Mature Cluster: Industry & Mature Cluster: Industry & Supply Chain DynamicsSupply Chain Dynamics

ONRIS Seminar Nov 4, 2005ONRIS Seminar Nov 4, 2005

Peter WarrianPeter Warrian

University of TorontoUniversity of Toronto

ONRIS: Mature ClustersONRIS: Mature Clusters

• Role of Lead/Anchor FirmRole of Lead/Anchor Firm

• Shift from Analytic to Synthetic Shift from Analytic to Synthetic KnowledgeKnowledge

• Supply Chain DynamicsSupply Chain Dynamics

• External Linkages and Internal External Linkages and Internal Dynamics of ClustersDynamics of Clusters

• ConclusionsConclusions

Cluster Typology: Mature Cluster Typology: Mature IndustriesIndustriesKnowledge Knowledge DimensionsDimensions

Industrial Structure and Cluster LinkagesIndustrial Structure and Cluster Linkages

Lead/Anchor FirmLead/Anchor Firm Global Supply ChainGlobal Supply Chain Local Value ChainLocal Value Chain

SyntheticSynthetic Ontario SteelOntario Steel Montreal AerospaceMontreal AerospaceSouthern Ontario Southern Ontario

AutopartsAutoparts

Sudbury Mining S&SSudbury Mining S&SWindsor Automotive Windsor Automotive

TDMTDMToronto MultimediaToronto Multimedia

AnalyticAnalytic New Brunswick ITNew Brunswick ITOttawa Photonics and Ottawa Photonics and

TelecomTelecom

Waterloo ICTWaterloo ICTMtl, Tor, Van, HalMtl, Tor, Van, HalBiotechBiotech

Cape Breton ITCape Breton ITVancouver New MediaVancouver New MediaMontreal New MediaMontreal New MediaQuebec PhotonicsQuebec PhotonicsOttawa BiotechOttawa Biotech

HybridHybrid Saskatoon BiotechSaskatoon Biotech Ontario/BC WineOntario/BC WineBC WoodBC WoodOntario FoodOntario Food

Cluster Typology: Mature Cluster Typology: Mature IndustriesIndustriesKnowledge Knowledge DimensionsDimensions

Industrial Structure and Cluster LinkagesIndustrial Structure and Cluster Linkages

Lead/Anchor FirmLead/Anchor Firm Global Supply ChainGlobal Supply Chain Local Value ChainLocal Value Chain

SyntheticSynthetic Ontario SteelOntario Steel Montreal AerospaceMontreal AerospaceSouthern Ontario Southern Ontario AutopartsAutoparts

Sudbury Mining S&SSudbury Mining S&SWindsor Automotive Windsor Automotive TDMTDMToronto MultimediaToronto Multimedia

AnalyticAnalytic New Brunswick ITNew Brunswick ITOttawa Photonics and Ottawa Photonics and TelecomTelecom

Waterloo ICTWaterloo ICTMtl, Tor, Van, HalMtl, Tor, Van, HalBiotechBiotech

Cape Breton ITCape Breton ITVancouver New MediaVancouver New MediaMontreal New MediaMontreal New MediaQuebec PhotonicsQuebec PhotonicsOttawa BiotechOttawa Biotech

HybridHybrid Saskatoon BiotechSaskatoon Biotech Ontario/BC WineOntario/BC WineBC WoodBC WoodOntario FoodOntario Food

Cluster Typology: Mature Cluster Typology: Mature Industries ON SteelIndustries ON SteelKnowledge Dimensions

Industrial Structure and Cluster Linkages

Lead/Anchor Firm Global Supply Chain Local Value Chain

Synthetic Ontario Steel Montreal AerospaceSouthern Ontario Autoparts

Sudbury Mining S&SWindsor Automotive TDMToronto Multimedia

Analytic New Brunswick ITOttawa Photonics and Telecom

Waterloo ICTMtl, Tor, Van, HalBiotech

Cape Breton ITVancouver New MediaMontreal New MediaQuebec PhotonicsOttawa Biotech

Hybrid Saskatoon Biotech Ontario/BC WineBC WoodOntario Food

Role of Lead FirmRole of Lead Firm

• Exit: Windsor TDM (International Exit: Windsor TDM (International Tool)Tool)

• Labour Shedding: Mining (Inco)Labour Shedding: Mining (Inco)

• Implosion: Steel (Stelco)Implosion: Steel (Stelco)

International Tool: Exit of International Tool: Exit of LeaderLeader

Inco/Falconbridge: Shedding Inco/Falconbridge: Shedding LabourLabour

Stelco: Implosion of a Stelco: Implosion of a LeaderLeader

• Withdrawal from Analytic KnowledgeWithdrawal from Analytic Knowledge– Decline and elimination of Stelco Decline and elimination of Stelco

EngineeringEngineering

• Applied Product DevelopmentApplied Product Development– Dofasco as franchiser/value added Dofasco as franchiser/value added

reseller of Arcelor & NKK technologyreseller of Arcelor & NKK technology– Solutions in Steel: Application Solutions in Steel: Application

Development - Know HowDevelopment - Know How

Shift from Analytic to Synthetic Shift from Analytic to Synthetic KnowledgeKnowledge

• Patent DataPatent Data– Dates of ApplicationDates of Application– Dates of PublicationDates of Publication

• Steel Industry Patents 1970-2005Steel Industry Patents 1970-2005– Decline of Stelco Engineering/Steltech Decline of Stelco Engineering/Steltech

90s90s

Steel Patent Data by Steel Patent Data by Application DateApplication Date

0

10

20

30

40

50

60

1965 1970 1975 1980 1985 1990 1995 2000 2005 2010

0

1

2

3

4

5

6

7

8

USA

Canada

ON Steel Knowledge ON Steel Knowledge NetworksNetworks

• Withdrawal from Analytic KnowledgeWithdrawal from Analytic Knowledge– Decline and elimination of Stelco Decline and elimination of Stelco

