Perspectives on Various Issues of Interest

Complex Adaptive Systems Paradigm in Operations and Supply Chain Management Research

In a recently published article we present a conceptual model for a renewed consideration of the complex adaptive systems (CAS) perspective in operations and supply chain management research. In the paper we discuss the following conceptual issues and their relevance in operations and supply chain management research:

1) Constituents of a complex adaptive system

2) Nature of coevolution

3) Embracing Complexity

Building on the theoretical foundation around the above listed issues we describe the following conceptual model:

The paper offers several directions for future research. Operations and supply chain outcomes rely on certain search processes aimed at improving the local performance of the firms in the network. A CAS perspective can unravel the search process and present a deeper understanding of how overall performance improvement can be achieved. It can be particularly useful to study indirect effects within several operations and supply chain problems where there is no obvious relationship between cause and effects. The CAS perspective can help in understanding the process as well as the outcome of pattern formation that are evident in many situations pertaining to operations and supply chain management. As an example, norms in buyer– supplier relationships take shape through a collective pattern that can be examined by considering the CAS perspective. The CAS perspective calls for considering part “ in vivo.”  Investigating how changes in one part affect others and the behavior of the whole can help in assessing the inherent nature of CAS, such as supply networks. In this regard, this CAS perspective can help in further discerning how control and emergence operate in supply networks. 

Structure is typically viewed as a linear contingency variable in extant research. Studies adopting a complex systems perspective have shown that structure can also act as a nonlinear contingency. Similar considerations would help in disentangling the general and local effects within operations and supply chain management. Routines, replication, and inheritance form the cornerstone of several OSCM practices. The CAS perspective can help in better understanding how these aspects contribute toward short-term efficiency and long-term learning outcomes in organizations. Additionally, relaxation of the rationality assumptions can help in discerning the emergent properties of agents in operations and supply chain management contexts.

The paper also provides directions for new methodological approaches such as latent space models and latent class models (e.g., stochastic block models), entropy measures, Reynold's number, attractor geometry, fractal dimensions, and others.

Source: Nair, A. and Reed‐Tsochas, F., 2019. Revisiting the complex adaptive systems paradigm: Leading perspectives for researching operations and supply chain management issues. Journal of Operations Management, 65(2), pp.80-92.

How much control should buyers exert over their suppliers in complex supply networks?

In a recently published paper, my co-authors and I examine how much control should a focal firm exert on the suppliers within its supply network. Control over suppliers is a core issue for a buying firm. Despite the amount of research on the topic, how much of its supply network (i.e., scope of control) a buying firm should control, so as to increase supply network performance, is a question that has not received adequate research attention. The study addresses this research question by considering the supply network as a complex adaptive system and developing an empirically informed agent-based simulation model using the NK fitness landscape framework, to examine how varying levels of scope of control influence supply network performance. We also investigate the direct effect of two supply network complexity dimensions (i.e., number of firms and level of supply interactions) on supply network performance and the moderating effect played by the scope of control. Results show that the relationship between scope of control and supply network performance follows an inverted-U shape. Furthermore, we find that the complexity dimensions negatively affect supply network performance with the performance decrease depending on the scope of control. Based on these findings, we formulate different control strategies to mitigate the negative influence of complexity.

Our main finding is that a moderate scope of control results in higher SN performance than when the scope of control is either too high or too low. Controlling a right number of suppliers improves coordination and helps in aligning the conflicting goals of supply chain partners, while with no control, coordinated activities become difficult and performance suffers. At the same time, controlling a large number of suppliers may deteriorate SN performance because it constraints the ability of the SN to adapt. Therefore, focal firms should consider allowing some level of autonomy so as to improve the efficacy of adaptation of their SNs.

Our study also found that the scope of formal control influences the negative effect of complexity on SN performance. In the case of complexity due to high level of supply interactions, if the scope of control is high (low), SN performance suffers less (more). This also suggests that in networks that are highly interconnected, the focal firm should guide its suppliers toward a coherent direction by means of control. As to the negative effect of the number of firms on SN performance, we found that the higher the scope of control, the higher the negative influence on SN performance. This suggests that when SN complexity is associated with a higher number of firms, less control is beneficial. Our results suggest two different strategies to mitigate the negative influence of complexity. If the source of complexity is the level of supply interactions, more scope of control is needed; if the complexity is due to the number of firms, less scope of control should be applied.We were able to establish the validity of our results by exploring the boundary conditions.

To pursue our research aims, we use a simulation-based approach to model supply network and develop an NK simulation model that is based on empirical data that we collected from Honda. In particular, the network data of the Accord’s center console are used to calibrate the NK model parameters and build the baseline model using real values concerning the critical variables of this study (i.e., the number of firms, number of supply interactions among firms, relative power of the focal company vis-`a-vis suppliers in the network, and level of formal control exerted on upstream suppliers). Our interactions with Honda managers during the empirical data collection revealed that Honda exerts control on its supply base with the help of its first-tier suppliers. Hence, in this study, we conceptualize the notion of scope of control to include formal control exerted by either the focal firm (i.e., Honda) or its first-tier suppliers. Complexity is associated with the number of firms and the level of interconnections in the SN.

