In this paper, relationship between the operational policies of manufacturing postponement, centralizated distribution and value chain flexibility is presented and their impact on performance is examined. Three dimensions of performance (i.e., asset productivity, delivery competence and responsiveness) are used.
Centralized distribution relates to logistics postponement in that the forward movement of goods is delayed as long as possible in the chain of operations, and goods are kept in storage at central locations in the distribution chain. Manufacturing postponement refers to the postponement of certain manufacturing tasks, such as labeling, packaging, and assembly/manufacturing, based on clearer understanding of demand. Value chain flexibility comprises of product development flexibility, manufacturing flexibility, logistics flexibility, and spanning flexibility. Product development flexibility is the ability to introduce and launch new products and to modify products quickly; manufacturing flexibility is the ability of the organization to manage manufacturing resources and uncertainty to meet various customer requests; logistics flexibility is the ability of the organization to respond quickly to customer needs in delivery, support, and services; and spanning flexibility is the ability of the organization to provide horizontal information, connections across the supply chain.
The following research hypotheses are tested:
H1: Manufacturing postponement is positively related to asset productivity.
H2: Manufacturing postponement is positively related to delivery competence.
H3: Manufacturing postponement is positively related to responsiveness.
H4: Centralized distribution is positively related to asset productivity.
H5: Centralized distribution is positively related to delivery competence.
H6: Centralized distribution is positively related to responsiveness.
H7: Manufacturing postponement is positively related to value chain flexibility.
H8: Centralized distribution is positively related to value chain flexibility.
H9: Value chain flexibility is positively related to asset productivity.
H10: Value chain flexibility is positively related to delivery competence.
H11: Value chain flexibility is positively related to responsiveness.
H12: The relationship between manufacturing postponement and asset productivity is mediated by value chain flexibility.
H13: The relationship between manufacturing postponement and delivery competence is mediated by value chain flexibility.
H14: The relationship between manufacturing postponement and responsiveness is mediated by value chain flexibility.
H15: The relationship between centralized distribution and asset productivity is mediated by value chain flexibility.
H16: The relationship between centralized distribution and delivery competence is mediated by value chain flexibility.
H17: The relationship between centralized distribution and responsiveness is mediated by value chain flexibility.
Hypotheses are tested using 306 survey responses from senior logistics or supply chain executives in manufacturing, wholesale/distributing and retail firms. All hypotheses (except H3) are supported from the empirical analysis of the data.
Implications:
In hindsight, the lack of support for H3 seems intuitive since manufacturing postponement results in a delay in changing the form of a product close to the occurrence of actual demand. Such a delayed differentiation approach for the product could be at the expense of efficient responsiveness.
The results, however, confirm a positive relationship between manufacturing postponement/ centralized distribution and value chain flexibility. This implies that firms that contemplate using the strategies of manufacturing postponement and centralized distribution also emphasize value chain flexibility. Therefore, the requirements of flexibility in product development, manufacturing, logistics and other spanning activities go hand in hand with the intent to introduce postponement and centralization strategies.
Value chain flexibility is positively related to all dimensions of performance. This emphasized the important role that this flexibility measure plays in developing a variety of innovative, low-cost, high-quality products reliably and quickly. Further, such a flexibility competence is characterized by imperfect imitability and substitutability leading to sustained competitive advantage.
Value chain flexibility mediates the impact of manufacturing postponement on asset productivity, delivery competence and responsiveness, and the impact of centralized distribution on asset productivity and responsiveness. Partial support was found for the mediating effect of value chain flexibility on the relationship between centralized distribution and delivery competence.
The citation for the paper is as follows:
Nair, Anand. 2005. Linking manufacturing postponement, centralized distribution and value chain flexibility with performance. International Journal of Production Research, 43(3): pp. 447-463.