Article

Global Sourcing and Quality Recalls: An Empirical Study of Outsourcing-Supplier Concentration-Product Recalls Linkages

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Abstract

This study investigates how supply chain sourcing strategies are associated with product quality recalls. In particular, the research examines how make-or-buy decisions (i.e., outsourcing), the use of foreign suppliers (i.e., offshore outsourcing), the relocation of production to offshore markets (i.e., offshoring), and decisions to consolidate supply bases (i.e., the use of few vs. myriad suppliers) are related to product recalls. Product recalls are serious quality failures in supply chains with significant, negative impacts on firm performance. Product recalls are frequently connected to the globalization of supply chains. Globalization has, at times, promoted inconsistency in quality control and standards, leading to quality problems and failures. Data across multiple industries, with widely reported recalls, have been collected and analyzed using regression techniques. Our findings indicate that offshore outsourcing has a greater impact on recalls than offshoring without outsourcing; outsourcing domestically has the least influence. Outsourcing to a smaller supplier base may lead to fewer recalls at low levels of outsourcing. However, it may exacerbate the impact of outsourcing on recalls at high levels of outsourcing.

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... Nevertheless, high partner diversity within the supply chain network may come with additional overhead costs, and some concerns about channel conflicts and data governance. As Steven et al. (2014) suggest, a complex supply chain network where a large number of suppliers are involved may lead to "upstream complexity" issues in the supply chain, such as increasing the difficulty of monitoring supplier behaviour. Due to such increased complexity, companies are likely to face supplier risk and lower supplier responsiveness (Choi and Krause, 2006). ...
... Put into our research context, hotels heavily rely on SMA to deal with social media data, such as review aggregators of travel-related content, booking preferences and patterns generated from their business partners to optimise service operations (Cohen, 2018). Where hotels have a close partnership with a few selected business partners, and therefore the partner diversity is low, hotels should be capable of accessing high quality social media data from its partners and the information sharing between the hotel and other partners should be more accurate (Steven et al., 2014). Conversely, hotels with high partner diversity will need to invest more resources to build strong SMA capability to address consumer needs due to the complexity of social media data governance. ...
... Promoting SMA in a firm could be resource demanding. Firms not only need to invest in the analytics platforms and human resources for data mining, monitoring and interpretation, but must also sustain a close collaboration with business partners, who may share the social media data from different platforms (Steven et al., 2014). Where partner diversity is low, the company will be better able to maintain close collaboration and ensure the data quality. ...
Article
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Purpose: Underpinned by the lens of Contingency Theory (CT), the purpose of this paper is to empirically evaluate whether the impact of social media analytics (SMA) on customer satisfaction (CS) is contingent on the characteristics of different external stakeholders, including business partners (i.e. partner diversity), competitors (i.e. localised competition) and customers (i.e. customer engagement). Design/Methodology/Approach: Using both subjective and objective measures from the multiple sources, we collected primary data from 141 hotels operating in Greece and their archival data from TripAdvisor and the Hellenic Chamber of Hotels (HCH) database to test the hypothesised relationships. Data were analysed through structural equation modelling. Findings: This study confirms the positive association between SMA and CS, but it remains subject to the varied characteristics of external stakeholders. We find that an increase in CS due to the implementation of SMA is more pronounced for firms that (1) adopt a selective distribution strategy where a limited number of business partners are chosen for collaboration or (2) operate in a highly competitive local environment. The results further indicate that high level of customer engagement amplifies the moderating effect of partner diversity (when it is low) and localised competition (when it is high) on the SMA–CS relationship. Originality/Value: This study provides novel insights for practitioners on the need to consider external stakeholder characteristics when implementing SMA to enhance firms’ CS, and for researchers on the value of studying SMA implementation from the CT perspective.
... The quality of goods and services, or product quality in general, is an important research topic in Operations Management (OM). OM researchers have investigated various factors related to internal operations (e.g., plant utilization) and supply chain management (e.g., buyer-supplier proximity) that explain the variation in product quality across firms (Steven et al., 2014;Bray et al., 2019;Gray et al., 2011;Shah et al., 2017). However, the extant OM literature has largely F o r R e v i e w O n l y 2 overlooked the possible product quality impact of competition from companies located in other countries (i.e., foreign competition). ...
... OM researchers have also examined various factors that explain the variation in product quality across firms (e.g., Pil and Rothenberg, 2003;Gray et al., 2011;Bray et al., 2019;Steven et al., 2014;Steven and Britto, 2016;Shah et al., 2017;Phillips and Sertsios, 2013). Earlier studies on the antecedents of product quality focus on firm-level characteristics, such as firms' financial conditions (Phillips and Sertsios, 2013), environmental performance (Pil and Rothenberg, 2003), and plant-level variety and utilization (Shah et al., 2017). ...
... For instance, Pil and Rothenberg (2003) show how firms' efforts to enhance environmental performance can drive superior product quality, while Shah et al. (2017) identify several plant-level operational characteristics (e.g., plant variety and utilization) as the causes of product quality issues. Moving beyond the single-firm context, a growing literature has investigated the antecedents of product quality performance in a supply chain setting (Steven et al., 2014;Bray et al., 2019;Gray et al., 2011). For example, Steven et al. (2014) examine how firms' supply chain strategies including outsourcing and offshoring are related to product quality recalls. ...
Article
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Researchers have investigated various factors that explain the variation in product quality across firms, but little is known about how competition from companies located in other countries may affect domestic firms’ product quality. Although such foreign competition has received much attention from news media and the public, especially during the recent US-China trade war, its impact on product quality is still unclear. Our research answers this important question by conducting a quasi-natural experiment in the US, in which significant reductions in import tariff rates represent an exogenous increase in foreign competition for US firms. Performing a difference-in-differences estimation of the difference in product quality changes between treatment and control firms, our research shows that increased foreign competition has a negative impact on the product quality of the US firms concerned. However, such a negative impact is less significant for firms with high levels of operational slack and R&D intensity. Firms pursuing product differentiation rather than cost leadership strategies are also less affected by foreign competition. Overall, our research demonstrates foreign competition’s negative impact on product quality and highlights the crucial role that firms’ operational resources and strategies play in mitigating the negative impact.
... The term "supply chain complexity" has often been used in the extant literature in relation to product recall risks and recalls. Deep and dispersed supply chains are often characterised as part of the causes of these risks and can also describe a serial interconnection of suppliers in a geographically dispersed system (Lyles et al., 2008;Marucheck et al., 2011;Steven et al., 2014;Tse and Tan, 2012). While the term "complexity" has been used for over 20 years, the concept of complex supply chains has only recently gained momentum and a solid base of empirical evidence to explain disruptions and lack of transparency and traceability in supply chains (Bode and Wagner, 2015;Lyles et al., 2008;Marucheck et al., 2011;Steven et al., 2014). ...
... Deep and dispersed supply chains are often characterised as part of the causes of these risks and can also describe a serial interconnection of suppliers in a geographically dispersed system (Lyles et al., 2008;Marucheck et al., 2011;Steven et al., 2014;Tse and Tan, 2012). While the term "complexity" has been used for over 20 years, the concept of complex supply chains has only recently gained momentum and a solid base of empirical evidence to explain disruptions and lack of transparency and traceability in supply chains (Bode and Wagner, 2015;Lyles et al., 2008;Marucheck et al., 2011;Steven et al., 2014). There is general consensus that the complexity of supply chains increased over the last decades and that supply chain complexity is negatively associated with firm performance (Bode and Wagner, 2015;Bozarth et al., 2009). ...
... Studies on product related operational drivers of product recalls are still scarce in the academic literature . Product attributes of low complexity and low cost, among other factors, are often decisive for outsourcing production Steven et al., 2014). PPE products are defined by these characteristics and are largely manufactured in China (Chopra, 2020), which explains the large physical distance between suppliers and end users in other countries and continents. ...
Article
Purpose The purpose of this paper is to investigate strategies to manage product recalls where shortages are a critical threat, with impacts such as loss of life. The authors aim to identify key supply chain strategies and opportunities for theoretical advancement by taking a resilience perspective on temporary supply chain design. Design/methodology/approach First, the authors conducted an impact event analysis of product recalls by exploring the RAPEX database and official statements of individual country regulators. Second, the authors conducted an exploratory case study with the Cambridge University Hospitals on Personal Protective Equipment to explore product recall risks, utilising an action research methodology. Findings Additional processes, mainly testing, can compensate for the risks that may arise from temporary supply chains, where changes in location and product design are not possible due to the immediate nature of demand caused by COVID-19 pandemic. This finding reflects on the resilience of designing and implementing temporary supply chains from the perspective of product, process and location. Research limitations/implications This paper does not employ an in-depth multiple case study methodology. However, the authors argue that the role of institutional actors in global supply chains and its implications on product safety needs to be empirically studied in order to expand existing supply chain management theories to cover resilience in emerging, mature and temporary supply chain. Practical implications Managers can learn from the Cambridge University Hospitals case study that a downstream quality inspection system can be deployed to manage product quality and safety risks where recalls are not an option, such as during critical situations in the COVID-19 pandemic. Social implications The authors’ observations suggest that governments may be socially responsible for implementing rigorous mechanisms to manage product recall risks that compromise consumer safety. Originality/value The authors’ study is uniquely designed and studies various specific phenomena of product recalls risks in COVID-19. The unique design features include a dynamic and recent database analysis involving a product, process and location centric perspective complemented with a Cambridge University Hospitals case study.
... Research shows that supply base complexity hinders a firm's use of its supply base's R&D development . It also creates delivery delays (Milgate, 2001;Vachon & Klassen, 2002), production disruptions (Bozarth et al., 2009), and quality problems (Steven et al., 2014). ...
... More broadly, our exploration fits in the two components of transaction costs, namely transaction risk (i.e., the operational uncertainty due to the trade war) and coordination costs (supply complexity). Specifically, we first examine the role of firm's make or buy structure (Steven et al., 2014) and the three dimensions of supply base complexity, namely multiplicity, diversity, and interrelatedness (Choi & Krause, 2006;. ...
... However, firms with a low degree of vertical integration can focus on core competency and exploit low-cost production opportunities (Stevenson, 2018). However, as these firms outsource their operational tasks, they have less control over their supplies (Hendricks et al., 2009), more vulnerability to disruptions (Kleindorfer & Saad, 2005;Hendricks et al., 2009), more supply chain complexity, and higher coordination costs (Steven et al., 2014). Therefore, we argue that the negative impact of the trade war will be more severe for firms with a low degree of vertical integration: H3: The negative impact of tariff increases on U.S. firm performance is more severe for firms with a lower degree of vertical integration. ...
Preprint
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Multinational corporations (MNCs) have benefited tremendously from free trade in the past few decades in the form of cost reductions, resource advantages, and market expansion. However, the dynamism of international relations and a global recession have rekindled the debate over frictionless trade. In this study, we examine how trade friction, created by tariff trade barriers, affects the operational performance of domestic firms. We also investigate how different supply chain characteristics and strategies can moderate the impact of such trade friction. Motivated by the 2018 U.S.-China trade war, we conducted a difference-indifference analysis to examine the impact of trade tariffs on various firm performance indicators of U.S. firms. We find that U.S. firms with direct supply chain partners (i.e., first-tier suppliers) in China have worse performance in terms of inventory (days of supply) and profitability (ROA). We further show that the negative impact on firms' profitability is more severe when firms have a lower degree of vertical integration and when firms have a higher degree of horizonal, spatial, and cooperative supply base complexity. We discuss the implications for international operations management, supply chain networks, and supply risk management, and provide suggestions to supply chain practitioners and trade policy makers.
