Professional Documents
Culture Documents
Case study
Harland et al. (1999) indicates that the evolution of
The development of supply chain management theory is driven by rapid
supply chain changes in global business practice. The worldwide
recession of the late 1980s and early 1990s forced
management within the firms to re-examine, at a strategic level, the ways in
which they aimed to add value and reduce costs
aerospace throughout their business. The resulting changes
brought about large-scale programmes of
manufacturing sector rationalisation and organisational down-sizing,
(Kanter, 1994; Porter, 1990; Prahalad and Hamel,
R.R. Bales 1990), cost reduction drives, quality improvement
initiatives and inventory reduction programmes
R.S. Maull and (Slack, 1991; Womack et al., 1990). This paper
Z. Radnor describes the changes that are occurring in the
structure of aerospace material supply chains as a
result of these initiatives. Case study results are
The authors
presented of one organisation that has changed its
R.R. Bales is a Researcher and R.S. Maull is Senior Lecturer in business focus from being a supplier to a single
Management, both at the School of Business and Economics, source material service provider.
University of Exeter, Exeter, UK.
Evidence presented here supports the argument
Z. Radnor is Lecturer in Operations Management at Warwick
Business School, University of Warwick, Coventry, UK.
that there has been a general change in
organisations desire to integrate vertically. The
Keywords current tendency is for firms to cooperate more
closely rather than maintaining a diverse range of
Supply chain management, Aerospace industry, Case studies
internal skills and resources. The literature
demonstrates that since the mid 1980s many
Abstract
industries have developed a more open approach
This paper analyses the development of aerospace material towards cooperation rather than vertical
supply chains. The paper begins with an overview of operations integration (Porter, 1987; Thackray, 1986). The
management literature, which introduces and conceptualises the
trend has been for large, vertically integrated
research area. Supply chain literature is examined, focusing on
supply chain structure and the inter-organisational links between
organisations to gradually reduce the financial risk
supply chain actors. Analysis of case study material is presented associated with operating broad business
to illustrate the scope, complexity and interdependent nature of portfolios. Cooperating firms tend not to have
the aerospace supply chain. Recurring themes from the literature become locked in inappropriate, non-core activities
are compared with the data categories emergent from the and have been able to attain an increased global
empirical case data. The results are discussed in terms of the coverage capability (Miles and Snow, 1987).
changes that are taking place in supply chain structure to The operations management concept of focus
increase the overall effectiveness of the network. The paper (Skinner, 1969) is central in the development of
concludes by identifying the need for, and discussing the nature this strategy. Organisations concentrate on a
of, a specialised organisation focused on managing the complex
limited and closely related task load, which, by the
structure of the supply chain.
nature of its manageability, allows for the
Electronic access development of an increased competency level.
Non-core competencies (Prahalad and Hamel,
The Emerald Research Register for this journal is 1990) are classed as periphery activities, which can
available at
be outsourced to specialist organisations (Snow
www.emeraldinsight.com/researchregister
and Miles, 1992). The focus of this paper is the
The current issue and full text archive of this journal is web of interdependent relationships that results
available at from focussed operations and cooperation, driven
www.emeraldinsight.com/1359-8546.htm by the trend in globalisation.
253
The development of supply chain management Supply Chain Management: An International Journal
R.R. Bales, R.S. Maull and Z. Radnor Volume 9 Number 3 2004 250-255
increases further, where, for example, The global supply chain category describes the
subcontractors hold work packages as a prime geographic scope of the aerospace supply chain,
contractors but also complete work as second or both in terms of offset opportunities and the
third tier suppliers. This means less material and potential to benefit from low-cost manufacturing. It
therefore less supply and demand information is is an important factor in the empirical data, because
transferred directly with the OEMs. The empirical successful supply chain solutions must be adaptable
data has highlighted problems with incomplete to the global market place. The base level concepts
BOMs, resulting in material shortages for projects, that form this category identify and describe the
including the Eurofighter programme. Demand importance of offset agreements in terms of market
and supply information that was held centrally by access and potentially low manufacturing costs in
the OEMs and used to manufacture in-house return for technology transfer and the wider
requirements is now disseminated throughout the economic multiplier effects created by the packages
supply chain. The need to control this information of sub-contract work. Data from this category
is recognised within the partnering and demonstrates the investment Western supply chain
information exchange categories by the companies are making to enter the Chinese market
importance of building relationships with supply to support the OEMs.
chain actors in order to gather decentralised
demand and supply information.
As the level of cooperation between
organisations increases, so does the level of inter- Conclusion
dependency. The empirical data also shows that
the OEMs have outsourced strategic activities such The case material demonstrates the complex nature
as the metal supply chain. The existence and of the aerospace manufacturing industry. The inter-
development of service providers is highlighted as dependent nature of the supply chain results from a
a role that includes traditional purchasing and combination of end-product complexity and the
stocking functions, historically carried out by the increasingly dynamic structure of the modern
OEMs, but also information management services supply chain. Historically OEMs acted as the focal
required to operate the evolving supply chain point of supply chains, carrying out the majority of
structure. Sub-contractors form a relationship transformational manufacturing and assembly
with one organisation and together they manage processes in-house and co-ordinating work placed
supply and demand information to ensure they with third parties. The OEMs also controlled and
receive their required material on schedule at a co-ordinated raw material purchase and stock,
visible and competitive price. These relationships balancing the key supply chain control mechanisms
become reinforcing loops, which act to strengthen of supply and demand to satisfy operational
inter-organisational relationships and dependency. requirements. The development of the global
It becomes easier for supply chain actors to business environment increased economic pressure,
cooperate with the network than it does for them to causing organisations to focus on specific skills and
compete against it. competencies.