 

An Examination of the Relationship between Intellectual Capital and Supply Chain Integration in Humanitarian Aid Organizations: A Survey-Based Investigation of Food Banks

Food banks are humanitarian aid organizations that collect, organize, and deliver food to nonprofit member agencies and also to individuals to help alleviate the society’s hunger problem. The supply chain of food banks is characterized by private sector companies, individual donors and governmental agencies providing monetary support and food inventory on the supply side, and the member agencies such as food pantries, soup kitchens, shelters, and volunteers delivering support on the demand side. Within the purview of this supply chain, food banks strive to improve their performance, which is commonly measured in terms of the amount of food delivered to the communities in need. Food banks rely on managerial talent that is relatively more constrained than the private sector and also use a voluntary workforce for attaining their performance goals. Considering the unique yet pertinent role of human assets in food banks to manage their supply chain integration (SCI) initiatives, in a recent paper my co-authors and I employ an intellectual capital (IC) framework to analyze the human, organizational, and social capital antecedents of supply chain integration in food banks. Specifically, we suggest that intellectual capital drives supply chain integration in humanitarian organizations. Moreover, we propose specific relationships between the dimensions of intellectual capital. A carefully crafted survey is used to inform our results. The results indicate that human capital significantly impacts social capital, which, in turn, drives all supply chain integration dimensions.

Our study sheds light on the mechanism through which Social Capital is built in a humanitarian aid setting. The findings from SUR and mediation analyses indicate that Human Capital and Organizational Capital precede Social Capital, which, in turn, helps in building SCI in food banks. Since Social Capital channels the impact of Human Capital and Organizational Capital on SCI, it suggests that the quality of relationships shaped by the Social Capital plays a critical role in attaining SCI in food banks. Prior studies have reported that relational embeddedness, which is a part of Social Capital, is especially instrumental in terms of process innovation. We show that achieving strategic collaborative relationships in humanitarian supply chains is driven by the interplay among the dimensions of IC. This is one of the significant theoretical contributions of our study. We show that Human Capital and Organizational Capital play a foundational role in developing Social Capital. The Social Capital thus formed, in turn, determines the way SCI is driven. Specifically, Social Capital acts as a mediator between Human Capital and Supply Integration, and between Human Capital and Internal Integration. Moreover, we also observe a mediating role of Social Capital between Organizational Capital and Supply Integration, and between Organizational Capital and Internal Integration. Systematic lack of support of the mediation of the relationship between Human Capital and Demand Integration, and between Organizational Capital and Demand Integration by Social Capital is interesting and is worth investigating in future research.

It seems that upstream and internal SCI is achieved via Social Capital facilitating Human Capital and Organizational Capital; however, we do not observe the same facilitating influence of Social Capital in the downstream. There are studies that investigate supply integration or buyer–supplier relationships and Social Capital in the literature. However, the relationship between demand integration and Social Capital has not been studied as much and it could shed light on the lack of significance for the mediating role of Social Capital. Age of the food bank did not turn out to be a significant variable in our model. While one might suspect the history of the organization to play a significant role in terms of establishing SCI, a lack of significance or a negative relationship between age and SCI has been observed in the literature before. Traditional organizations might not be willing to engage in joint decision making, which is a common indicator of integration with supply chain partners, due to their inertia and resistance to change. In our case, we observe no significant relationship between SCI and age. Therefore, we can say that in the nonprofit sector, determinants of supply chain dynamics might be different than the amount of time the organization has been in existence.

In general, our study presents valuable insights for the management of food banks. First, given that IC precedes and acts as an antecedent to SCI, food banks should be proactive in managing their Human, Organizational, and Social Capital. Human Capital is especially instrumental in building Social Capital. Our findings show that Social Capital is influenced more by the skilled workforce as compared to codified knowledge repository and information exchange mechanisms. Hence, food bank managers should give emphasis to enhancing the skill levels of their workforce, perhaps with training programs and workshops that focus on continuous improvement. Our results support the argument that good information does not translate into productive coordination unless knowledge facilitates the use of these resources effectively and contributes to collaboration. Further, information is transformed into knowledge when it is combined with know-how and expertise of the staff. This knowledge helps in making informed decisions and also promotes collaboration by improving alignment between parties involved in decision-making. Hunger issue needs to be addressed urgently and on a continuous basis, and the food bank staff has to work under various financial and time constraints to find creative solutions to deliver food. Food banks, like other humanitarian organizations, need to be agile and adaptable so as to handle the operational issues they face. In this respect, the intellectual structure of the organization is instrumental in achieving the required responsiveness by appropriately shaping the supply chain management practices.