... As modern supply chain practices, such as supply base optimization, strategic partnerships, and longterm contracts, are extensively utilized, there has been a growing trend for firms to purchase more products from a selected small group of suppliers (Choi and Krause 2006;Sako et al. 2016;Wagner and Bode 2006), resulting in higher concentration of their supplier base (Sako et al. 2016;Wagner and Bode 2006). However, existing literature provides conflicting insights on the performance impact of supplier concentration (Moeen et al. 2013;Steven et al. 2014;Tang and Rai 2012;Wagner and Bode 2006). Some highlight the benefits of increased supplier concentration in cooperation and knowledge sharing on firm competitive advantage and performance (Tang and Rai 2012). ...
... Recent literature has recognized the importance of supplier concentration on economic actions and outcomes (Kim and Davis 2016;Sako et al. 2016;Tang and Rai 2012). Steven et al. (2014) study the role of supplier concentration in product recalls and find that outsourcing to a smaller supply reduces recalls at a low level of outsourcing. Kim and Davis (2016) explores the impact of supplier concentration on supply chain sustainability and find that supplier concentration reduces the likelihood to declare products conflict-free. ...
... Supplier concentration reflects the number and relative importance of major suppliers in a firm's supply base (Steven et al. 2014;Tang and Rai 2012). We followed prior research (Tang and Rai 2012) and employed Herfindahl index to operationalize supplier concentration as the ratio of firm i's purchase across its top four suppliers in the year 2016, as described below: ...
Conference Paper
Previous studies provide mixed insights on the relationship between supplier concentration and financial performance. To reconcile the conflicting perspectives, this study draws upon social capital theory and absorptive capacity literature to propose that IT-enabled absorptive capacity moderates the influence of supplier concentration on firm financial performance. Specifically, we distinguish IT-enabled potential absorptive capacity from IT-enabled realized absorptive capacity and examine their differential effects in moderating the supplier concentration-financial performance relationship. Using data collected from 908 manufacturing firms in two rounds, this study reveals that IT-enabled potential absorptive capacity positively moderates the supplier concentration-financial performance relationship whereas ITenabled realized absorptive capacity negatively moderates the relationship. Theoretical contributions and managerial implications of the study are discussed.
... Schumacher, R., Kumar, M., Niedenzu, D.: Product and supply chain complexity -a product safety perspective -Abstract accepted at EurOMA Conference 2020 (cancelled due to The empirical results from these studies suggest that the spatial and organisational distance between buyers and suppliers as well as a geographically diversified supply base hinders an effective communication between buyers and suppliers, leading to information asymmetry, incentive misalignments and consequently product recalls (Chao et al., 2009;Steven, 2015;Steven & Britto, 2016;Steven et al., 2014). ...
... Conversely, a concentrated supply base and the co-location of facilities may enhance communication more effectively and lower product safety risks Steven et al., 2014). A further consideration with regard to problems of outsourcing are distinctive characteristics of in-house outsourcing (offshoring) and inter-firm outsourcing, as communication and information barriers create possibilities for opportunistic behaviour because of incentive misalignments between buyers and suppliers (Steven et al., 2014). ...
... Conversely, a concentrated supply base and the co-location of facilities may enhance communication more effectively and lower product safety risks Steven et al., 2014). A further consideration with regard to problems of outsourcing are distinctive characteristics of in-house outsourcing (offshoring) and inter-firm outsourcing, as communication and information barriers create possibilities for opportunistic behaviour because of incentive misalignments between buyers and suppliers (Steven et al., 2014). For example, within a company, the manufacturer has influence on personnel selection, processes and investment decisions, whereas this influence is not present in buyer-supplier relationships ...
... lack of consideration of: exchange rates variations, governmental pressures, flexibility losses). Moving to more recent contributions, subtraction of know-how/violation of intellectual property rights (Hansen et al., 2013), quality issues (Steven et al., 2014) and underestimation of offshoring projects costs (Platt and Song, 2010) are often cited. Other critical aspects refer to country risks, in particular to geographical/cultural distance (Hutzschenreuter et al., 2016) and political instability (Hansen et al., 2017). ...
... China) (Wu and Zhang, 2014;Wiesmann et al., 2017), reduced low-cost countries attractiveness and strengthened the consideration for technologically advanced locations (World Bank, 2020), as also confirmed by our results (Table 3). On the other, by allowing firms to be competitive also producing in developed (high-cost) countries, such technologies helped companies to overcome quality, operational capability and flexibility problems they experienced in their activities abroad (Moretto et al., 2020;Patrucco et al., 2016;Steven et al., 2014) (due to the need to adapt production processes to the limited skills of the staff in developing contexts - Abele et al., 2008). Moreover, from a technology-transfer perspective, relocating activities in more developed contexts could open the doors to bidirectional learning and upgrading (e.g. ...
Article
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Purpose - This paper aims to offer a long-term systematic picture of the evolution of manufacturing offshoring (in terms of intensity, geography and drivers) highlighting the changes in the surrounding context and the resulting transitions points ("points in time") that have shaped its development path. Design/methodology/approach - Three statistical tools were adopted on a dataset of 644 cases. First, the authors resorted to multiple structural change tests to identify the transition points. Second, the authors explored offshoring geography by conducting a network analysis. Finally, the authors adopted gravity models to shed light on offshoring drivers. Findings - Results highlight three offshoring phases: expansion (2002-2006), reconsideration (2007-2009) and rationalization (2010 onwards). During the first phase, characterized by economic growth, firms were mainly interested in economic savings; offshoring to low-cost countries was the prevailing location strategy. Subsequently, during the economic crisis, the number of cases declined and the main drivers became market-based factors together with the research for cost savings. Finally, in the third phase, when the economy was still stagnating and new manufacturing technologies appeared, the number of offshoring cases has further decreased, and technological-and market-based factors have become the main location drivers. Originality/value - The study is the first to adopt a systematic, empirical and quantitative approach to analyze the evolution of the manufacturing offshoring considering both the phenomenon itself and the triggering changes in the surrounding context. In doing this, the authors also tested the importance of considering the point in time in offshoring strategies.
... The ongoing relocation and restructuring of supply led to the development of complex and untransparent supply chains (Christopher and Holweg 2011). The industry faced a precarious paradox: while focal firms became increasingly reliant on their supply network, they possessed less knowledge about their upstream processes than ever before (Steven, Dong, and Corsi 2014). New and unforeseen ecological and social risks arose. ...
... We chose this study context, as global automotive supply chains are seen to be less responsive, integrated, and visible compared to other sectors (e.g. consumer goods or pharmaceutical industry) (Shibin et al. 2020). This very well applies to the German automotive industry, which is further characterised by complex supply networks (Christopher and Holweg 2011), high dependence on upstream supply chain entities (Steven, Dong, and Corsi 2014), highly formalised buyer-suppliers relationships (Durach and Wiengarten 2017), and, finally, extensive external sustainability pressures triggered by the emission scandal in 2014 (Jung and Sharon 2019). With all these characteristics demanding the implementation of SSCM, the German automotive sector serves as the perfect setting for our investigation. ...
Article
Full-text available
In recent decades, supply chains have become a critical source of competitive advantage. Yet, in the Germany automotive industry, supply chains have turned out to be untransparent and prone to sustainability breaches, with the recent Volkswagen manipulation scandal exemplifying the financial and reputational consequences. Many firms today, therefore, focus on what is called sustainable supply chain management (SSCM). While drivers, barriers, and performance implications of SSCM have been widely explored, little is known about its implementation process. Building on the foundations of organisational change, this study inductively analysed 54 sustainability reports from three German automotive triads between 2014 and 2019. Our results led to an SSCM implementation framework that sequentially employed the nine most prominent implementation stages and related change measures. The framework expands our knowledge on the SSCM implementation process; furthermore, it serves as an example for industry experts aiming to turn their supply chains into sponsors for sustainability.
... Another stream of studies empirically explores the factors that may affect the likelihood of recalls. The results show that business strategies (research and development focus and broader product portfolios) (Thirumalai and Sinha, 2011), supply chain sourcing strategies (outsourcing, offshoring, and offshore outsourcing) (Steven et al., 2014) and outsourcing to emerging markets (Steven and Britto, 2016) increase product recalls, while prior recall experience (Thirumalai and Sinha, 2011) and sales penetration into emerging markets (Steven and Britto, 2016) reduce product recalls. ...
... First, it enhances existing knowledge on the practices that manufacturers adopt to manage quality and product recalls. Researchers have provided empirical evidence on the negative effects of product recalls on performance and how the effects are influenced by companies' strategies, operations and environment (Chen et al., 2009, Steven et al., 2014, Ni et al., 2016, Zhao et al., 2013, Hora et al., 2011, Steven and Britto, 2016. Few studies have investigated the components of product recall capability (Wowak and Boone, 2015). ...
Article
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Supply chain quality management (SCQM) has been viewed as a critical method for a manufacturer's management of product recalls. This study aims to empirically investigate the impact of SCQM practices on product recall capability using a sensemaking perspective. We adopt a multi-method approach by combining case study and quantitative survey methods. This study selects three manufacturers from the food, automobile and pharmaceutical industries to conduct an explorative case study. The findings reveal that product recall capability includes tracking and traceability and formal process, and the manufacturers use quality management teamwork, supplier qualification and supplier involvement as the key SCQM practices. A conceptual framework of the relationships between SCQM practices and product recall capability is developed based on the findings of the case study. The hypotheses are empirically tested using structural equation modelling, bootstrapping method and data collected from 400 manufacturers in China. We find that quality management teamwork and supplier qualification are positively associated with product recall capability. Quality management teamwork is positively associated with supplier qualification and involvement. In addition, supplier qualification partially mediates the effect of quality management teamwork and fully mediates the effect of supplier involvement on product recall capability.
... Quality failures in global sourcing can arise due to a number of reasons, including "miscommunication, betrayal of trust, cross-cultural differences in values, relationships and rules of reciprocal exchanges" among global supply chain partners (Lyles, Flynn, & Frolich, 2008, p. 169). Although quality management has generated substantial interest among scholars (Sousa & Voss, 2002), quality failures have been underresearched from a supply chain perspective (Steven, Dong, & Corsi, 2014). This paper investigates whether product-quality failures are associated with a firm's international sourcing supply base, and what are some of the measures to prevent quality failures. ...
... When firms move abroad for their sourcing initiatives, the institutional context in which they operate plays a very important role in their performance (Peng 2003). Existing literature has not looked in depth the quality consequences of lengthening the supply chain through international sourcing (Steven et al. 2014). Our investigation suggests that the institutional environment of the international sourcing bases influences the likelihood of product-quality failures. ...
... With data dating back to 2006, the SPLC function in Bloomberg allows users to search a focal firm and view a list of its suppliers, customers, and competitors. Specifically, it offers data regarding 1 Recently several researchers have published articles in top management and supply chain management journals utilizing Bloomberg SPLC (i.e., Elking, Paraskevas, Grimm, Corsi, & Steven, 2017;Kim & Davis, 2016;Steven, Dong, & Corsi, 2014). the percentage of costs and revenues attributed to suppliers and customers and allows researchers to create a comprehensive dataset of IORs to construct entire buyer-supplier networks. ...