Supply chain managers aim to maintain the Within the new emerging supply chain
equilibrium between cooperation and the ever- structure, the pressures which forced the OEMs to
present risk of opportunistic behaviour, while co-ordinate and maintain in-house productivity
managing the flow of inter-dependent demand and have reduced. A greater proportion and variety of
supply information to ensure continuity of supply. work is now carried out by specialist third-party
Creating transparent processes and procedures organisations including the complete metal supply
can increase supply chain visibility. This increases chain. This has altered the supply chain structure
the levels of confidence that the supply chain and decentralised the flow of information. OEMs
actors have in the integrity of their supply chain have transferred risk down the supply chain, but in
system, this is shown within the empirical data by doing so they have lost direct control of the
the development of sole service agreements. information flows at the basic supply and demand
Intra-organisational issues were not the direct level.
focus of this research but they are part of the Although the OEMs remain strategically
supply chain. In addition to the overall increase in powerful, they have lost operational control of
supply chain visibility, the increasingly inter- outsourced work packages, reducing their overall
organisational nature of supply chain management power and therefore influence over the supply
means that internal procedures become externally chain. Cox (1999) believes the way organisations
linked and therefore visible to the supply chain. control power within the supply chain directly
For example, Apollos internal warehousing affects their ability to retain or control
procedures are now directly linked to customer- appropriated value. Evidence from this empirical
supplier systems and form part of the inter- research, combined with the recurring themes in
organisational supply chain network. the literature, indicates the increasing importance
254
The development of supply chain management Supply Chain Management: An International Journal
R.R. Bales, R.S. Maull and Z. Radnor Volume 9 Number 3 2004 250-255
of inter-organisational supply chain management. Glaser, B.G. and Strauss, A.L. (1967), The Discovery of Grounded
This balances the needs of individual supply chain Theory, Aldine, Chicago, IL.
actors with the requirement for a supply chain Harland, C.M. (1996), Supply chain management relationships,
unit, capable of competing within the evolving chains and networks, British Journal of Management,
Vol. 7, March, pp. S63-80.
global aerospace market.
Harland, C.M., Lamming, R.C. and Cousins, P.D. (1999),
The empirical data suggests that within this Developing the concept of supply strategy,
supply chain environment there is a need for a new International Journal of Operations & Production
organisational layer in the form of a supply chain Management, Vol. 19 No. 7, pp. 650-73.
integrator to manage and co-ordinate the supply Hewitt, F. (2001), Why demand chain communities are
chain. This new organisational layer must balance replacing supply chains, The International Journal of
the seemingly logical principles of power and value Logistics Management.
appropriation (Cox, 1999) with the commercially- Kanter, R.M. (1994), Collaborative advantage, Harvard
Business Review, July-August, pp. 96-108.
driven requirement for organisations to co-operate
Miles, R. and Snow, C. (1987), Network organisations: new
closely to remain commercially viable. Current concepts on new forms, California Management Review,
supply chain literature references the importance Vol. 28 No. 3, pp. 62-73.
of inter-organisational links in creating integrated Oliver, R.K. and Webber, M.D. (1992), Supply chain
supply chain networks (Harland et al., 1999). The management; logistics catches up with strategy, in
nature and sophistication of these links determines Christopher, M.G. (Ed.), Logistics: The Strategic Issues,
the level at which this system can develop. As Chapman & Hall, London, pp. 63-75.
illustrated by Figure 1, Hewitt (2001) describes a Pandit, N.R. (1996), The creation of theory, The Qualitative
Report, Vol. 2 No. 2.
development beyond supply chain networks as
Porter, M.E. (1985), Competitive Advantage: Creating and
demand chain communities featuring non-linear Sustaining Superior Performance, Free Press, New York, NY.
inter-dependent relationships. Porter, M.E. (1987), Managing value: from competitive
This paper has described and illustrated the advantage to corporate strategy, Harvard Business
evolving structure of aerospace material supply Review, May-June.
chains, identifying the need for a new Porter, M.E. (1990), Competitive Advantage of Nations,
organisational layer to act as a supply chain Macmillan Press, London.
integrator. Further research explores the transition Prahalad, C.K. and Hamel, G. (1990), The core competence of
the corporation, Harvard Business Review, May-June,
from hierarchically-managed supply chains
pp. 79-92.
towards a more efficient self-managing system. Saunders, M.J. (1995), Chains, pipelines, networks and value
This links the existing supply chain literature and streams; the role, nature and value of such metaphors in
the evolving supply chain structure to alternative forming perceptions of the task of purchasing and supply
forms of governance based on the theory of management, 1st World-wide Research Symposium on
transaction cost economics. Purchasing and Supply Management, Tempe, AZ,
pp. 469-85.
Saunders, M., Lewis, P. and Thornhill, A. (2003), Research Methods
for Research Students, Pearson Education Limited, Harlow.
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