As Social Capital is a crucial aspect of IC and influences all dimensions of SCI, it should be given particular attention in food banks. Our pre-analysis interviews with the food bank executives indicated that they are quite cognizant of the criticality of human assets in their business. We show that while this recognition of the importance of Human Capital is good, executives in charge of strategic decisions in the food-banking sector should prioritize development of Social Capital to enhance their internal and external integration initiatives. The results of our study show that Social Capital provides the pathway for obtaining the SCI benefits resulting from both Human Capital and Organizational Capital. Social Capital is the sum of all resources, existing and potential, residing in and available through the network of relationships of members of a group. Social Capital encourages cooperative behavior and promotes value creation through development of new forms of association and innovative methods.We find support for the facilitating role of this important dimension of IC in a humanitarian aid setting. Food banks are social enterprises that require practical solutions, dynamism, and agility to operate and survive. Social Capital provides access to broader sources of information that is relevant, timely, and of high quality. The knowledge, capabilities, and skills of the actors (Human Capital) and the knowledge engrained in structures, systems, and processes (Organizational Capital) are transformed into practices that support integrated supply chains through the network of interrelationships (Social Capital).

Social Capital makes exchange of knowledge possible both within the organization and across boundaries with external partners because the actors identify themselves with a community and commit to collective goals and shared targets. In sum, we consider IC as a structural characteristic that drives managerial practices (SCI) in the organization. As food banks deal with extensive uncertainty in terms of supply base, inconsistency and lack of standards in donations, variety of partners, and matching supply to demand, these organizations can and do benefit from strategic supply chain management practices. We propose an IC framework to analyze a potential driver for SCI in this type of resource-constrained nonprofit organizations. Managers of food banks should spend effort in recruiting and maintaining talent and relationships for the survival of their organizations as our analysis provides empirical support for the influence of the human factor in the nonprofit organization and emphasizes the social aspect of operations in this setting.

Re-visiting collaborative behavior in supply networks – structural embeddedness and the influence of contextual changes and sanctions

In a recently published paper, my co-authors and I consider decision making beyond a dyadic buyer-supplier context to the network context. Decisions made by firms are shaped by behavioral norms within the supply network as perceived by the decision makers. Firms can perceive themselves to be part of a collaborative regime or one in which the potential for noncooperation is high. Further, the ability to put sanctions on non-cooperating firms could shape the overall behavioral patterns in the network. To gain further insights into these aspects and their interactive effects on firm behavior, our study investigates decision-making in supply network by means of behavioral experiments. By organizing practicing managers in a supply network, the study investigates the role of structural embeddedness, incentive structure, and sanctioning mechanisms on the level of collaboration. The results of this study confirm that while sanctions are detrimental for collaborative behavior in a supply network, they play an important role when the underlying norms of governance of such a network are perturbed. The results show that structural embeddedness provides a context that aids adaptive collaborative behavior by firms that are part of the supply network. Once the incentive structure is altered such that there is a higher payoff from defection, the adaptive collaborative behavior is replaced by a behavior in which firms try to maximize their returns and forego collaborative decision-making behavior.

The study reveals that collaboration behavior in embedded supply networks is far more complex than simple buyer-supplier dyads might have indicated in the past. Managers face the daunting task of reacting to this increasing complexity. Foremost, managers have to pay attention to the level of structural embeddedness present in supply networks as it fosters collaboration in the network. This means that managers must understand their behavior as part of a network and be aware of how interdependent and interconnected their sourcing network is. In the presence of high structural embeddedness, collaboration in the network is likely to be high even though the action of every single network member might not necessarily be collaborative. The results suggest that managers should not be myopic in terms of focusing on the actions of individual actors in the network even though these actors might be the ones with whom they are in a direct relationship in their supply network activities. The overall outcome in the network might turn out to be quite distinct from the observations at individual firm level.

The study's findings suggest that managers have to pay attention to the presence of institutional forces that change the incentive structure and thereby impact the level of collaboration in the supply network. It is necessary for managers to act quickly in order to sustain collaboration before the tipping point is reached and collaboration is driven out of the network. Collaboration in networks calls for great attention and continuous care by managing embedded structures and sanctioning options based on the circumstances. The study provides managerial insights regarding the likelihood of supply chain members changing their behavior based on the alterations in the underlying incentive structure. When institutional factors diminish the incentives for collaboration by making private investments more attractive than group investments, as is observed in the case of industry consolidation, firms adopt maximizing behavior at the detriment of the overall collaborative environment in the supply network. In the presence of collaborative regime, managers tend to adopt a satisficing stance, whereas changed incentive structure towards defection results in a focus on maximizing the outcome of self. Thus, with changed incentive structures that provide higher rewards for noncooperative behavior, sanctions become specifically necessary.