... To compensate for this lack of data, Bloomberg SPLC relies on a human and computerized process to aggregate publicly disclosed data. Moreover, Bloomberg SPLC has developed advanced proprietary supply-chain data system to search and calculate, either mathematically or algorithmically, more complete buyer-supplier relationship information (Steven, Dong, & Corsi, 2014). In other words, Bloomberg SPLC will discover buyer-supplier relationships, record any disclosed relationship exposure data, and then take any unquantified relationships (i.e., relationships with an unknown numerical exposure) and convert them to quantified relationships (i.e., relationships with a known numerical exposure, such as sales). ...
... With data dating back to 2006, the SPLC function in Bloomberg allows users to search a focal firm and view a list of its suppliers, customers, and competitors. Specifically, it offers data regarding 1 Recently several researchers have published articles in top management and supply chain management journals utilizing Bloomberg SPLC (i.e., Elking, Paraskevas, Grimm, Corsi, & Steven, 2017;Kim & Davis, 2016;Steven, Dong, & Corsi, 2014). the percentage of costs and revenues attributed to suppliers and customers and allows researchers to create a comprehensive dataset of IORs to construct entire buyer-supplier networks. ...
... To compensate for this lack of data, Bloomberg SPLC relies on a human and computerized process to aggregate publicly disclosed data. Moreover, Bloomberg SPLC has developed advanced proprietary supply-chain data system to search and calculate, either mathematically or algorithmically, more complete buyer-supplier relationship information (Steven, Dong, & Corsi, 2014). In other words, Bloomberg SPLC will discover buyer-supplier relationships, record any disclosed relationship exposure data, and then take any unquantified relationships (i.e., relationships with an unknown numerical exposure) and convert them to quantified relationships (i.e., relationships with a known numerical exposure, such as sales). ...
Chapter
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Research involving interorganizational relationships (IORs) has grown at an impressive rate. Several datasets have been used to understand the nature and performance implications of these relationships. Given the importance of such relationships, we describe a relatively new dataset, Bloomberg SPLC, which contains data regarding the percentage of costs and revenues attributed to suppliers and customers, as well as allows researchers to construct a comprehensive dataset of IORs of buyer–supplier networks. Because of this, Bloomberg SPLC data can be used to uncover new and exciting theoretical and empirical implications. This chapter provides background information about this dataset, guidance on how it can be leveraged, and new theoretical terrain that can be charted to better understand IORs.
... 2. Our firm has been relying on a small number of suppliers Vachon and Klassen (2002), Koufteros et al. (2007), Bode and Wagner (2015), Sharma et al. (2019), Dong et al. (2020) Detail -variety 1. The number of countries represented in supply base 2. Suppliers in this supply chain are the same size (Reverse-coded) 3. The degree of difference in technical capabilities, manufacturing capabilities, and R&D directions Steven et al. (2014), Bode and Wagner (2015), Brandon-Jones et al. (2015), Gao et al. (2015), Lu and Shang (2017), Sharma et al. (2019), Dong et al. (2020) Dynamic 1. Our suppliers' lead times are too long compared to our competitor's suppliers 2. We can depend on on-time delivery from suppliers in this supply chain (Reverse-coded) 3. The extent to which firms changed suppliers last year Danese and Romano (2013), Brandon-Jones et al. (2015), Gao et al. (2015), Habermann et al. (2015) Downstream complexity Detail -numerousness 1. Number of customers Bozarth et al. (2009) ...
Article
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Increased globalization, varying customer requirements, extended product lines, uncertainty regarding supplier performance, and myriad related factors make supply chains utterly complex. While previous research indicates that supply chain complexity plays an important role in explaining performance outcomes, the accumulating evidence is ambiguous. Thus, a finer‐grained analysis is required. By meta‐analyzing 27,668 observations across 102 independent samples from 123 empirical studies, we examine the link between supply chain complexity and firm performance. While the preponderance of evidence from previous studies identifies supply chain complexity as detrimental to firm performance, our results illustrate that although supply chain complexity has a negative effect on operational performance, it has a positive effect on innovation performance and financial performance. Furthermore, we also distinguish among different levels of supply chain (i.e., upstream, downstream, and internal) and observe nuanced findings. Finally, our findings also reveal moderating effects of construct operationalization and study design characteristics. We discuss implications for theory and practice and provide avenues for future research.
... Where sufficient information is available, these relationships are quantified both as a percentage of the supplier's revenues from a buyer, and as a percentage of the buyer's spend on a supplier (see Bloomberg 2011 for more details). Bloomberg SPLC is gaining traction within academic research as a source of supply chain relationships (e.g., Osadchiy et al. 2015, Steven et al. 2014. We compiled the Bloomberg SPLC data in January 2016. ...
Article
This paper provides empirical evidence on the effect of the September 2015 Volkswagen diesel emissions scandal on the stock prices of publicly traded firms in the global automotive ecosystem. We focus on both the supply chain partners of VW – tier‐1 suppliers; tier‐2 suppliers; and business customers – and three groups of firms that are not VW supply chain partners – other motor vehicle manufacturers; parts manufacturers not identified as VW suppliers; and wholesalers, retailers, and rental agencies not identified as VW customers. We find that tier‐1 suppliers of direct material to VW suffered a mean stock price reaction of ─2.69% in the week following the scandal, but this effect varied by region. European suppliers were the most impacted with a mean stock price reaction of ‒5.52%. Suppliers with larger revenue dependence on VW experienced greater negative stock price reactions, as did suppliers of components for engines and/or emissions systems. Non‐VW parts manufacturers experienced a positive effect. We find a mean stock price reaction of ─5.28% to VW’s European customers, but no significant effects for non‐VW customers. European motor vehicle manufacturers experienced a mean stock price reaction of ‒7.60%. Our results suggest that firms should not just focus on selecting and monitoring responsible suppliers but also apply some of the same principles to developing responsible customers. Our work also has implications for industry groups, regulators, and legal systems, entities that have the resources and capabilities to effectively monitor large firms to reduce illegal or irresponsible behavior such as the VW scandal.
... 반면, 본 연구는 글로벌 자동차 제조사들이 소비자들이 인식하기에 지 역 차등적 리콜로 보이는 행위에 이르게 되는 복잡한 맥락을 보다 정밀히 규명하고자 한 시도 이다. 그런 면에서, 리콜의 결정요인을 단일 지역 을 대상으로 제품 수준, 조직 수준, 경영자 수준에 서만 탐색한 연구와는 다른 관점을 제공한다(Dean, 2004;Hammond, 2013, Shah, Ball, & Netessine, 2017Steven, Dong, & Corsi, 2014;Wowak, Mannor, & Wowak, 2015). 또한, 리콜 행위를 제품 결함과 관련한 정보 공개 전략으로 만 개념화하거나, 조직 학습의 관점에서 위기나 조직 실패가 가시화된 결과로만 본 연구와도 다른 관점을 제공한다(Haunschild & Rhee, 2004). ...
Article
This paper explores the rationales behind different responses by global automakers when dealing with consumer safety issues across different regions, and examines region-specific circumstances under which they reach such decisions. We argue that the strategic importance of a given region and its institutional characteristics pertaining to the governance of consumer safety issues are two important but under-explored factors that might trigger different recall responses by global firms across different regions. Specifically, we hypothesize that the likelihood that a given global firm will respond to consumer safety issues without delay will be higher in regions of greater strategic importance, while the likelihood of responding to such issues with delay will be higher in regions of lower strategic importance. We also predict that this relationship might be amplified for firms with higher brand reputations. Further, we contend that institutional stringency (vs. laxity) will likely affect the timing of recall responses by global firms across different regions. Our claims are tested with a unique dataset of engine and brake-defect recalls carried out by global automakers across eight countries from 2007 to 2016. Our findings show that early recall responses to severe product defects tend to be more common in countries in which a given global firm’s market dependency is greater and in locations characterized by higher institutional stringency. In contrast, late recall responses are more often found in countries where a given global firm has lower market dependency and in locations marked by higher institutional laxity.
... From initially seeking a partner to implementing the project and final software delivery, offshore clients and vendors require continuous interactions to ensure delivery quality. OSDO is a form of global virtual collaboration that introduces various challenges, including geographical, temporal, and intercultural differences (Steven, Dong, & Corsi, 2014). Global virtual collaboration may face additional challenges, such as information-technology adoption levels of clients and vendors vary (Taras et al., 2013), asynchronous coordination (Chamakiotis, Boukis, Panteli, & Papadopoulos, 2020), and divergent organizational climate (Chen & Huang, 2007). ...
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Vendors and clients collaborate on outsourcing projects through virtual teams. Trust is an important indicator of mutual relationships that lead to successful projects. This study's objective is to investigate the determinants of trust in different stages of collaboration during offshore software-development outsourcing. Using a case study approach to collect data, we find that reputation, a cognition-based trust factor, influences clients' trust in vendors in the team-forming stage. Responsible team climate, a knowledge-based trust factor, impacts clients' trust in vendors in the team-storming and norming stages of software design and development. Structural assurance, an institutional trust factor, encourages vendors' trust in clients in the same team-storming and norming stages of software design and development. Benefit, a calculative-based trust factor, influences vendors' trust in clients in the team-performing stage of software delivery and implementation. Our research findings have implications for software-outsourcing collaboration theories and practices and may have implications beyond that sphere, including team building in multiple contexts and environments.
... 2. Our firm has been relying on a small number of suppliers Vachon and Klassen (2002), Koufteros et al. (2007), Bode and Wagner (2015), Sharma et al. (2019), Dong et al. (2020) Detail -variety 1. The number of countries represented in supply base 2. Suppliers in this supply chain are the same size (Reverse-coded) 3. The degree of difference in technical capabilities, manufacturing capabilities, and R&D directions Steven et al. (2014), Bode and Wagner (2015), Brandon-Jones et al. (2015), Gao et al. (2015), Lu and Shang (2017), Sharma et al. (2019), Dong et al. (2020) Dynamic 1. Our suppliers' lead times are too long compared to our competitor's suppliers 2. We can depend on on-time delivery from suppliers in this supply chain (Reverse-coded) 3. The extent to which firms changed suppliers last year Danese and Romano (2013), Brandon-Jones et al. (2015), Gao et al. (2015), Habermann et al. (2015) Downstream complexity Detail -numerousness 1. Number of customers Bozarth et al. (2009) ...
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... The increasing complexity and embedded supply risks make SSCM more challenging (Zimmer et al. 2017). First, within the economic dimension, the globalization of supply chains has prompted companies in industrialized countries to increasingly outsource their production processes, resulting in serious potential quality failure risks (Steven et al. 2014). Toyota's product recall crisis has been interpreted as being the result of supply risk from the perspective of the economic dimension. ...
