be considered. Thisincrease is mainly for peripheral variants that have a lower degreeof difference compared to fundamental varieties (e.g., factors thatlead to a different body-in-white manufacturing process). Thisleads to a low mix range heterogeneity offered to end-customers.

A graphical cross-case synthesis is provided in Fig. 3, where theSC constraints were represented in ellipsis with an arrow pointingto the SC tier affected by the constraint.

It is interesting to note that SCs well-stablished in the localmarket had similar constraints, in contrast with new entrants. SC Aand B suffered mainly from 1st tier suppliers capacity constraintand the lack of local link capacities. In the case of SC A, first tiersuppliers constraints were further aggravated by supplier diversityand a lack of cooperation, trust and commitment constraints at2nd tier suppliers level. In both cases, there was a resultant lack ofproduct flexibility (volume and mix) at the dealer and subse-quently at the customer level. In SC C, a new entrant endured SCcontextual constraints related to the country's lack of logisticsinfrastructure associated with institutional constraints of tariffsand duties for imported components and fluctuating exchange

Table 4Cross case comparisons.

Characteristics Supply chains

A B C

Time in the market Well established Well established New comerMarket segment Low cost subcompact Low cost subcompact and highly valued compact Premium compactMarket dynamics Expansion/growing Expansion/growing Retraction/decrease

Main constraintsOEM None None None1st tier supplier Supplier capacity (engine plant limited capacity production) Supplier capacity (limited capacity production

of air conditioning, power steering, andalloy wheels)

Exchange rate(engine and transmission)Inventory(overstocked componentsof the doors and seattrims)

Diversity of suppliers (alloy wheels – singlesourcing)

2nd tier supplier Suppliers capacity as well as cooperation trust and commitment(engine blocks, crankshafts and 1.0 litre electronic injection);Diversity of suppliers (1.0 litre electronic injection and dieselcomponents supply – single sourcing)

Flexibility observedDealers Postponement: order decisions of trivial configurations/

low heterogeneityPostponement: late configuration of airconditioning and power steering

OEM Air conditioning: sourcing (new supplier) Logistics(supplier park nearby)

1st tier supplier Engine plant: labour force journeys and contracts Power steering: flexible labourAlloy wheels: relationships (negotiatedan increase in production capacity)

2nd tier supplier Electronic injection and diesel components: sourcing(new supplier)

Order-to-deliverystrategies

Forecast based; Built to stock; long order lead times Forecast based; Built to stock; long orderlead times

Forecast based; built tostock; long order leadtimes

Flexibility use Mainly reactive, dealers proactive (trivial postponement) Mainly reactive, dealers proactive(trivial postponement)

Mainly reactive, OEMproactive (supplier park)

Limitation toend-customers

Volume and mix Volume and mix Mix

A.M.T. Thomé et al. / Int. J. Production Economics 158 (2014) 91–105100

rates. In terms of the SC constraints dimensions of Table 1, one canexpect that infrastructure and institutional constraints wouldoperate at the strategic and tactical levels (mostly) while networkconstraints would be situated more at the operational level(Lorentz et al., 2012). In this case, long stablished SC faced mainlyoperational network-related constraints, while new comers facedstrategic-level and tactical level institutional and infrastructureconstraints. Consequently, SC A and B resorted to relational andpostponement flexibilities to counteract mainly suppliers and locallink capacity constraints at 1st and 2nd tiers, while SC C had toendure lost sales and high inventories facing a recessive marketwith institutional and infrastructural constraints.