Differential Impact of Network Size on Cost Performance for High and Low Quality Hospitals

In a recently published study my co-authors and I consider the deductive configuration perspective and distinguish high and low quality hospitals by using clinical and experiential quality as two dimensions of quality capability. We examine the impact of healthcare network size on operating costs of hospitals. Additionally, we investigate the interaction effect of hospital demand and healthcare network size on operating costs.  The results of this study show that quality laggards experience lower costs per day through their affiliation with larger healthcare networks, but experiential quality focusers and clinical quality focusers experience higher costs. In contrast to our hypothesis, affiliation with a large healthcare network does not adversely affect the operating costs of holistic quality leaders. We show that clinical quality focusers and holistic quality leaders can complement the effect of network size and hospital demand to reduce their operating costs. However, quality laggards and experiential quality focusers do not observe a reduction in their costs due to the complementary effects of network size and hospital demand. 

Our results offer important theoretical and managerial implications that we discuss next. Healthcare networks are becoming ubiquitous. Even distinct health systems that can either take the form of a diversified single hospital system or multi-hospital system comprising of two or more hospitals owned, leased, sponsored, or contract managed by a central organization are entering into network arrangements. By being part of a network quality laggards may gain additional patients, which helps in increasing their resource utilization levels. In addition, the ability to learn best practices from other hospitals in the network further helps in reducing their operating costs. The marginal cost for these hospitals to be part of a network is low. However, experiential quality focusers and clinical quality focusers face the challenge of coordinating with other hospitals in the network while at the same time maintaining their quality levels. While health systems have a central governance structure, health networks do not have this ability to exert centralized control for efficiency. Hence, operations of healthcare networks require hospitals to complement their network-based benefits with their demand. Holistic quality leaders are especially well positioned to gain this complementary benefit. The clinical process of care and the practices that are aimed at enhancing patient experience are synergistic. These quality leaders attract larger numbers of patients by their intrinsic quality characteristics and network effects; however, they stand in good stead to achieve demand-based utilization levels and reduce the coordination burden of affiliation with large healthcare networks.

Growth in hospital networks, healthcare demand, and experiential learning calls attention to a better understanding of the relationship between a hospital’s holistic quality profile and its ability to gain benefits from healthcare network. This research sheds some important insights in this domain. There has been increasing evidence suggesting that hospitals must carefully manage both clinical and experiential quality. By focusing on both clinical and experiential quality, unlike experiential quality focusers and clinical quality focusers, holistic quality leaders are not adversely affected by the size of their network. Our results suggest that experiential quality focusers and clinical quality focusers should either embrace holistic quality management or restrict the size of their networks to maintain their quality level and to reduce coordination costs. 

Technology alignment in the presence of regulatory changes: The case of meaningful use of information technology in healthcare.

In a recently published study my co-author and I examine the impact of regulatory change on technology implementation and use. The findings show that the seeds for structural change necessitated by regulatory changes are cultivated very early in the decision making sequence. The pivotal role of the length of IT planning horizon and frequency of steering committee meetings in broadening the scope of IT plans is evident in the results. Hospitals that have a longer IT planning horizon go beyond myopic technical and cost issues. This helps in creating a broader scope of IT plan. Hospitals with more frequent steering committee meetings will have higher engagement in fulfilling the IT plans and additional opportunities to ask questions and receive help on any implementation issues. Additionally, meetings keep priorities at the forefront of a person’s thoughts, so that solutions and time spent on implementation is increased. The scope of IT plans forms the basis for technology appropriation within the contextual environment set by the choice of IT adoption strategy.

The findings show that hospitals with a broader scope of IT plan are able to fulfill meaningful use requirements when they use best-of-suite strategy. Meanwhile, the association between the scope of IT plan and achievement of meaningful use requirements in the top quartile is absent for those hospitals that rely on single-vendor or best-of-breed strategies. These results highlight the risks involved with using a single-vendor or best-of-breed strategy and suggests that hospitals could be constrained by vendor’s capabilities for successfully integrating all of the IT applications. Centralized and decentralized IT strategies such as the single-vendor or best-of-breed adoption strategies may lead to sub-optimal rationalizing such that an organization settles for what may integrate with their current set of applications or vendor capabilities. As the breadth of IT applications grows, a decentralized organization may find it difficult to adapt their applications to meet new or updated requirements. Similarly, a centralized organization may find that their vendor is not capable of quickly implementing new or updated requirements, which will delay achievement of strategic objectives, like the meaningful use mandates and the associated reimbursements from the HITECH Act. Since the best-of-suite adoption strategy emphasizes integration among various information systems within a hospital, the appropriation of technology is more efficient than the single-vendor and best-of-breed strategies. The dynamic nature of the healthcare environment has resulted in an increase in managed-care contracts in hospitals, which calls for finding appropriate mechanisms for risk-sharing and ensuring financial stability. It is therefore important to find appropriate mechanisms to structure IT to ensure that IT adoption is not disruptive to the overall functioning of hospitals.