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With the recent emphasis on supply risk management in sustainable supply chains (SSCs), the evaluation and selection of appropriate suppliers are more important than ever. However, most existing research does not take all three sustainability perspectives of supply risk into account simultaneously and they rarely consider the correlation among supply risk factors in risk assessment. Therefore, considering the uncertain information decision-making environment, this research paper proposes a risk-based integrated group decision-making model for sustainable supplier selection (SSS). First, the weights of decision-makers (DMs) are taken as linguistic terms denoted by intuitionistic fuzzy numbers (IFNs). Second, after obtaining the aggregated intuitionistic fuzzy decision-making matrix considering the expert weights, this study uses the entropy weight method to calculate the criteria weights objectively. Then, the improved failure mode and effects analysis (FMEA) is adopted for the risk assessment to exclude high-risk suppliers. Finally, the extended alternative queuing method (AQM) is applied to rank the qualified suppliers in SSCs. This model can not only enable enterprises to reduce supply risk in SSS practices and identify and prevent the failure modes that lead to supply risk, but also reduce the uncertainty of decision-making, in order to make supplier selection more accurate. The feasibility and effectiveness of the proposed model are illustrated through application in a leading Chinese electrical appliance manufacturing company.
... The performance impact of outsourcing is a highly debated topic supported with empirical evidence that highlights both advantages and drawbacks (e.g., Tsay et al., 2018). Among the disadvantages, empirical studies have examined potential opportunism (Handley & Benton Jr, 2012), reduced control over firm activities and capability losses (Handley, 2012), quality failures (Steven, Dong, & Corsi, 2014), and a loss of R&D competitiveness (Teece, 1988). Key advantages include that outsourcing provides numerous opportunities to enhance performance through efficiency and competence gains (Quinn, 1999). ...
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The dominant view is that outsourcing is driven by efficiency considerations. We demonstrate that a different path to outsourcing originates from critical internal resource shortages. These shortages pose a critical dilemma; on the one hand outsourcing is a reasonably durable approach to solving resource shortages. On the other hand, the same resource shortages complicate the management of outsourcing and may create knowledge and evaluation problems. We empirically examine this dilemma and thereby add to the limited work on the enabling effects of outsourcing under resource constraints. We employ two rich and unique panel datasets of Australian firms observed over five-year periods, to test dynamic change models if firm-level financial and competence constraints induce outsourcing, and if this in turn enables internal process improvement. The results show that outsourcing indeed is associated with both financial and competence constraints, although the impact of these constraints differs over time. In turn, we find that increased outsourcing relates positively to contemporaneous and future process improvement. These findings thus shed a positive light on how outsourcing can enable firms to overcome constraints and realize internal process improvement.
... The requirements typically vary between countries and often provide minimal clarity on individual operators' roles to ensure traceability or are non-existent (UK FSA, 2017). At the same time, global supply chains are positively related to product recalls due to information asymmetry between actors and lack of product traceability (Steven et al., 2014), indicating that a lack of harmonised requirements for traceability may manifest in compromised consumer safety. For example, the lack of supply chain traceability standards and associated risks became evident through high profile recall incidents such as the horsemeat scandal, which led to a tidal wave of media responses and the withdrawal of contaminated processed food. ...
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Digitalisation is expected to transform end-to-end supply chain operations by leveraging the technical capabilities of advanced technology applications. Notwithstanding the operations-wise merits associated with the implementation of digital technologies, individually, their combined effect has been overlooked owing to limited real-world evidence. In this regard, this research explores the joint implementation of Artificial Intelligence (AI) and Blockchain Technology (BCT) in supply chains for extending operations performance boundaries and fostering sustainable development and data monetisation. Specifically, this study empirically studied the tuna fish supply chain in Thailand to identify respective end-to-end operations, observe material and data-handling processes, and envision the implementation of AI and BCT. Therefore, we first mapped the business processes and the system-level interactions to understand the governing material, data, and information flows that could be facilitated through the combined implementation of AI and BCT in the respective supply chain. The mapping results illustrate the central role of AI and BCT in digital supply chains’ management, while the associated sustainability and data monetisation impact depends on the parameters and objectives set by the involved system stakeholders. Afterwards, we proposed a unified framework that captures the key data elements that need to be digitally handled in AI and BCT enabled food supply chains for driving value delivery. Overall, the empirically-driven modelling approach is anticipated to support academics and practitioners’ decision-making in studying and introducing digital interventions toward sustainability and data monetisation.
... This is reflected by the tenet that global scale operations significantly increase risks and vulnerability to focal companies (James, 1990), and large companies are more exposed to reputation damage (Oelze & Habisch, 2018). Nonetheless, comparative cost advantages and other benefits related to global business may seem to outweigh the risks stemming from the increased distance, complexity and fragmentation of supply chains (Steven, Dong, & Corsi, 2014). ...
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The United Kingdom's Modern Slavery Act exposed companies to a new ethical challenge in their supply chains. An estimated 40.3 million people worldwide are in modern slavery, working in a range of supply chains, including construction and facilities management. In this article, we show how the UK construction and facilities management sector responded to this challenge through an intra‐industry initiative and went through a process of collaborative sense‐making and sector‐wide agreement on a joint approach to challenge modern slavery in the sector's operations and supply chains. The research takes an engaged research approach whereby the researchers have been able to gain deep and continued access to the phenomenon from participation in a multi‐company initiative on the implementation of responses to the UK Modern Slavery Act in supply chain and procurement activities of their sector. We identify and discuss key areas for supply chain and procurement practitioners tasked with addressing a human rights topic in their operations and supply chains: Motivation, risk hot‐spots, challenges and response and provide a rich understanding of an intra‐industry initiative which creates a basis for further research on collective sustainability approaches by businesses who are otherwise commercial competitors. The study's results and insights are useful for policymakers and practitioners who are aiming to apply market‐based approaches for sustainability improvements in supply chains.
... It calculates the percentage of revenues a supplier receives from its major customers and the percentage of COGS a customer spends on its major suppliers. This database has been used by researchers to measure supplier concentration (Steven et al., 2014). Similarly, we manually obtain the count of our sample firms' Japanese suppliers and customers and collect the percentage of revenues a firm receives from its major customers to measure supply chain linkage and customer concentration, respectively. ...
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It is unclear how a natural disaster such as earthquake affects disaster-stricken firms’ industry peers located in other countries. While those industry peers might benefit from the disaster due to the competitive advantage gained over the disaster-stricken firms (positive competitive effect), they might also suffer from the disaster due to their linkages to the disaster-stricken firms (negative contagion effect). Based on a natural experiment in which a series of earthquakes struck Kumamoto, Japan’s Silicon Island, in April 2016, we find that the earthquakes have a negative impact on the stock returns of the semiconductor manufacturers located in China, suggesting that the contagion effect overweighs the competitive effect. Moreover, the negative impact is more pronounced for firms with supply chain connections with Japanese firms. However, we also find a positive impact among Chinese firms with high inventory turnover and customer concentration. Overall, our research reveals the dynamic effects of a natural disaster across national borders, urging firms to pay attention to the negative contagion effect through supply chain linkages and the positive competitive effect resulting from better operational efficiency.
... When sufficient information is available, Bloomberg (2011) reports the percent of the supplier's revenues obtained from each buyer. Bloomberg SPLC is increasingly used by academic researchers as a source of business relationships within supply chains (e.g., Bellamy et al., 2020;Osadchiy et al., 2015;Steven et al., 2014;Wang, Li, et al., 2021). We assembled the data from Bloomberg SPLC in February 2019. ...
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Government trade actions are an increasing source of supply chain risk. This research provides empirical evidence of the stock market reaction to trade actions against a targeted firm on other firms in the targeted firm's supply chain eco‐system. We test our hypothesized stock price effects using the case of the 2018 US government ban on US firms from supplying to ZTE, a Chinese telecommunications manufacturer. We estimate the ban's effects on ZTE's tier‐one US and non‐US suppliers, as well as the upstream and downstream supply chain propagation effects by considering ZTE's tier‐two suppliers and business customers. We also estimate impacts to ZTE's competitors. We find that tier‐one US suppliers experienced a stock price effect of −3.33% following the ban, and the reaction was more negative for those suppliers more dependent on ZTE for revenues. We find a stock price effect on tier‐two suppliers of −0.40%, but an insignificant effect on non‐US tier‐one suppliers. Business customers experienced a stock price effect of 0.66%, and the competitors' stock price effect was 1.34%. The reversal of the ban 4 weeks later resulted in a stock price effect of 1.56% for tier‐one US suppliers, 1.72% for tier‐one non‐US suppliers, and 1.35% for competitors. The 2018 ZTE trade ban by the US government resulted in significant market value losses (median −3.33%) for ZTE's US suppliers, but not for its non‐US suppliers. The reversal of the ban 4 weeks later resulted in significant market value gains (median 1.56%) for ZTE's US suppliers, but the gains were not sufficient to offset the losses incurred by the ban. Policymakers and regulators need to be sensitive to the potential market value gains and losses due to government trade actions for both domestic and non‐domestic firms, and supply chain managers and investors need to be aware of the magnitude of the impacts.
... To fully obtain the cooperation and competition status of the supplier relationship strategy, the measurement index of the supplier relationship strategy requires reflecting not only the closeness of the relationship between enterprises and suppliers but also their bargaining advantages. This study refers to the existing literature and applies supplier concentration as one of the indicators to measure the supplier relationship strategy (16,17,59,60). For another dimension of supplier relations, considering the work of Wang and Wang (61), supplier financing that is the net occupation of enterprises, to supplier financing, is selected. ...
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With the development and application of e-commerce in the process of supply chain integration, the choice of supplier centralized strategy or decentralized mode and how to use supplier financing have become significant contents of supply chain management. This study investigates the effect of competition and cooperation on the corporate cash dividend policy under the influence of the supplier relationship strategy and its mediating mechanism based on Chinese data. The motivation of this study is to provide a basis for enterprises to grasp the dynamic evolution process of the economic consequences of supply chain relationships based on big data and adjust the relationship strategy in time to maximize the positive effects of supplier relationships. This study considers supplier concentration and supplier financing as two dimensions to measure the supplier relationship strategy and selects the balanced panel data of Chinese A-share listed companies from 2007 to 2020 as samples by applying the Logit and Tobit model. The results demonstrate that the supplier relationship is negatively correlated with the cash dividends. The intermediary effect found that the competition effect of the supplier relationship aggravates the agency conflict of enterprises and intensifies the degree of financing constraints, and thus acts on the cash dividends of enterprises. This study expands the economic consequences of relational transactions and provides an explanation of dividend policies from the perspective of a supply chain.
... We first obtained a list of US-listed firms from the Compustat database and collected the supply chain data for 13 these firms from Bloomberg's SPLC database. The supply chain data from Bloomberg have been widely adopted by recent supply chain management studies on product recall (Steven et al., 2014), inventory strategy (Elking et al., 2017), and supply base innovation (Dong et al., 2020). Our tactic was to ascertain whether our 244 Chinese manufacturers were listed as their respective US-listed firms' suppliers prior to 2020 (i.e., in 2019). ...
Chapter
Outsourcing as an industry recently has made an evolutionary jump forward. Diverging from the past has clearly occurred in the Pharmaceutical and Aviation industries. Both industries have shown that they are simultaneously maximizing classical outsourcing as well as breaking off and developing their own evolution of outsourcing as a strategic powerhouse. This chapter will cover the historical significance of how both industries had an independent progressive supplier relationship that has led to their significant industry outsourcing perspective and innovation. We will especially see how their strategic sourcing innovations impacted the outsourcing evolution, as a whole.