5. Discussions

SC A was exposed to uncertainty both upstream and down-stream from the vehicle assembly plant. From the perspective ofthe usage aspect of flexibility, it can be said to be reactive with alow level of responsiveness. Despite managing part of the higher-than-expected demand increase with internal labour flexibility atthe engine plant, it lacked other internal flexibility types forsuccess. The lack of a flexibility relationship increases the possi-bility of a constraint at the engine block and crankshaft supplierbecause there is no cooperation, trust and commitment betweenthis second-tier supplier and other members of the SC (e.g., bysharing investments and/or risks related to future idle production

capacity), which is in keeping with the empirical findings ofStevenson and Spring (2009). The cases where there was a lackof sourcing flexibility that created a SC constraint (diversity ofsuppliers), regarding second-tier suppliers for the 1.0 engine'selectronic injection and components for the diesel engine are alsonotable; it was impossible to find new suppliers in the short term.While the former was caused by the demand increase, the latterresulted from a supply process breakdown. Here, capacity con-straints resulted in a lack of volume-mix flexibility to end-customers. Both cases were exacerbated by a low level of diversityof suppliers, a consequence of the supplier base rationalisationtrend within the automotive industry's SC. On the one hand, thisrationalisation seeks the benefits of a close relationship that canprovide flexibility with a greater willingness on the part of thesupplier to cope with change, but on the other hand, suchrelationships can make SC re-configuration more difficult, as seenin both cases. This reinforces the concerns in the literatureregarding this type of relationship in an environment of uncer-tainty (Lee et al., 2009), resulting in trade-offs with risk andflexibility in the SC (Stevenson and Spring, 2009).

In turn, SC B was also exposed to uncertainty as the demandincreased unexpectedly. From the perspective of the usage aspectof flexibility, it was also reactive, but its response varied dependingon the limitation and on the analysed product (vehicle model).Considering the air conditioning and power steering componentsfor the low-cost subcompact model, the chain's ability to provideflexibility to its end-customers can be considered satisfactory,

Car dealer1.0 and 1.6 litres engines

Engine blocks& crankshafts

1.0 litreelectronicinjection

Diesel enginecomponents

Car dealer

Vehicle Assembly Plant for a low costsubcompact and a

highly valued compact models

Alloy Wheels

Air Conditioning

Power Steering

Vehicle Assembly Plant for a premium

compact model

Engines and Transmissions

Seats

Doors

2º TierSupplier 1º TierSupplier OEM Distribuition

SCA

SCB

SCC Car dealer

Vehicle Assembly Plant for low cost

subcompact modelswith 1.0 and 1.6 litre

engines

CTC

SD

SCa, LC

SD

TD, Er

CLIPMV

In

PMV

In

PMV

In

SCa, LC SCa

SCa: Supplier Capacity; LC: Local link capacity; CTC: Cooperation, trust & commitment; SD: Supplier diversity; PMV: Product

(mix and volume); In: Inventory, storage, backorders; CLI: Country’s logistic infrastructure; Td: Tariffs and duties; Er: Exchange

rates.

Fig. 3. Cross case synthesis.

A.M.T. Thomé et al. / Int. J. Production Economics 158 (2014) 91–105 101

although there was a mix limitation delivered to end-customers.The SC managed the demand increase by using different internalflexibility types, such as labour, relationships, postponementand sourcing. Both postponement and sourcing flexibilities canbe considered examples of allowing re-configuration flexibility.The same SC did not react as successfully with the highly valuedcompact model because the postponement flexibility was notsuccessful, resulting in a different flexibility level provided bythe chain to end-customers. Considering the supply of alloywheels, the lack of sourcing flexibility caused a constraint ofsupplier diversity that consequently limited the supply chain'sability to provide flexibility to its end-customers and impactedthem differently (mix for the low-cost subcompact model andvolume for the highly valued compact model).

Postponement flexibility is present in SCs A and B. This flexibilitytype is used to address uncertainties in customers' variety pre-ference (mix) resulting from the long order lead-time of the vehicleassembly plants' delivery strategies. Dealers use late configurationas a means to accommodate specific customer preferences withinconsiderably shorter lead-times. Although postponement increasesthe range number of the mix offered to end-customers, it also haslimitations because dealers can add only peripheral variants to thevehicles, resulting in low range heterogeneity.