The findings suggest that the best-of-suite adoption strategy allows adaptive changes to technology while it is in use and thereby aids in aligning complex hospital IT applications to achieve the top quartile of meaningful use requirements. As hospitals fulfill the requirements set in various stages of meaningful use as stipulated in the HITECH Act, they receive payments from the federal government. To examine the financial impact of fulfilling meaningful use requirements, we compared federal payments received by hospitals in the top 10% fulfilling meaningful use requirements with those who received payment in the bottom 10%. We find hospitals in the top 10% receive on average $2,209,679 more in federal financial incentives than those in the bottom 10%. Additionally, ANOVA results show significant difference in terms of meaningful use payments for hospitals adopting single-vendor, best-of-breed, and best-of-suite strategies [F(2, 524) =5.78, p= 0.01]. A Tukey post-hoc test confirmed that payments to hospitals with the best-of-suite adoption strategy are higher than those with single-vendor (p < 0.01) and best-of-breed (p < 0.10) adoption strategies. A hospital with a best-of-suite adoption strategy can expect an additional payment ranging from $425,732.10 to $659,593.00 than hospitals using a single-vendor adoption strategy during the first year of completing meaningful use requirements. Since the Phase I meaningful use payments are paid out over four years at 100%, 75%, 50% and 25%, respectively, the benefits increase substantially to $1,064,330.25 to $1,648,982.50 over the course of four years. Similarly, hospitals with a best-of-breed strategy can expect up to $378,208.20 less than hospitals with a best-of-suite strategy during the first year of completing meaningful use requirements. This could lead to $945,520.50 less in meaningful use payments spread out across four years. These results provide a compelling reason for hospitals to carefully consider their IT planning structure and adoption strategies.

The fit between supply chain strategies and practices: A contingency approach and comparative analysis

In a recently published paper, my co-authors and I present a contingency model that examines the external links between the business environment and supply chain strategies, and the internal links between supply chain strategies and supplier management practices. The research model theorizes that flexibility and low-cost oriented supply chain strategies should fit with the underlying business environments, and, in turn, supplier management practices (i.e., long-term relationships, supplier assessment, and integration) should fit with the chosen supply chain strategies. The dataset to test the research model was drawn from a survey of managers from 232 Australian manufacturing firms, and comparative path analyses were employed to assess the fit among different business environments, supply chain strategies, and supply chain practices. The findings show that dynamic environment has a better fit with flexibility strategy than low-cost strategy, while competitive environment surprisingly does not show a stronger fit to low-cost strategy than flexibility strategy. Additionally, the results show that while supplier assessment is important for both flexibility and low-cost oriented strategies, longterm relationship and logistics integration are more important for flexibility strategy than for low-cost strategy. 

From a managerial perspective, this study demonstrates the importance of understanding the right supply chain strategies with respect to the business environment and the practices for supporting the strategies. Managers need not only understand the external fit between the business environment and supply chain strategy but also the internal fit between supply chain strategies and supplier management practices. The findings suggest that companies following low-cost strategy are less concerned with building long-term strategic relationships and might be prepared to switch suppliers more frequently—primarily based on the price offered by the suppliers. This is particularly true when firms adopt an arm’s length approach in their relationship with suppliers, which is aimed at maintaining competition in the supply base by putting pressure on suppliers to keep their prices low or even reducing them. A closer observation of the findings confirms this point as they show that low-cost strategy only has a weak (marginal) relationship with logistics integration, and even no association with long-term relationship. Flexibility strategy, on the other hand, is linked with more advanced steps in supplier management by incorporating both logistics integration and long-term relationship, which reflect the technical and social aspects of SCM. 

The Product Quality Impact of Aligning Buyer-Supplier Network Structure and Product Architecture

There has been a trend, in the last decade, of buyers outsourcing new product development (NPD) activities to suppliers. In a study my co-authors and I examine the impact of (mis) alignment between buyer-supplier network structure and product architecture on two product development outcomes: product quality and product recalls. The hypotheses are tested on a uniquely assembled database of supplier networks of automakers for 12 vehicle systems. The results suggest that while dense supplier network are associated with higher future product quality and lower future recall magnitude, structural holes are associated with lower future product quality and higher future recall magnitude. Further, the results suggest that product quality partially mediates the relationship between supplier network characteristics and recall magnitude. Interestingly, these effects are significantly moderated by the product architecture. While network density is positively related to product quality of weak design interfaces (i.e., modular systems), structural holes in the supplier network are positively related to product quality of strong design interfaces (integral systems). The results offer valuable insights to managers about the appropriate supplier network structure for superior quality.