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Purpose – This study investigates the relationship between buyer-supplier top management team (TMT) demographic misalignment (defined as differences in TMT composition based on background, age, and gender) and environmental performance. Design/methodology/approach – The empirical setting is publicly held U.S. manufacturing firms that are present in both KLD’s annual environmental performance ratings, and Bloomberg’s SPLC supply chain database. The study employs panel data regression methods on an unbalanced panel dataset of 7,493 dyad-year observations comprising 427 unique firms. Findings - The research shows that misalignment in functional background and gender composition between TMTs have a negative outcome on both the buyer’s and the suppliers’ environmental performance. However, increasing presence of females across TMTs has a positive influence on environmental performance. Further, the research shows that misalignment based on age between the TMTs does not impact environmental performance in any significant way. On the contrary, increasing age across TMTs is a significant predictor of environmental performance. Originality/value – This study builds on existing works in TMT heterogeneity and adds context to the heightening belief in the positive linkage between heterogeneity and performance through extension to a boundary spanning interfirm context.
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Quality issues in supply networks can adversely affect the performance of suppliers and their downstream customers. Since suppliers might fail to comply with quality guidelines, decentralized quality controls by each firm in a supply network may be insufficient; thus, a complete network perspective on risk management could help to minimize supply disruptions. Here, we develop a novel modeling framework drawing on epidemiology, to demonstrate how network structure impacts the propagation of quality issues—akin to the spread of an infectious disease. We formulate an SIS model in which nodes represent individual suppliers while directed edges represent the movement of goods between suppliers; these nodes can be either susceptible (S) to or infected (I) by a disruption. Applying the model to 21 real-world networks, we find that a quality issue’s magnitude depends strongly on its origin node and the network archetype. The network’s maximum Authority value—based on the relationship between relevant authoritative nodes and hub nodes— is highly correlated with the extent of a supply disruption in our simulation. We examine different network-level strategies for containing an outbreak and find that improving quality control at critical nodes—those characterized by a high Authority value or customer proximity—is an effective measure. Adjusting the network structure by focusing on an upstream-centric flow of goods, thereby reducing the maximum Authority value, decreases vulnerability to quality issues. Managers can reduce the impact of quality disruptions through a combination of conventional firm-level strategies and novel network risk management strategies.
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Recent advances in manufacturing and communication technology have made it possible for firms to offer products that are personalized to individual customers’ specifications. While personalizing products leads to benefits for firms, it also requires significant resources, calling into question the financial efficacy of this practice. This situation is especially salient in the pharmaceutical industry, where drugs are personalized to individuals. This type of medicine is expected to account for approximately 50% of drug spending in the U.S. market by 2022; however, the rising costs of producing and delivering such medications make their viability uncertain. In this study, we present a framework that conceptualizes a nonlinear inverted U-shaped relationship between product personalization and financial performance. We further investigate the role of supply-chain disintermediation in enhancing the benefits of personalization. Analysis of data from the pharmaceutical industry confirms that product personalization improves financial performance only up to a point, beyond which firms experience negative performance effects. Furthermore, supply-chain disintermediation moderates this relationship such that the inverted U-shape is steeper with increasing disintermediation levels. Together, these findings provide important guidelines for managers formulating their firms’ product personalization strategies. KEYWORDS: Product personalization; Supply-chain disintermediation; Pharmaceutical industry; Precision medicine; Econometric analysis
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Stakeholders expect focal firms to improve their environmental performance. While firms may be able to accumulate the environmental expertise needed to achieve this goal internally, doing so may require significant time and resource commitments. Alternatively, buyer firms can leverage their suppliers’ existing environmental expertise and gain access to such expertise when they purchase products and services from these suppliers. The purpose of this study was to develop and test theory regarding under what conditions suppliers’ environmental expertise influences a buying firms’ procurement spend with these suppliers. We ground our study in transaction cost economics and agency theories and empirically test our hypotheses using a unique buyer–supplier dyadic data set. We find that buyer firms are willing to increase their overall business spend with suppliers that have strong environmental expertise, particularly when the buyer firms are more profitable and have higher levels of absorptive capacity. However, we find the opposite effect when the buyer firm’s executive compensation is linked to the firm’s environmental, social, and governance (ESG) performance. Likewise, we also find that the buyer firm’s environmental concern ratings negatively moderate the relationship between the supplier’s environmental expertise and the buyer’s procurement spend with the supplier.
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Product recalls are often associated with quality failures and may negatively affect customer satisfaction and firm performance. Motivated by counterintuitive anecdotal evidence on the positive relationship between recalls and sales, we develop an endogenous consumer reference model with stochastic quality levels and consumer valuation of gain‐loss utility to examine the consumer's willingness to buy in the event of a recall. A consumer makes purchasing decisions by evaluating gain‐loss values against a quality reference point. The theory of endogenous reference points incorporates the consumer's expectations of buying into forming a reference point based on the consumer's beliefs about quality outcomes (Kőszegi & Rabin, 2006, 2007). The uncertainty of the consumer's quality expectations combined with the consumer's personal equilibrium makes the reference point endogenous, generating predictions different from those under conventional exogenous reference point and in the case of deterministic quality expectations. We find that a product recall may revise the consumer's belief toward a more negative quality outcome, and therefore, a lower reference point, when quality expectations are uncertain and the consumer's reference point is endogenous. The consumer expects a greater gain from buying the product against the lower reference point, leading to a higher willingness to buy. In addition, we find that supply chain offshoring, which may be associated with consumer evaluation of gain‐loss utility or consumer loss aversion, may complicate the effect of recalls on a consumer's willingness to buy. These results suggest that firms should consider consumer preferences under uncertainty when designing and developing their global supply chain strategies in quality management.
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Extant literature offers differing perspectives regarding whether buying firms benefit from having highly dependent suppliers. One view is that buyers benefit from having dependent suppliers as this provides buyers the ability to dictate terms in the relationship. An alternative perspective is that buyers are worse off from having dependent suppliers in that this dependence can lead to conditions that harm value creation. In this manuscript, supply chain management theory is extended by evaluating these differing predictions. This is accomplished by analyzing a database from Bloomberg of objective, secondary data for more than 3,000 supplier relationships for 49 firms independently recognized as possessing exemplar supply chains and 530 of these firms’ largest industry rivals based on GICS industry codes. These data are utilized to develop a portfolio‐level measure of buyer–supplier dependence that incorporates the bilateral nature of dependence. The findings indicate that, relative to their industry rivals, firms with exemplar supply chains have suppliers with a lower level of dependency. These results contribute to theory, inform management practice, and suggest avenues for future research.
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We examine how Amazon's decision to vertically integrate its retail platform and last‐mile delivery operations can lead to anti‐competitive outcomes as a result of a deterioration in the operating efficiency in the routes served by a last‐mile transportation firm. Based on an operational analysis of the last‐mile transportation firm, we find that Amazon's decision to vertically integrate increases significantly the mileage necessary to deliver parcels in the ZIP code areas where this integration occurs. Moreover, this increase is significantly amplified by the remoteness and proportion of fast deliveries in these areas. These effects translate, on average, into $1.36 in additional costs necessary to cover extra vehicular and labor expenditures per parcel delivered. Because at the root of these outcomes are interactions among multiple organizations with significant market power asymmetries, we expand on a variety of potential anti‐competitive service and pricing outcomes stemming from the impact of Amazon's vertical integration on the last‐mile delivery firm's costs. We then put forth different public policy remedies that could be implemented to address these potential sources of anti‐competitiveness in the last‐mile delivery industry. Our analysis of Amazon's decision to vertically integrate its retail platform and last‐mile delivery operations shows significant adverse effects on the operating efficiency across service areas with last‐mile transportation routes. The negative impact on the operating efficiency is more prominent among service areas that are hard to reach and with a large proportion of fast deliveries. Public policy should consider market power dynamics in evaluating powerful platforms' vertical integration in the last‐mile transportation industry.
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The automotive industry appears to be a particularly attractive application case for blockchain technology adoption. Blockchain is one of the innovations that has much potential to change current business processes in German original equipment manufacturers (OEMs) and enable new services for their customers. This paper combines collective case study and in-depth interviews to explore the potentials and existing challenges of blockchain technology-based applications at German OEMs. The results suggest that blockchain applications have advantages in aggregating product information, securing transaction information, and establishing a reliable supply chain. Based on the TOE (technology, organisation and environment) model, our case study shows that the biggest obstacles for blockchain technology adoption in the automotive supply chain include: technology immaturity, lack of guidance and industry standards, non-cooperation of chain members, and legislative ambiguity. Based on auto manufacturers investigated, blockchain technology is perceived to have great potentials in reducing process costs, ensure product quality, and enhance the automotive supply chain’s visibility and digitisation.
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The capabilities-based view postulates that organizational capabilities are a key driver of competitive advantage. However, while increasing the pace of deploying organizational capabilities, such as new product development (NPD), may enable alignment with changing environments, it may also have unintended consequences. In this study, we advance theory on these unintended consequences by investigating how the increased deployment of NPD capability leads to organizational errors. Borrowing from organizational research employing systems theory, we argue that an increase in NPD deployment may increase the likelihood of routine discoordination and, thus, the incidence of intra-firm and interfirm errors. However, we also proffer that firms can mitigate errors from increases in NPD capability deployment by engaging in distinct internal and external activities that enable the accumulation of knowledge on how to coordinate systemic change. We distinguish between internal and external errors, demonstrating that in the context of increased NPD deployments, internal voluntary investigations ameliorate internal manufacturing errors, while supplier alliances mitigate outsourced component errors. We find support for our predictions using data from new product introductions and recalls in the U.S. automotive industry. This study sheds light on the tension inherent to accelerating the deployment of patterned organizational activities and suggests that the outcomes of deploying an organizational capability are best viewed holistically within the milieu of organizational systems the capability spans.
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Research on product recalls has recently witnessed a sharp increase; however, this stream of research is dispersed within and outside the discipline of management. In the current article, we review this research stream by adopting a stakeholder-stage framework that draws on stakeholder theory and crisis management literature. Specifically, we summarize and integrate the product recall research along two dimensions: the stakeholders involved (e.g., managers, employees, shareholders, consumers, suppliers, competitors, media, and regulators) and the key issues at different stages of a recall (before-recall, during-recall, and after-recall). We find that current research has focused on managers, shareholders, and consumers, but has paid limited attention to other equally important stakeholders such as suppliers, employees, competitors, media, and regulators. Also, researchers have predominantly examined the issues associated with the after-recall stage to minimize the consequences of recalls, while the before- and during-recall stages that prevent recalls and make them more effective are relatively underexamined. To address these gaps and extend the current research, we develop a range of future research opportunities that can make nuanced theoretical contributions and generate implications for practice and policy. By emphasizing the need to adopt a stakeholder management approach and consider recalls as a process, rather than an event, this review paves the way for enriching future research on product recalls.
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The Product Recall study is a relevant issue for both quality management and supply chain management. This paper identifies the main contributions, approaches and methodologies proposed in the scientific literature to address product recall, through a bibliometric analysis and a taxonomical classification regarding works made over the last 20 years. For this, a literature review was carried out in the Taylor and Francis, EBSCO, Science Direct, Scopus, Springer Link, IEEE, Google Scholar and Proquest databases. The bibliometric analysis allowed to identify the main clusters related to product recalls. The taxonomical classification allowed grouping of works into six categories: type of work, quality approach, problem approach, type of methodology, data characteristics, and product category. The sectors with the highest level of occurrence of product recalls are toy industry, automotive sector, electrical supplies, and food industry.