Like SCs A and B, SC C was exposed to uncertainty regardingend-customers' demand. However, this chain had a decrease in itsforecasted demand, and its lack of flexibility in dealing withexisting inventories and purchased orders in the pipeline causedan inventory SC constraint that limited the mix range-numberoffered to end-customers. As the product variety offered wasconsidered important in its vehicle's market segment, this mixconstraint not only resulted in lost sales but also forced discountsat dealers and ended with some damage to the OEM's brand in themarket. It is possible to examine the limited chain's ability to dealwith this decrease in demand. In this case, however, the con-straints in the SC had a strong influence on other SC members,especially those hosted in the OEM's supplier park near the plant.This supplier park was established to offer logistics flexibility tothe OEM in a greenfield area. However, the vehicle model demandwas lower than forecasted, resulting in the transference of the seatsupplier assembly line from the OEM's supplier park to anotherexisting facility and a huge overcapacity of the other suppliers'installations in the supplier park, as they could not use theircapacity to meet demand in other plants. Here, forecast errors atthe OEM level did not meet with logistics flexibility and induced alack of mix flexibility for the end-customer.

The flexibility capabilities observed in the three supply chainswere at the level of individual resources, shop floor, and plant levelin Koste and Malhotra (1999) cone's framework. The cone shapehelps portray flexibility as a capability. In other words, observedflexibility is located at the bottom and middle of a cone of flexiblecapabilities, corresponding to more operational and tactical flex-ibility, with no strategic flexibility dimensions observed.

6. Conclusions

From an academic perspective, this paper contributes to fillingthe gap in the literature regarding empirical multi-tier studiescapable of investigating the inter-organisational components ofSCF and SC constraints. Therefore, unlike other empirical studiesthat examine the theme of SCF under the one-sided view of thecompany being researched or from dyads, this paper analyses theconstraints in three SCs at many different tiers that limit the supplychains' ability to provide products to their end-customers. A frame-work is proposed that scrutinises the relationships between SCcontextual constraints (institutional, infrastructural and network)

and flexibility types. The research is intentionally restricted to focuson the flexibility types that matter to end-customers (and theirdimensional aspects) as a reaction to uncertainty in operational andtactical time-frame perspectives. Constraints were identified indifferent SC members, including tier-1 and tier-2 suppliers, whichreinforce the academic literature findings about the need to extendthe flexibility debate to go beyond the boundaries of a singlecompany'. The main constraints identified were suppliers´ capacity,diversity of suppliers, suppliers´ cooperation, trust and commit-ment, tariffs, exchange rates and inventory. These constraintsjeopardised SCs flexibility and significantly reduced their ability tomeet the requirements of the end customers.