The conceptual model for the study is as follows:

A sample network is as follows:

The findings of this study offer numerous valuable insights for managerial practice. In recent years, there has been increased emphasis on improving supply chain performance. The emphasis has been using concepts such as modularization, flexible manufacturing, and lean versus agile manufacturing to boost performance. Despite such advances, the poor performance of supply chains, as evidenced in growing number of product recalls in the marketplace, continues to frustrate and disenchant managers. Our study shows that mismatch between structure of buyer-supplier networks and product architecture aggravates crises such as product recalls.

We find that network density and structural holes have different effects on recall outcomes. Dense supplier networks are associated with superior outcomes such as better quality and lower magnitude of recalls whereas supplier networks with structural holes are associated with greater recall magnitude. The implication for buyers is that they ought to encourage its suppliers to forge ties with each other and facilitate exchange and sharing of information. For example, a supplier facing a quality problem with the root cause not known can benefit from the exchange of solutions from the supplier network. Although maintaining a dense supplier network is costly, the information exchange benefits are significant especially when buyers farm out important processes such as product design and manufacturing to suppliers. In contrast, structural holes in a supplier network increase the magnitude of recalls experienced by buyers.

Importantly, our findings caution managers to refrain from viewing dense supplier networks as beneficial and supplier networks with structural holes as detrimental for quality. Our findings, instead, point to the need to evaluate the normative supplier network structure in conjunction with the architecture of the product. The findings suggest that dense networks are beneficial for weak design interfaces (modular systems) than for strong design interfaces (integral systems). As noted before, when buyers outsource design and manufacturing of modular systems, they cede control to supplier networks. Thick ties between suppliers facilitate coordination and information exchange and ensure that buyers are able to meet varying downstream demand without compromising the quality of weak design interfaces. In contrast, structural holes in supplier networks are more beneficial for strong design interfaces than for weak design interfaces. Buyers need to be located centrally in supplier networks and mediate information flows between suppliers to ensure that the quality of integral systems does not degrade.

We performed a univariate transfer function analysis to better understand the economic value of matching buyersupplier network structure and product architecture. We computed the direct impact of a one standard deviation (S.D.) increase in network density and structural holes in the supplier network on quality and recall magnitude. We evaluate this relationship for strong and weak design interfaces. The high and low levels of SDI are set at the +1 S.D. and −1 S.D. from mean values of the variable, respectively. To compute the dollar impact of decrease in recall frequency because of matching, we turn to previous research that has assessed the shareholder value destroyed by product recalls. Barber and Darrough [6] note that on average a product recall in the automobile industry eroded shareholder wealth by $72.99 million. This amounts to $125.62 million in 2011 dollar terms. Our post hoc analyses reveal that a 1 S.D. increase in network density increases economic value by $29.85 million at low levels of SDI and decreases economic value by $106.41 million at high values of SDI. The total economic value was destroyed because of a mismatch between supplier network density and product architecture is $136.26 million. While dense networks are costly to maintain because of higher number of ties and greater information flow, our findings show that the economic value of dense ties in supplier networks is quite substantial. Similarly, a 1 S.D. increase in structural holes increases economic value by $219.31 million at high levels of SDI and diminishes economic value by $14.27 million at low levels of SDI. The total economic value was destroyed because of a mismatch between structural holes and product architecture is $233.59 million. Cumulatively, mismatches between supplier network structure characteristics and product architecture destroy the buyer’s shareholder wealth to the tune of $369.85 million on an annual basis. The following table summarizes the economic implications of our findings:

Source: Kalaignanam, K., Kushwaha, T. and Nair, A., 2017. The Product Quality Impact of Aligning Buyer-Supplier Network Structure and Product Architecture: an Empirical Investigation in the Automobile Industry. Customer Needs and Solutions, pp.1-17.

Assessment of supply chain integration and performance relationships

The concept of integration has received considerable attention in operations and supply chain management literature in a time spanning over two decades. To advance theory development, it is important to critically examine the empirical findings in various integration studies. In a recently published paper my co-author and I undertake an extensive investigation of the relationships between supply chain integration and various performance dimensions using a metaanalytical methodology. The study contributes to literature in four important ways. First, the findings empirically show that internal integration, supplier integration, and customer integration have significant impact on a firm's financial performance. Second, the study examines the impact of internal integration, supplier integration, and customer integration on a firm's operational performance; and its underlying dimensions of cost, quality, delivery, and flexibility separately. Third, the study points out the specific relationships between supply chain integration and performance that need to be further examined within contingency framework to discern the role of moderating factors. Finally, to provide direction for managerial decision-making, the study offers insights regarding integration dimension(s) that have largest breadth and depth of impact on various performance measures.