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Social media has become a vital platform for voicing product-related experiences that may not only reveal product defects, but also impose pressure on firms to act more promptly than before. This study scrutinizes the rarely studied relationship between these voices and the speed of product recalls in the context of the pharmaceutical industry in which social media pharmacovigilance is becoming increasingly important for the detection of drug safety signals. Using Federal Drug Administration drug enforcement reports and social media data crawled from online forums and Twitter, we investigate whether social media can accelerate the product recall process in the context of drug recalls. Results based on discrete-time survival analyses suggest that more adverse drug reaction discussions on social media lead to a higher hazard rate of the drug being recalled and, thus, a shorter time to recall. To better understand the underlying mechanism, we propose the information effect, which captures how extracting information from social media helps detect more signals and mine signals faster to accelerate product recalls, and the publicity effect, which captures how firms and government agencies are pressured by public concerns to initiate speedy recalls. Estimation results from two mechanism tests support the existence of these conceptualized channels underlying the acceleration hypothesis of social media. This study offers new insights for firms and policymakers concerning the power of social media and its influence on product recalls.
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Maintaining a healthy buyer–supplier relationship enhances the competence of the firm and the entire supply chain. This study examines the stability and concentration of both the upstream and downstream relationships in the focal firms in a supply chain. Using empirical evidence from 2,920 listed firms in China, we find that maintaining higher stability with major suppliers and customers enhances a firm’s financial performance, whereas a higher concentration of major suppliers and customers negatively affects the firm’s financial performance. The positive impact of stability is higher than the negative effect of concentration on firm’s performance. Additionally, geographical distance with the customer amplifies the positive impact of customer stability on a firm’s performance, and the geographical distance with suppliers and customers enlarges the concentration’s negative impact. Firms should build an open, long-term relationship that is stable but not exclusive with their major suppliers and customers to achieve better financial performance.
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Although outsourcing remains a dominant strategic choice for managers, the understanding of its implications on the firm remains inconclusive. In this paper we focus on empirical evidence around contingencies that determine whether and how outsourcing impacts firm performance. Specifically, we examine how type of value chain activity (core vs. non-core), industrial nature of activity (manufacturing vs. services), and provider’s location (domestic vs. international) impact performance. We conduct a meta-analysis of 121 samples from 106 primary studies spanning over 28 years (1992–2019). We find that outsourcing–firm performance relationship is positive. But more importantly, our results demonstrate that the association is stronger for non-core outsourcing than core outsourcing. Interestingly the outsourcing–firm performance relationship does not meaningfully vary across manufacturing and services outsourcing. Our results further indicate that the positive relationship is stronger for international outsourcing than domestic outsourcing. We discuss implications of our findings and present opportunities for future research.
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This study centers on the roles of marketing and operations capabilities in preventing future recalls. Whereas prior literature identifies operations capability as critical for recall prevention, the current research highlights the equivalent importance of marketing capability. Furthermore, rather than limiting marketing’s role to damage control efforts after a recall, this study identifies its potential for preventing future recall incidents. With research conducted in the consumer packaged goods industry, the authors determine that firms that improve their marketing and operations capabilities after a recall lower their likelihood of future recalls. A proposed motivation‐based model for post‐recall marketing and operations capability improvement predicts that recalling public firms, by default, do not invest in capability improvements. The test of the propositions, with a sample of 276 product recalls using joint estimation, reveals that stock market penalties for recalls, combined with analyst following and independent boards, push recalling firms to make capability improvements. However, well‐reputed firms and those whose competitors recently engaged in recalls push back against investors’ demands.
Article
Introducción: el estudio de las campañas de retiro de productos defectuosos del mercado {recalls} es un tema vigente y complejo en el contexto de la gestión de la calidad en cadenas de suministro para garantizar la seguridad y la protección de los consumidores. Objetivo: identificar los principales enfoques académicos y legales utilizados a nivel nacional e internacional para el diseño y ejecución de estrategias de retiro de productos. Materiales y métodos: se aplicó un enfoque exploratorio de la investigación, a través de una revisión de literatura y análisis bibliométrico con Vosviewer, considerando los artículos publicados en el periodo entre 1999 y 2019, en las bases de datos Taylor and Francis, EBSCO, Science Direct, Scopus, Springer Link, IEEE, Google académico y Proquest. Resultados: se evidenció un crecimiento en el número de recalls en los últimos 20 años, especialmente en la industria de juguetes (161 %), sector automotriz (140%), productos de belleza (70 %) y suministros eléctricos (64 %). Las principales metodologías para el estudio de los recalls son de naturaleza cualitativa. Conclusiones: son requeridos nuevos aportes académicos orientados al desarrollo de modelos y metodologías que permitan involucrar a todos los miembros de la cadena de suministro en el diseño y ejecución de estrategias coordinadas para disminuir los riesgos de ocurrencia de productos defectuosos o inseguros en el mercado.
Article
Purpose This study aims to investigate the extent to which the presence of chief supply chain officers (CSCOs) in top management teams (TMTs) helps firms to reduce the incidence of product recalls. Design/methodology/approach The authors identified all recalls for the period 2010–2017 issued by publicly held firms regulated by the US Consumer Product Safety Commission. These data were subsequently combined with information on TMT composition from BoardEx and financial performance data from Compustat to create a unique data set. Findings The study identified a significant and negative association between CSCO presence and incidence of product recalls. The evidence also supports the conjecture that this association is stronger in larger firms, indicating that CSCOs are especially effective when operating within more complex supply chains. Practical implications The findings provide important insights into quality management in contemporary supply chains and indicate that assigning specific responsibility for supply chain management to a TMT member improves product reliability. Originality/value These findings contribute to the growing literature on the underlying causes of a product recall by identifying corporate governance antecedents of external quality failures of this kind.
Chapter
Do you remember the slogans regarding the 3 Rs; well, there is actually 12. Each R can provide opportunity, but can also create peril if a management team is unacquainted with it at an inopportune time. Hence, we revisit the urgent need for companies—and society in general—to rethink supply chain strategy with respect to Rs. The expansion of the 3 Rs to 12 is inherent with the view that consumers and markets are focusing on product life extension—not product obsolescence. In an obsolescence economy, there are only three Rs and the R most revered and reported is Recycling. However, if the focus is on product life extension—getting all the value possible from a product and the by-products that result from the production, use and disposal of the product—recycling is considered the least attractive of the Rs. This is increasingly important as we face millennial challenges associated to greater glocal sustainability. The pandemic of 2020 shows us that even with tremendous shuttering of the world economy, greenhouse gas emissions and other measures of pollution are still substantial. In fact, the level of economic activity during the height of global lockdowns is described as being consistent with what is needed to keep the global average temperature to the target of 1.5 °C above baseline. Consequently, marshalling and extending our technical knowledge and related managerial skills is needed to meet the challenges of reduced greenhouse gas emissions and ensuring sustainability more broadly. Firms that are unaware of their position and that of their supply chains in relation to the 12 Rs, will have difficulties at multiple points in the future. Supply chains that engage the 12 Rs in an appropriate manner not only can avoid future difficulties but reduce their cost basis at a time when the growth in many markets is flat at best.
Innovation outsourcing creates two critical risks for a client firm. The first risk arises when a client discloses his/her technological knowhow and intellectual property (IP) with the service provider but the latter misappropriates the IP toward its own commercial benefit. Second, in the absence of perfect monitoring, the service provider might exert suboptimal effort on the innovation project. Management of client’s technology and innovation effort of agent are both crucially important in innovation outsourcing. It is shown that client can deter these risks by designing an appropriate contract. Two distinct regimes are considered. In Regime1, the client operates in an environment where IP cannot be protected. In Regime2, client’s IP is fully protected either due to strong legal enforcement or due to availability of a technological solution. First, it is found that an incentive payment scheme linked with project outcome can mitigate the shirking problem. Second, in Regime1, the client must provide higher compensation to the agent when compared to Regime2. A carrot and stick strategy involving higher incentive payments along with reduced sharing of background IP can deter the opportunistic behavior of the service provider. Third, if the cost of operating in Regime2 is prohibitively high, then the client can operate in Regime1 and yet obtain higher profits. In such a scenario, the client must use the carrot and stick strategy. Finally, due to predominant motive to reduce costs, clients might not be compensating their service providers appropriately. Such myopic cost-cutting strategy would exacerbate the IP misappropriation and suboptimal quality problems associated with outsourcing.
Article
Purpose Integration is a key element of supply chain management (SCM) and a lot of research has been executed within the field of supply chain integration (SCI). The purpose of this paper is to particularly identify the intellectual research front and foundation of SCI and how they developed over time. Design/methodology/approach The authors examined more than 1,700 peer-reviewed academic papers that were published between 1995 and 2019 in nearly 40 relevant peer-reviewed academic journals (all indexed in Web of Science). The authors analysed the structure of more than 55,000 individual references with the R-package bibliometrix and used VOSviewer for visualization. Findings The SCI research front is characterized by papers that show the effects of SCI on the firm performance, the consequences of SCI on SCM in general and present the enablers of SCI. The research front is embedded within the resource-based, transaction cost and contingency theory. The intellectual foundation refers to conceptual modelling, definitional clarification and integration dimensions. The research identifies Frohlich and Westbrook’s (2001) paper as the central reference for this research area. The dynamic evolution of the intellectual foundation of SCI changed from theorising in Phase 1 (1995–2006) towards empirical testing in Phase 2 (2007–2019). Research limitations/implications The results refer to the SCI discussion within a preselected number of peer-reviewed academic journals and to the data quality as provided by the Web of Science. Originality/value The study explored the research front and intellectual foundation of SCI. It reveals the most important papers and journals of this area by using bibliometric tools such as bibliometrix, biblioshiny and VOSviewer. The paper shows trends in research themes, theories and methodological developments.
Article
Little is known about the underlying product recall process that food companies go through to identify and remove tainted products from the supply chain or why this process varies. To help fill this void in the literature and close the gap between what we know and what we need to know about product recalls, we use a grounded theory approach to develop mid‐range theorizing about food recalls. In doing so, our findings reveal that two manifestations of complexity—upstream and downstream—introduce recall uncertainty, which is the driving force behind why the recall process varies. Our study is also the first to propose that managers use recall options when trying to manage recall uncertainty. Furthermore, our study reveals that product recalls may not cleanly fall into recall categories as previously thought, but rather take the form of recall layering—that is, nested recalls or a recall within a larger recall. Overall, our mid‐range theorizing (a) offers key insights about why the recall process varies within a massive industry that affects every person; (b) provides a detailed agenda to guide subsequent research; and (c) suggests practical steps managers can take to better manage future recalls.