This study also provides useful guidance for SC practitioners. Inthis sense, the SCs presented different aspects of flexibility thathighlighted or mitigated the effects of SC constraints. Suppliercapacity constraints caused by supply process breakdowns andsupply disruptions, highlight the growing need to manage risks inSCs and support the increasing interest in the subject of SC riskmanagement as suggested by Christopher and Lee (2004), Manuj andMentzer (2008), Stank et al. (2011), among others. The study alsoimplicitly highlights some drawbacks of the practice of reducing thesupplier base, which in recent decades has become frequent in theautomotive industry, especially in the Brazilian case (Pires andSacomano Neto, 2008; Scavarda et al., 2010). Thus, the dependenceon a single supplier for a particular item can result in a majorconstraint to the SC as a whole. Avittathur and Swamidass (2007)report a similar constraint in India. Likewise, the absence of one typeof flexibility in one member of the SC may negatively affect anothertype of flexibility downstream in the SC, limiting the overall supplychain's ability to demonstrate flexibility to its end-customers. Forinstance, the lack of relationship and sourcing flexibilities with OEMs'first- and second-tier suppliers may cause supplier's cooperation,trust and commitment constraints that result in volume and mixlimitations to end-customers. Similarly, the presence of one flexibilitytype may improve the overall supply chain's ability to demonstrateflexibility to its end-customers: postponing part of the vehicleconfiguration downstream in the SC may improve the mix offeredto end-customers. This reinforces the interdependence of the SCmembers highlighting the need to match/align customer flexibility tosupplier flexibility, which is in line with the studies from Avittathurand Swamidass (2007) and Hua et al. (2009). Furthermore, theresults highlight the importance of SCF to increase the supply chain'sability to change its overall production volume or its product mix. Itreinforces volume flexibility as a way to respond to demanduncertainty (for similar conclusions see Sánchez and Pérez (2005)).However, this is not always correctly understood among the analysedfirms. Increasing flexibility is not the same as increasing the supplychain's overall production plant capacity to react to a demandincrease, as noted in our findings. If the demand decreases, thisproduction capacity will became idle and stock will fill the pipeline.This concern was raised in the interviews regarding SCs A and B andwas the downfall of SC C. A flexible SC should be designed so it canincrease or decrease its production level to adapt to demand, whichrequires not only a firm flexibility level (e.g., internal manufacturingflexibility) but also a customer–supplier flexibility level. Our researchfindings point to SC members focused on the enhancement offlexibility at the firm level more than at the customer–supplier level.This corroborates findings by Sánchez and Pérez (2005) in theSpanish automotive industry and reinforces the fact that companiesmight miss opportunities to improve competitiveness by under-estimating customer–supplier flexibility capabilities. From the per-spective of usage flexibility, the analysed SCs have been reactive touncertainty (although with low response), and none of the studiedSCs used flexibility to completely seize opportunities proactively.

Our results also call for additional research. The effective use offlexibility concurrently for both proactive and reactive purposes was

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already studied in the printed circuit board industry (Sawhney, 2006)and should be better understood in the Brazilian automotive industrycontext, as it can become a competitive advantage from a SCFperspective. With the increasing synchronisation of SCs, bottlenecksin supplying operations can become serious constraints in deliveringproducts to customers. Therefore, additional research on how a SCcan be designed to increase the overall level of flexibility and howfactors within and between the individual SC partners may restrictthis flexibility is crucial for SC managers across many industries.

In terms of contribution to the SCF empirical research, we canhighlight at least three important points. Firstly, the object studiedhere was not restricted to just one or tier-pairs within the supplychains. Unlike other previous reported studies, this researchanalysed at least three tier levels within the supply chains.Therefore, this lack in the literature (analysing simultaneouslythe interrelations of at least three tier levels within the supplychains) required the creation of a new research design to conduct

and present the results of research, which helps in the search fornew approaches to researching this emerging topic. In this sense,and secondly, this study offers an integrated SC constraints andSCF framework that can help both academics and practitioners inthis understanding. Thirdly, flexibility and constraints were jointlyapproached from a SC perspective, which is not common amongthe extant literature on TOC and SCF.

Finally, it is worth noting that although the case study wasconducted on three relevant SCs of an emergent economy, theresearch approach provides evidence for a single industry and country,which limits the extent to which the findings can be generalisedacross a wider range of industries and countries. Because comparablestudies in the literature are still lacking, this investigation is only aninitial step towards the study of a topic that is likely to grow inimportance as companies continue to reduce their supplier base andoutsource their activities, making them more dependent on their SCmembers, both upstream and downstream.

Table A1Interview protocol.

Opening Introductions of the interviewer and the interviewee; overview of the study's scope; confidentiality assurance.Demographic data Title of the interview participants; job history; background of the organisation, supply chain and industry.Questions for dealers and OEMs'Regional sales offices

Could you indicate a significant case involving your supply chain that limited the ability to provide external flexibility to end-customers? Could you provide its main reasons and supply chain members involved? What were the main consequences forthe supply chain? How did you deal with this fact? What makes it easy (or difficult) for you to deal with flexibility withina supply chain perspective? What may help you in dealing with flexibility?