The study provides some insights for practitioners that are engaged in managing operations within their organizations as well as in the extended supply chain. Firms typically have limited resources and managers need to allocate these resources prudently to obtain maximum possible benefits. Supply chain integration requires monetary investments to set up the necessary infrastructure. This study provides some guidance for managers so that they can make decisions regarding integration investments based on the chosen competitive priorities. The investments allocated for integration could be targeted towards, and prioritized upon, the relevant dimensions of supply chain integration depending on the desired performance outcomes. Internal integration should generally precede external integration since it is important for the processes within an organization to be aligned before engaging in information sharing and collaboration activities with external supply chain partners. Managers should consider this sequence when they are making supply chain integration related decisions if the depth of impact is considered. Additionally, we find that supplier integration has the maximum breadth of impact (83.33%) followed by customer integration (66.67%) and customer integration (66.67%).

Moreover, managers should be aware of the contextual differences in the relationship between supply chain integration and performance. The findings of this study lend support to certain moderating effects that might be strengthening or weakening the relationships between supply chain integration and performance. The context should be carefully analyzed and studied before making potentially expensive and hard-to-reverse investments in integration. For instance, environmental uncertainty stands out as a critical issue to be considered when it comes to supply chain integration. Information processing becomes more crucial in highly uncertain environments relative to others, and managers should be cognizant of the requirements of the business environment they operate in when they are making supply chain integration decisions to align the degree of coordination internally as well as externally. In essence, managers should supplement their bandwagon-driven or benchmarking-driven integration initiatives with prudent consideration of their own contextual environments.

Source: Ataseven, C. and Nair, A., 2017. Assessment of supply chain integration and performance relationships: A meta-analytic investigation of the literature. International Journal of Production Economics, 185, pp. 252-265.

STRUCTURING SUPPLIER INVOLVEMENT IN NEW PRODUCT DEVELOPMENT: A CHINA-US STUDY

In a recently published paper, my co-author and I examine how three types of inter-group structures - administrative (formalization and centralization), task (task interdependence) and physical (co-location) - influence project performance and buyer learning in NPD projects. Buying and supplying organizations rely on each other for developing better products in an efficient manner, which explains the popularity of involving suppliers in new product development (NPD). However, such involvement is not always successful, partially due to the challenges of structuring a buyer-supplier team to manage joint dependence and dependence asymmetry. adopting a contingency theory perspective, we study whether the national context moderates the effects of inter-group structures on project outcomes. We adopt a two group structural equation modeling approach to test hypotheses with survey responses from a sample of NPD projects in the United States (US) and China. 

Survey responses from original equipment manufacturers (buyers) are used to test the hypotheses. The initial set of respondents comes from a commercial list provider who provided contact information of 2045 US-based company managers. Among this initial set, 2000 have email addresses and 45 have mail addresses. The initial set of respondents in China was extracted from member listings of manufacturer associations with a sample size of 580, all of which provided physical mailing addresses. Job titles and industries are used to screen respondents. Specifically, we limit the initial set of respondents to those that have responsibilities in the areas of engineering, manufacturing, product development, project management, or purchasing, which have been shown to be relevant for NPD projects. We limit industries to those that manufacture physical and discrete products and avoid service and software companies due to their significantly different innovation inputs, processes, and outputs. We adopted both electronic and hard-copy mailing approach for data collection. We hosted a two-part survey on Survey Monkey. The overall response rate for completed pairs of Part I and II surveys are 16.23%. Specifically, 186 completed surveys were collected online from the US out of 2000, indicating a response rate of 9.3%; 28 completed surveys were collected in mails out of 45 from the US, indicating a response rate of 62.2%; 212 completed survey were collected in mails out of 580 from China, indicating a response rate of 36.6%. 

All the constructs are measured using existing scales. In order to control for measurement errors, we adopted the two-group Structural Equation Modeling (SEM) approach to test whether effects of the four structural factors on project performance and buyer learning differ significantly between China and the US. The research model is as follows:

Our results show the importance of taking a national contingent view when studying the performance implications of inter-group structures in NPD projects. We found both similarities and differences between the two countries regarding how inter-group structural factors impact project performance and buyer learning. The effects of task interdependence, compared to those of other structural factors, seem to be least country contingent. All other structural factors differ significantly in influencing project performance and/or buyer learning between China and the US. Specifically, the results from our study show that colocation enhances buyer learning only in China and not in the US. This emphasizes the importance of considering the congruence of China’s national context, which values collective behavior, with the opportunities presented by colocation, when studying how co-location influences project outcomes. Similarly, we found that formalization inhibits buyer learning in China but not in the US. The rules and procedures within a formalized structure of NPD projects constrain the natural tendencies of engaging in informal knowledge exchange among Chinese team members. Since formal rules and procedures are the way of professional life in the US, the constraining effects on buyer learning are not significant. Among the four structural factors examined, centralization differs most between China and the US in its performance implications. Due to its congruence with China’s power distant culture, socialistic ideology and informal institutional environment, a centralized structure hurts buyer learning more in the US than in China. However, contradictory to our hypothesis, centralization is found to hurt project performance more in China than in the US. This unexpected result might suggest the importance of considering the types of project goals when examining the effects of centralization. For more task-oriented goals, such as project performance, the comfort of working in a centralized inter-group structure (in China’s case) might amplify the damaging effect of centralization due to a lack of urgency to correct the counterproductive mechanisms. This could endanger the accomplishment of immediate tasks and thereby hurt project performance.