Article
Purpose Outsourcing is a common practice that is often adopted to reduce costs and enhance capabilities. The underlying logic of a firm's outsourcing strategy is not always evident due to multiple antecedents with interacting effects. This study identifies critical factors that influence outsourcing strategies and reveals their interactions with empirical evidence from Chinese construction firms. Design/methodology/approach The quantitative decision-making trial and evaluation laboratory (DEMATEL) method was applied to analyze the interrelationships among the antecedents of project outsourcing strategies. First, 24 experts from 13 Chinese construction firms were invited to evaluate and score the influence of each factor on the other. Second, the graph theory and matrix tools of DEMATEL were used to quantitatively obtain the causality among factors and the prominence of each factor within the system. Findings Among the antecedents, a firm's pursuit of cost efficiency, identity, technological capability and contracting capability are the most prominent factors influencing project outsourcing strategies. For the interactions among these factors, this study reveals that the focal firm's technological capability significantly influences its contracting capability, and they jointly influence the firm's outsourcing practices, the selection of outsourcing vendors and, eventually, its pursuit of cost efficiency. Moreover, legal restrictions in the institutional environment strongly shape this capability–cost efficiency relationship. Originality/value Twelve critical factors following different theoretical perspectives at varying levels of analysis were identified from the literature review. By revealing the interrelationships among these factors, this study develops a holistic framework that integrates the transaction cost and capability perspectives for understanding project outsourcing strategies embedded in different institutional environments.
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A number of high profile product safety events and recalls have heightened public attention to the safety and security of the products that people consume and use. While product safety isn’t a new topic, the effect of the global supply chain in creating or exacerbating safety risks and vulnerabilities is both timely and relevant. In this essay we focus on how the field of operations management can provide fresh perspectives and insights in addressing the challenges of product safety and security in the global supply chain. We first examine the product safety issues and challenges that arise in five industries that are increasingly globalizing their supply chains: food, pharmaceuticals, medical devices, consumer products and automobiles. We describe four areas where operations management theory and methodologies can provide fresh insights and innovative solutions in addressing these problems; regulation and standards, product lifecycle management, traceability and recall management, and supplier relationships.
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Just-in-time delivery, design for manufacturing, and early supplier involvement based on frequent and close interactions between buyers and suppliers are some of the basic conditions of lean supply in the automotive industry. Many of these conditions appear to be difficult to achieve in global purchasing. This is because global purchasing has mostly been seen as a means of putting price pressures on suppliers. The aim of this paper is to highlight the interconnection between global purchasing and lean supply. A strategic project “live or die” was chosen within a major global auto original equipment manufacturer (OEM) located in North America. To get as complete a picture as possible of the context and causal conditions, and to be able to make coherent benchmarks with objectives, global purchasing was followed across one major project rather than across different ones. The data was collected through interviews both in the OEM and in six suppliers and validated by triangulation and internal seminars. The analysis was done by screening data into some of the conditions identified in lean supply, which were observed to be the most relevant in the case company. We found that lean supply is affected negatively by global purchasing based on price and thus, price-based global purchasing should not be used for sourcing complex components that require early supplier involvement and intensive engineering collaboration between OEMs and suppliers. Instead, it could be proactively used in the sourcing of less complex modules and simple components.
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Natural disasters, labor disputes, terrorism and more mundane risks can seriously disrupt or delay the flow of material, information and cash through an organization's supply chain. The authors assert that how well a company fares against such threats will depend on its level of preparedness, and the type of disruption. Each supply-chain risk - to forecasts, information systems, intellectual property, procurement, inventory and capacity - has its own drivers and effective mitigation strategies. To avoid lost sales, increased costs or both, managers need to tailor proven risk-reduction strategies to their organizations. Managing supply-chain risk is difficult, however. Dell, Toyota, Motorola and other leading manufacturers excel at identifying and neutralizing supply-chain risks through a delicate balancing act: keeping inventory, capacity and related elements at appropriate levels across the entire supply chain in a rapidly changing environment. Organizations can prepare for or avoid delays by "smart sizing" their capacity and inventory. The manager serves as a kind of financial portfolio manager, seeking to achieve the highest achievable profits (reward) for varying levels of supply-chain risk. The authors recommend a powerful what if? team exercise called stress testing to identify potentially weak links in the supply chain. Armed with this shared understanding, companies can then select the best mitigation strategy: holding "reserves," pooling inventory, using redundant suppliers, balancing capacity and inventory, implementing robust backup and recovery systems, adjusting pricing and incentives, bringing or keeping production in-house, and using Continuous Replenishment Programs (CRP), Collaborative Planning, Forecasting and Replenishment (CPFR) and other supply-chain initiatives.
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Investigates various benefits and challenges that retail firms perceive in global sourcing, and how those benefits and challenges differ in terms of firms’ demographic and managerial characteristics. Data were collected from 148 apparel retail firms. Three benefits factors (competitive advantage, quality assurance and service enhancement) and four challenge factors (logistics, regulations, cultural difference and country uncertainty) were identified. The types and levels of benefit factors a firm achieved from global sourcing were significantly different in terms of the product type and import volume. The challenge factors associated with global sourcing were also different in terms of the product type, percentage of imports, experience, and regions of sourcing. Information provided by this study expands our understanding of sourcing activities by apparel retailers which have significant presence in the global sourcing landscape in the USA.
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Purpose – The purpose of this paper is to propose using agency theory for assessing the likelihood of quality fade in buyer-supplier relationships and prescribing contractual mechanisms for reducing quality fade. In this paper, quality fade, an element of supply chain vulnerability, is defined as the unforeseen deterioration of agreed to or expected quality levels with respect to product and/or service requirements. The use of outcome-based, behavior-based, or mix contracts can be used to reduce the likelihood of quality fade and illustrate preferred scenarios for buyer and suppliers. Design/methodology/approach – This paper proposes a conceptual model for using agency theory to explain and address a type of supply chain vulnerability called quality fade. A 2×2 matrix is proposed that contrasts outcome measurability with outcome uncertainty to illustrate buyer and supplier vulnerability and to suggest contractual mechanisms that can be used to mitigate vulnerability for both parties. Findings – A typology of governance mechanisms is presented and described with the use of a manufacturer third-party logistics provider example to illustrate the theoretical framework. Four different scenarios are discussed and described. Contractual mechanisms are provided to mitigate vulnerabilities and reduce quality fade. Originality/value – Quality fade is a term that has not been described extensively in academic literature but is a term that is relevant in the broader discussion of supply chain vulnerability. Given that quality fade is a behavioral, as opposed to process oriented, approach, it requires a theoretical framework rooted in behavioral considerations. Agency theory is an appropriate framework for studying governance options. http://www.emeraldinsight.com/journals.htm?issn=0957-4093&volume=21&issue=3&articleid=1896066&show=html
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There has been increased interest in supplier integration in recent years, much of it supporting such initiatives in organizations. We operationalize supplier integration as a bundle of practices that include a set of “internal” and “external” practices. We hypothesize that such practices in specific configurations can be as important a source of performance differentials as the adoption of individual practices themselves. We theorize the existence of a level of integration that results in optimal performance. The paper uses data from a cross-section of more than 300 US manufacturing companies to test the notion of an optimal level of supplier integration, and examine the conditions surrounding its development. The results provide empirical support for the concept of an optimal set of supplier integration practices. We show that deviations from the optimal profile are associated with performance deterioration, and that indiscriminate and continued investments in integration may not yield commensurate improvements in performance.
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The Outsourcing Game is a role-play simulation that has been deployed in industry and academic training courses worldwide. It incorporates the concepts of hidden actions, hidden information, and misaligned incentives, and conveys messages about power, trust, and reputation. The game depicts the adventures of Acme, the brand owner of a product manufactured by an outsourced supply chain. Through a series of negotiations, Acme attempts to influence its partners (two suppliers and two service providers) by distributing its procurement “spend.” These partners, in turn, sway each other via side payments. To simulate the non-linear shifts in power that occur as outsourcing increases, we represent decision-making by a voting scheme with uneven vote allocations. This paper analyzes a database of game results to reveal behavioral factors that can undermine conspicuous win–win process improvements. For instance, preferences can be sensitive to the sequence in which the alternatives are encountered; decision-makers might value not only their own rewards, but also fairness in the allocation of total gains; and effectiveness of negotiation tactics will vary with community norms of acceptable behavior. Along the way we extend the political economics literature about power in block-based voting by proposing a heuristic approach for incorporating voter preferences.
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As the importance of supplier networks becomes increasingly recognized as a vital factor to company performance, researchers and practitioners alike are focusing their attention on this subject. The study's main objective is to test the specific hypotheses that effective use of Information Technology (IT) and the depth of company relationships with suppliers are directly related to Supplier Network (SN) performance, and that industry clockspeed moderates these relationships. A convenience sample of 135 manufacturing organizations was used to empirically test these hypotheses. Our results indicate that clockspeed does moderate the relationship between IT use effectiveness and supplier network performance. The same is true in the case of supplier relations depth, and hence, managers are encouraged to pay attention to the items comprising network performance as a determinant of supplier network performance.
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Collaborative manufacturer–retailer relationships based on efficient consumer response (ECR) have become ubiq-uitous over the past decade. Yet academic studies of ECR adoption and its impact on marketing relationships are relatively scarce. Inspired by the relational view of competitive advantage, the authors empirically investigate whether the extent to which suppliers of a major retailer adopt ECR has a beneficial impact on their outcomes. The results demonstrate that whereas ECR adoption has a positive impact on supplier economic performance and capability development, it also generates greater perceptions of negative inequity on the part of the supplier. How-ever, retailer capabilities and supplier trust moderate some of these main effects. The overall results are robust with respect to differences in supplier size as well as between branded and private-label suppliers., and the anonymous JM reviewers for their helpful comments. They also acknowledge the assistance of Elisabeth Honka for her dedi-cated support with the data collection and analysis.
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When major disruptions occur, many supply chains tend to break down and take a long time to recover. However, not only can some supply chains continue to function smoothly, they also continue to satisfy their customers before and after a major disruption. Some key differentiators of these supply chains are cost-effective and time-efficient strategies. In this paper, certain "robust" strategies are presented that possess two properties. First, these strategies will enable a supply chain to manage the inherent fluctuations efficiently regardless of the occurrence of major disruptions. Second, these strategies will make a supply chain become more resilient in the face of major disruptions. While there are costs for implementing these strategies, they provide additional selling points for acquiring and retaining apprehensive customers before and after a major disruption.
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In much of the current literature on supply chain management, supply networks are recognized as a system. In this paper, we take this observation to the next level by arguing the need to recognize supply networks as a complex adaptive system (CAS). We propose that many supply networks emerge rather than result from purposeful design by a singular entity. Most supply chain management literature emphasizes negative feedback for purposes of control; however, the emergent patterns in a supply network can much better be managed through positive feedback, which allows for autonomous action. Imposing too much control detracts from innovation and flexibility; conversely, allowing too much emergence can undermine managerial predictability and work routines. Therefore, when managing supply networks, managers must appropriately balance how much to control and how much to let emerge.
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Quality management (QM) has become an all‐pervasive management philosophy, finding its way into most sectors of today’s business society. After the initial hype and enthusiasm, it is time to take stock of the knowledge accumulated in what is now a mature field of study and look for directions to take the field further forward. This article reflects on the mass of literature in the field, synthesizing, organizing and structuring knowledge and offering suggestions for future research. It reviews QM research organized along five main themes: the definition of QM, the definition of product quality, the impact of QM on firm performance, QM in the context of management theory and the implementation of QM. The article draws on these themes to reflect on three questions which are fundamental to re‐visit and re‐appraise QM: (i) What is QM? (ii) Is the set of practices associated with QM valid as a whole? (iii) How to implement QM in a real business setting?