EngineeringEngineering

• Applied Product DevelopmentApplied Product Development– Dofasco as franchiser/value added Dofasco as franchiser/value added

reseller of Arcelor & NKK technologyreseller of Arcelor & NKK technology– Solutions in Steel: Application Solutions in Steel: Application

Development - Know HowDevelopment - Know How

Supply ChainsSupply Chains

• Asymmetric Knowledge Flows in Asymmetric Knowledge Flows in Supply Chains: AerospaceSupply Chains: Aerospace

• Dynamics and Dysfunction in Auto-Dynamics and Dysfunction in Auto-Steel Supply ChainSteel Supply Chain

Advanced Technology Cluster: Advanced Technology Cluster: AerospaceAerospace

• Niosi: Dynamics within Supply ChainNiosi: Dynamics within Supply Chain– OEM aerospace assemblersOEM aerospace assemblers– Tier 1 & Tier 2 suppliersTier 1 & Tier 2 suppliers

• Knowledge flows: International Knowledge flows: International circuits of design, procurementcircuits of design, procurement

• Asymmetry between knowledge Asymmetry between knowledge flows between firms and local labour flows between firms and local labour poolpool

Aerospace: Asymmetry of Aerospace: Asymmetry of Knowledge FlowsKnowledge Flows

Changing Supply Chain Models Changing Supply Chain Models Drive InnovationDrive Innovation

• Toyota ModelToyota Model– Lean Production & JITLean Production & JIT– Reduced inventory, cycle times, SPCReduced inventory, cycle times, SPC

• Dell ModelDell Model– Mass CustomizationMass Customization– Build-to-OrderBuild-to-Order

Purchasing Programming Marketing

Order Bank

Scheduling

Sequencing

NationalSales Co.PlanPlan

Schedule Schedule

Tier 2Supplier

Tier 1Supplier

InboundLogistics

Body, paint, assemble

OutboundLogistics

Dealer Inv.

Customer

Typical Order-to-Delivery ProcessTypical Order-to-Delivery Process

Auto Industry Build to OrderAuto Industry Build to Order

• On average, it takes 40 days to get a carOn average, it takes 40 days to get a car• 30 days for an customer order to 30 days for an customer order to

actually be inserted in the assembly actually be inserted in the assembly plant schedule. plant schedule.

• 60 days total inventory in the supply 60 days total inventory in the supply chainchain

• Same number as Henry Ford in 1926.Same number as Henry Ford in 1926.• Closer integration of supply chain has Closer integration of supply chain has

increase volatilityincrease volatility

Auto Supply Chain VolatilityAuto Supply Chain Volatility

0

500

1000

1500

2000

2500

OEM Assembly

Supplier Assemby

Component(internal)Component(external)

DofascoDofasco

• Benchmarking against Dell: Vanilla Benchmarking against Dell: Vanilla BoxesBoxes

• Mass customization strategy: PlatformsMass customization strategy: Platforms– Information content of the steel Information content of the steel

• Diversity creates key bottleneck in Diversity creates key bottleneck in Mills: Slab Specifications & ProductionMills: Slab Specifications & Production– Slabs ‘Designs’: Dimensionality, Physical & Slabs ‘Designs’: Dimensionality, Physical &

Chemical PropertiesChemical Properties– From 10,000 Designs -> 300 Vanilla BoxesFrom 10,000 Designs -> 300 Vanilla Boxes

External Linkages and Internal External Linkages and Internal Dynamics of Clusters Dynamics of Clusters

• Dynamics of Disaggregation in Dynamics of Disaggregation in ClusterCluster– Mining ServicesMining Services– ON SteelON Steel

Disaggregation in Mining Disaggregation in Mining ServicesServices

Algoma Algoma

• OEM, Tier 1and OEM, Tier 1and Specialized Tier 2 Specialized Tier 2 SuppliersSuppliers

• Interface with Interface with Design Capacities: Design Capacities: SafetySafety

• Metallurgy: AHSS Metallurgy: AHSS microstructuresmicrostructures

Disaggregation of Auto Disaggregation of Auto Steel ClusterSteel Cluster

• Circuit 1: Global Supply ChainCircuit 1: Global Supply Chain– Auto OEM, Tiers 0.5-1.0, highly Auto OEM, Tiers 0.5-1.0, highly

specialized Tier 2 firmsspecialized Tier 2 firms– Integrated Mill Metallurgy: DFS, STE, AGAIntegrated Mill Metallurgy: DFS, STE, AGA

• Circuit 2: Local Value ChainCircuit 2: Local Value Chain– Generalized Tier 2, Tier 3, StampersGeneralized Tier 2, Tier 3, Stampers– Processing Technology: Service Centres, Processing Technology: Service Centres,

Processors, MinimillsProcessors, Minimills

ConclusionsConclusions

• Cluster Life CyclesCluster Life Cycles

• Multiple Policy ObjectsMultiple Policy Objects– DisaggregationDisaggregation

• Policy targets are moving and Policy targets are moving and changingchanging

Knowledge Dimensions and Knowledge Dimensions and Flows in Mature ClustersFlows in Mature Clusters• Synthetic Knowledge & InnovationSynthetic Knowledge & Innovation

– Application of existing sources & Application of existing sources & combination of knowledgecombination of knowledge

– Interaction between clients & suppliersInteraction between clients & suppliers– Reliance on applied product Reliance on applied product

developmentdevelopment

• InfrastructureInfrastructure– Problem solvingProblem solving– Sources of talent & recruitmentSources of talent & recruitment