In summary, these significant differences between the two countries show that the national context, as a multi-dimensional variable, could significantly influence performance implications of inter-group structure in interorganizational NPD projects. These impacts could result due to different reasons, such as culture, ideology, and institutions, which present challenges in terms of measuring the exact intervening variables. Data from the US and China allows us to consider these facets to be subsumed within the national context and examine how various factors, together, might create contextual limits (or opportunities) for structuring interorganizational NPD projects. The context-dependent relationship of inter-group structure with project performance and buyer learning lends credence to the equifinality argument. Specifically, there are multiple ways in which structural elements can impact project performance and buyer learning and, depending on the underlying context, different structural arrangements can provide various pathways to improve NPD project performance.

By considering both project performance and buyer learning, our study highlights the multi-faceted performance implications of inter-group structures in interorganizational NPD projects. The results point to distinct ways in which the same inter-group structure could differentially or similarly impact project performance and buyer learning in NPD projects. For instance, co-location helps with both project performance and buyer learning in China, which shows the possibility of simultaneously improving both aspects of performance. In contrast, formalization helps with project performance in the US while hurting buyer learning in China, which shows a trade-off relationship between the two types of performance. For buyer learning, we witness a stronger contingent role played by the country context. In contrast, the effect of inter-group structure on project performance is more universal and less country-dependent. These results suggest the importance of simultaneously considering multiple types of performance when studying project structures in interorganizational innovation.

Our results show support to the relevancy of an organizational dependence view for differentiating performance implications of various inter-group structural dimensions in interorganizational project teams. By reducing uncertainty emanating from dependence asymmetry, formalization helps in creating an efficient NPD process in both countries. By increasing joint dependence, task interdependence facilitates buyer learning and co-location increases project performance in both countries. Overall, our results suggest that project success relies on a higher level of joint dependence with a prudent context-specific management of dependence asymmetry. These results lay a foundation for future studies that adopt an organizational dependence view to study effects of joint dependence and dependence asymmetry in interoganizational collaboration.

Unlike the other three dimensions, task interdependence relates to the value gained by performing two tasks together as compared to the value received when they are done independently. Previous literature has argued that task interdependence enhances cooperation by intensifying interactions and increasing perceived mutual dependence. With high task interdependence, individuals perceive others as closely-coupled partners rather than independent or competing entities. Such perceived mutual dependence encourages the emergence of collaborative behaviors and norms, such as open communication, autonomous adaptation, mutual respect, trust, and reciprocity. Our results confirm these findings and further show that one benefit of task interdependence is enhanced buyer learning. We also found that an interdependent task structure does not necessarily mean a less efficient and effective process, given the insignificant effects of task interdependence on project performance. Overall, our results suggest a more positive view about structuring a task interdependent structure to organize multi-group project teams.

Managerial Insights

This study helps project managers understand how inter-group structural factors distinctively influence NPD project outcomes. Specifically, we show that formalized rules and procedures improve project performance. However, managers need to recognize the adverse impact of formalization on buyer learning in certain national contexts. Hence, a balanced approach that incorporates some degree of informality in project management should work best for improving multiple goals simultaneously. Managers need to formalize inter-group interactions by specifying roles and rules, while leaving enough room for members to explore innovative ideas.

In NPD projects, managers often rely on an interdependent task structure with the hope that it fosters learning and instill a sense of team spirit. Our study supports the use of interdependent task structure in NPD projects. It enables utilizing complementary capabilities of the supplier. By jointly performing a task with the supplier, the buyer learns new innovation possibilities that could be part of subsequent NPD projects. The negative effect of task interdependence on project performance was not confirmed in our study, which further supports the benefits of an interdependent task structure. Buyer and supplier members can be co-located and be guided by formal rules and procedures when working in an interdependent task structure. In certain national contexts, spatial proximity not only enhances efficiency but also creates opportunities for buyer learning. Our findings show that centralized structures are detrimental in NPD projects for either project performance or buyer learning, depending on the underlying cultural, social and institutional contexts. So managers need to be cautioned when relying on a hierarchical administrative structure to manage an interorganizational NPD team.

Results of this study point to the importance of considering the national context, as a contingency factor, when organizing an interorganizational team. Our focus on the US and China is relevant in providing important insights to practicing managers since these two countries play important roles in emerging global product development initiatives. The findings from our study have direct implications for project managers in charge of interorganizational NPD teams in these two countries. Our results also present some directions for managers engaged in interorganizational NPD projects conducted in other countries to structure NPD teams to better fit the underlying cultural contexts.

Source: Yan, T., Nair, A. 2016. Structuring supplier involvement in new product development: A China-US study. Decision Sciences, 47(4), 589-627.