Building Coordination Capabilities Building Coordination Capabilities to Create Future Supply Chain to Create Future Supply Chain

OpportunitiesOpportunities

Irene J. Petrick, Ph.D.Irene J. Petrick, Ph.D.Professor of Practice andProfessor of Practice and

Director, Enterprise Informatics and Integration (EII) CenterDirector, Enterprise Informatics and Integration (EII) Centeripetrick@ist.psu.eduipetrick@ist.psu.edu

Supply Chain World North America 2007Supply Chain World North America 2007Philadelphia, PA Philadelphia, PA

March 19-21, 2007March 19-21, 2007

COLLEGE OF INFORMATION SCIENCES AND TECHNOLOGY

© I.J. Petrick

OutlineOutline

Challenges in the 21Challenges in the 21stst Century Supply Chain Century Supply Chain Distributed innovation & production networksDistributed innovation & production networks Knowledge sharingKnowledge sharing Situational awarenessSituational awareness Implications for firm practicesImplications for firm practices

© I.J. Petrick

Closed System-Internal management-Sense and control

Evolving organizational formsEvolving organizational forms

Hierarchical Model

Open Market Model

Strategy

Action

Open Environment-Collaboration is self motivated-Many actors

© I.J. Petrick

Evolving organizational formsEvolving organizational forms

Hierarchical Model

Open Market Model

Community ofCreation

S1

S2 S4

S3

Context creates shared strategythrough extended participation and distributed production

© I.J. Petrick

Production networks as we Production networks as we understand them todayunderstand them today

Lead firms driving activities Lead firms driving activities Trend toward large scale Trend toward large scale

systems integrators (LSSI) and systems integrators (LSSI) and assemblersassemblers

Innovative capacity an Innovative capacity an influencerinfluencer

Outsourced non-core Outsourced non-core activitiesactivities

International focusInternational focus Market Market ProductionProduction

Supplier relationships range Supplier relationships range from commodity supplier to from commodity supplier to key supplier/collaboratorkey supplier/collaborator Design collaboratorDesign collaborator Market collaboratorMarket collaborator

Linkages across firms vary Linkages across firms vary but increasingly are but increasingly are underpinned with IT and underpinned with IT and collaborative processescollaborative processes

© I.J. Petrick

Economic power

Economic power Innovation power

Power and influence in networksPower and influence in networks

Raw Material

Raw Material

Raw Material

Raw Material

Parts

Parts

Parts

Parts

Assembly

Assembly

Assembly

Purchasing Groups

Dealers

Parts

Parts

Parts

Parts

Parts

Parts

Parts

Parts

Tier 3 Tier 2 Tier 1

OEM

Big Box Retailers

Direct sales outlets or Web

End Consumer

Distributors

EnablersEnablers Emphasis on firm core Emphasis on firm core

competencescompetences Modularization of designModularization of design Increased global Increased global

production capabilityproduction capability Information infrastructureInformation infrastructure

OEM

© I.J. Petrick

Mixed network structureMixed network structure

OEM

Direct suppliers

Tier

s

ProductArchitecture

Domain Expertise

© I.J. Petrick

Multiple inputs intensify search requirementsMultiple inputs intensify search requirements

The Enterprise

Acquisition Assessment Transfer Diffusion

SupplierInformation

CustomerInformation Information search behaviors rely on the

searcher’s ability to see the relationship between data and need or data and opportunity

The Environment

KM Organizing framework Knowledge useInformation search

Roadmapping

© I.J. Petrick

Information diversityInformation diversity

TIME

Technology

Development

Applied Research

Basic Research

PRODUCT GoalProduct Portfolio Plan

Sources of Competitive Advantage

Internal Resources

Manufacturing Outsourcing Strategy

I/P Partnership Strategy

External Resources

Capabilities

Manufacturing

I/P

Strategy

Strategy

Gov’t, Social, International and Other Factors

Environment

Market Market Assessment(s) of Changing Customer Desires Over Time

External Factors

© I.J. Petrick

Situational awareness in Situational awareness in complex organizations complex organizations and networksand networks

© I.J. Petrick

Situational awarenessSituational awareness

Source: Petrick and Maitland, 2006Source: Petrick and Maitland, 2006

Network Situation

AwarenessExchange

NetworkUseful

Multiple Network NodesIncrease Geographic Reach

Firm

ConsciousKnowledge

AutomaticKnowledge

Firm Situation

Awareness

KnowledgeAssessment

Firm Useful

Network Node One or more network nodes

Action Coordination

StrategicPlan Economies of Speed

NetworkEfficiency

NetworkEffectiveness

DecisionMaking

CompetitiveAdvantage

Capture & Creation Assessment & Exchange Action & Coordination

Social Capital Building

Economic Value

© I.J. Petrick

Evolving rolesEvolving roles

Source of Power

Role Innovation Economic

SupplierUnique access to technical knowledge drives product feature innovation

Emphasis on low cost production combined with just in time coordination metrics promotes high through-put

Assembler

Concentration on core capabilities combined with background knowledge of non-core technologies and collaborative design processes increases market relevance of end-product

Emphasis on process innovation, assembly automation and logistics coordination of the supplier base reduces the price/performance ratio over time

© I.J. Petrick

Matching coordination & collaboration Matching coordination & collaboration approaches to supplier rolesapproaches to supplier roles

Commodity components dominate outsourced parts.

Suppliers are rated on cost, quality and schedule.

OEM specifications drive component features that are tailored to product architecture.

Suppliers are rated on cost, quality, schedule and ease of integration.

OEM establishes architecture, interfaces & feature targets supplier develops approach & specifications to meet needs.

Suppliers rated on feature performance attainment, cost, quality, schedule and R&D leverage.

OEM & strategic suppliers interact to determine product architecture and component/sub-system features.

Suppliers rated on capabilities, innovation potential and R&D leverage.

TransactionContract

Coordination/Collaboration

Level 1Commodity

Point Solution

Level 2Tailored

Point Solution

Level 3Engineered

Solution

Level 4 Integrated

Systems Solution

BidContract

ProposalDown-select

MemorandumOf Understanding