Questions for OEMs and suppliers Do you agree with the case identified by your downstream partner? Could you provide its main reasons and supply chainmembers involved? What were the main consequences for the supply chain? How did you deal with this fact? What makesit easy (or difficult) for you to deal with flexibility within a supply chain perspective? What may help you in dealingwith flexibility?

Additional unplanned/floating prompts Will you describe that? Could you tell me more about that? Will you explain that in more detail? Can you give me examples ortell me about a related case? Could you provide the contacts of the executives companies that were involved so we could try toinclude them in the study?

Table A2Observational guideline.

Flexibility types Supply Chain constraints dimensions

Network Infrastructure Institutional

Product (mix and flexibility):ability to alter product mix(keeping overall output stable)and to change its overallproduction volume

Are there evidences of changes in the mixof products offered (e.g., models, options)?Did the network faced sudden rises or fallon the volume of products demanded bythe market? If yes, how did the networkrespond? At which level in the SC?

Are there identified bottlenecks in the logisticscapabilities of service providers and of theexisting logistic infrastructure that hindschanges in product mix or product volumes?What are the constraints, when did it occurand for which products? How often?

Are there trade barriers, laws andregulations, organisational policies andcultural factors preventing the SCnetwork to deliver product flexibility(mix and volume)?

Sourcing: ability to find anotherpartner, upstream

Is the supplier base large or restricted (e.g.,single sourcing)?

Are the logistics providers, plant/sellerlocation and logistics infrastructureperceived as problems to acquireproducts/components/materials/parts?

Are there trade barriers, laws andregulations, organisational policies andcultural factors preventing adiversification of suppliers?

Is there a well-stablished local basis ofcomponents and spare parts suppliers?

Relational: ability to buildcollaborative relationships,both upstream anddownstream

Ask for a description and review materialsabout the existing network of suppliers,distributors and retailers for the productsselected for the research: are they stable?Since when were they stablished?

Are there any infrastructure relatedobstacles for relational flexibility, such asgeographical distances, road conditions,ports that could affect the flow ofproducts/material in the network?

Are there trade barriers, laws andregulations, organisational policies andcultural factors hindering relationalflexibility?

Delivery: ability to receive anddeliver products as sourcesof suppliers and distributorschanges

Do the network experiences deliveriesfailures or delays (upstream/downstream)as a result of suppliers/distributorschanges?

Do the logistics infrastructure andcapabilities affect the ability to receive/sendproducts in time and in the adequatequantities when suppliers and/ordistributors change?

Are there trade barriers, laws andregulations, organisational policies andcultural factors hindering deliveryflexibility?

Postponement: ability to keepproducts generic until latein the distribution network

Are there examples of postponement ofproduct configuration in the network? Forwhich products/models? Where the finalconfiguration (assembling, accessories, etc.)take place?

Do the logistics infrastructure and capabilitiesaffect the ability to deliver postponementflexibility (e.g., transportation and storageof components and/or spare parts; localassembling/installation of options...)?

Are there trade barriers, laws andregulations, organisational policies andcultural factors hindering postponementflexibility?

General instructions: (i) Review each constraint separately for each flexibility type. Probe with additional questions and ask for additional evidence when answers are notsufficiently clear; (ii) After identifying flexibility issues (constraints/opportunities) ask how the specific flexibility issues identified affect the introduction of new productsand the ability of the SC to introduce new product flexibility or to be responsive in adapting/modifying existing products (modification flexibility).

A.M.T. Thomé et al. / Int. J. Production Economics 158 (2014) 91–105 103

Acknowledgements

The Authors gratefully acknowledge all the top managers fortheir invaluable assistance with this research project. The authorsare also very grateful to the anonymous referees for their con-structive suggestions and to the research agencies CNPq, CAPES,DAAD and DFG for their support.

Appendix A

See Tables A1 and A2.

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