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The interest among practitioners and researchers in quality management and other factors that may affect quality performance reflects the understanding that a firm's output (i.e., performance) can be only as good as the quality of its inputs. However, studies of the quality management‐quality performance relationship have led to mixed results regarding the existence of a positive correlation between the two. The results of a survey of 348 aerospace component manufacturers are examined here to provide new insights into factors that affect supplier quality performance. In this study, the inconsistent association between practice and performance is accounted for by considering the process view of quality management. Process management links quality management with process optimization to address both effectiveness and efficiency concerns. Performance is also affected by transaction‐specific investments (asset specificity) in the buyer/supplier relationship that lead to poorer component quality and higher transaction costs. Asset specificity and organizational efficiency at implementing Total Quality Management hold great promise for resolving the mixed practice‐performance findings in the quality management literature.
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We show that, despite coordination in the quality level of the components that they provide, independent vertically-related (disintegrated) monopolists will provide products of lower quality level than a sole integrated monopolist. Further, the integrated monopolist achieves higher market coverage, higher consumer surplus, and higher profits.We establish these results for any distribution of preferences in the standard model of quality differentiation. Despite the lower quality, we also show that, for a wide class of cost functions, price will be higher in a market of independent vertically-related monopolists. All results are the effects of the interaction of double- marginalization, occurring in the market of independent monopolists, with the choice of quality.
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Introduction In the standard economic treatment of the principal–agent problem, compensation systems serve the dual function of allocating risks and rewarding productive work. A tension between these two functions arises when the agent is risk averse, for providing the agent with effective work incentives often forces him to bear unwanted risk. Existing formal models that have analyzed this tension, however, have produced only limited results. It remains a puzzle for this theory that employment contracts so often specify fixed wages and more generally that incentives within firms appear to be so muted, especially compared to those of the market. Also, the models have remained too intractable to effectively address broader organizational issues such as asset ownership, job design, and allocation of authority. In this article, we will analyze a principal–agent model that (i) can account for paying fixed wages even when good, objective output measures are available and agents are highly responsive to incentive pay; (ii) can make recommendations and predictions about ownership patterns even when contracts can take full account of all observable variables and court enforcement is perfect; (iii) can explain why employment is sometimes superior to independent contracting even when there are no productive advantages to specific physical or human capital and no financial market imperfections to limit the agent's borrowings; (iv) can explain bureaucratic constraints; and (v) can shed light on how tasks get allocated to different jobs.
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Economics has much to do with incentives--not least, incentives to work hard, to produce quality products, to study, to invest, and to save. Although Adam Smith amply confirmed this more than two hundred years ago in his analysis of sharecropping contracts, only in recent decades has a theory begun to emerge to place the topic at the heart of economic thinking. In this book, Jean-Jacques Laffont and David Martimort present the most thorough yet accessible introduction to incentives theory to date. Central to this theory is a simple question as pivotal to modern-day management as it is to economics research: What makes people act in a particular way in an economic or business situation? In seeking an answer, the authors provide the methodological tools to design institutions that can ensure good incentives for economic agents. This book focuses on the principal-agent model, the "simple" situation where a principal, or company, delegates a task to a single agent through a contract--the essence of management and contract theory. How does the owner or manager of a firm align the objectives of its various members to maximize profits? Following a brief historical overview showing how the problem of incentives has come to the fore in the past two centuries, the authors devote the bulk of their work to exploring principal-agent models and various extensions thereof in light of three types of information problems: adverse selection, moral hazard, and non-verifiability. Offering an unprecedented look at a subject vital to industrial organization, labor economics, and behavioral economics, this book is set to become the definitive resource for students, researchers, and others who might find themselves pondering what contracts, and the incentives they embody, are really all about.
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Collaborative manufacturer-retailer relationships based on efficient consumer response (ECR) have become ubiquitous over the past decade. Yet academic studies of ECR adoption and its impact on marketing relationships are relatively scarce. Inspired by the relational view of competitive advantage, the authors empirically investigate whether the extent to which suppliers of a major retailer adopt ECR has a beneficial impact on their outcomes. The results demonstrate that whereas ECR adoption has a positive impact on supplier economic performance and capability development, it also generates greater perceptions of negative inequity on the part of the supplier. However, retailer capabilities and supplier trust moderate some of these main effects. The overall results are robust with respect to differences in supplier size as well as between branded and private-label suppliers.
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Previous studies on the effects of outsourcing have relied largely on anecdotal evidence, non-financial metrics or accounting-based measures that ignore intangible value. This study views outsourcing effects from its future revenue-generation potential, using market value. The relation between firms’ market valuation and outsourcing decisions is investigated using a cross-sectional valuation approach. Results based on Japanese manufacturing industries data from 1994 to 2002 indicate that core business-related outsourcing, offshore outsourcing, and shorter-term outsourcing have positive effects on outsourcing firms’ market value. In contrast, non-core business-related outsourcing, domestic outsourcing, and longer-term outsourcing are not found to enhance firm value.
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The general principal–agent problem is formulated, in which agents have both private information and private decisions, unobservable to the principal. It is shown that the principal can restrict himself to incentive-compatible direct coordination mechanisms, in which agents report their information to the principal, who then recommends to them decisions forming a correlated equilibrium. In the finite case, optimal coordination mechanisms can be found by linear programming. Some basic issues relating to systems with many principals are also discussed. Non-cooperative equilibria between interacting principals do not necessarily exist, so quasi-equilibria are defined and shown to exist.
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Does offshore production pose an added quality risk relative to domestic production? If so, what factors influence the quality risk? Progress addressing these deceptively simple questions has been hindered by the challenges associated with (1) difficulties in controlling for a wide range of factors that may potentially affect quality risk in offshore manufacturing and (2) the lack of available measures that are consistent across geographic regions. This paper contributes to the academic discourse by empirically assessing differences in quality risk across domestic and offshore plants in a setting that naturally controls for many confounding factors. Specifically, we employ a sample of 30 pairs of regulated drug manufacturing plants in the U.S. mainland and Puerto Rico matched both by parent firm and by product standard industrial code (SIC). Using a plant-level measure of quality risk that is measurement invariant, our findings indicate that Puerto Rican plants operate with a significantly higher quality risk than matching plants operated by the same firm located in the mainland U.S., on average. This finding persists above and beyond potentially important factors, such as geographic distance and the local population's general and industry-specific skills. Thus, challenges related to the transfer and maintenance of the knowledge required to operate with a low quality risk across non-geographic distance are left as the most plausible explanatory factors. Practically, our research highlights the need for manufacturing firms to carefully consider increased quality risk associated with the offshoring of production, particularly with regard to process-sensitive products like drugs. From a policy standpoint, our study highlights the need for the Food and Drug Administration (FDA) to continue to intensify its inspection focus on international manufacturing.
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Brand equity is a valuable yet fragile asset. The mounting frequency of product-harm crises and ill-prepared corporate responses to such crises can have profound consequences for brand equity. Yet there is little research on the marketing impact of crises. The authors employ the expectations-evidence framework to understand the impact of firms' responses to crises on customer-based brand equity. The results of a field survey and two laboratory experiments indicate that consumers interpret firm re-sponse on the basis of their prior expectations about the firm. The interaction of expectations and firm response is shown to affect postcrisis brand equity. The authors draw implications for the expectations-evidence framework and for the outcomes of different types of firm response (i.e., unambiguous support, ambiguous response, and unambiguous stonewalling) on brand equity.
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Single sourcing is a purchasing policy that purportedly can produce significant benefits for both parties involved. This article takes a close look at the pros and cons of single sourcing, particularly from the perspective of the vendor. It is important that buyers understand the factors that are likely to motivate a vendor to enter into this type of relationship. With this understanding, a buyer is better prepared to explore the possibility of single sourcing arrangements with selected vendors.
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Not long ago, most North American and European companies believed that how they influenced and managed suppliers made little diff erence in their overall performance. This perception changed, however, when global competitors showed that working with suppliers could create competitive market advantages in cost and cycle time reduction, on-time delivery, and access to product and process technology. Nowhere has the benefit of progressive supply chain practices become more evident than in supporting product and service quality, which remains a core requirement for competing successfully on a global basis. This article addresses the increasing importance of suppliers, particularly in supporting product and service quality requirements, and presents a series of questions concerning how well purchasing and sourcing activities contribute to total quality. It also provides a profile of organizations that are best positioned across four enabling areas to pursue advanced supplier qualityrelated activities.
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Many researchers have studied how the buying company manages its relationship with suppliers (i.e. buyer–supplier relationship). Extending this genre of study, researchers have recently shown interest in investigating how the buying company manages relationships between the suppliers (i.e. supplier–supplier relationship). In other words, just as the relationship with the suppliers does, the relationships between suppliers have strategic implications for the buyer. We present in this study eight cases that describe supplier–supplier relationship dynamics. Using theory building through case studies, we identify five archetypes of supplier–supplier relationships. Each type of relationship is a unique configuration of the relational characteristics. We also present working propositions that associate the antecedent conditions that lead to these archetypes and eventual performance implications.
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Offshoring service work is an accelerating trend. While the cost-savings from offshoring service work are usually clear, operating at a distance also brings with it certain “invisible costs.” We combine existing service operations theory with insights from the literature on communications and culture to present a new conceptual framework, organized around interaction intensity and interaction distance. We identify the drivers of these costs. We conclude with recommendations for controlling or attenuating invisible costs in offshoring service work.
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In today's business environment, companies are driven to conduct a few functions in-house and to obtain the rest from other sources through aggressive outsourcing. While outsourcing may seem attractive at the strategic management level serious pitfalls are often encountered as the strategy is pushed downward into operations. At the operational level, the strategic intent tends to be lost in a hectic day-to-day, problem-to-problem business environment. Outsourcing decisions made at the operational level can easily lead to dependencies that create unforeseen strategic vulnerabilities. These pitfalls are addressed by a systematic methodology that can guide the operational level to achieve strategically appropriate actions.
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Many marketing exchanges are characterized by an information asymmetry between suppliers and customers. Specifically, customers are faced with both adverse selection and moral hazard problems that involve, respectively, uncertainty about supplier characteristics and the risk of quality cheating. Drawing on prior research, the authors propose that agency problems in a customer relationship can be resolved by means of customer bonds and price premiums, which serve as signals and supplier incentives, respectively. The authors also propose that adverse selection and moral hazard problems exist in relationships between suppliers and their employees. Similar to the customer relationship, these problems can be addressed with signals and incentives of various kinds. The authors present hypotheses regarding the agency problems in both of these relationships and test them empirically in the context of automotive service purchases. Data obtained from 287 service managers support the hypotheses. The data also suggest that institutional differences across service outlets (e.g., ownership structure and size) influence how the two types of agency problems are managed.
Article
Purpose – The purpose of this paper is two-fold: to examine two approaches buying firms can utilize to manage supplier quality; and to investigate the ways in which factors inherent in supply chain relationships affect the use of these approaches in supply chain quality management. Design/methodology/approach – Drawing on agency theory, this paper proposes a conceptual framework that relates the underlying factors of a supply chain relationship to the use of quality management approaches. Two types of approaches, outcome-based and behavior-based, are discussed in terms of their focuses, purposes, and methods. Propositions are developed about the effects of these factors on the decisions buying firms make about supply chain quality management. Findings – This study suggests that rather than relying on one generic supply chain quality management approach for all suppliers, firms need to choose different management mechanisms for different suppliers based on the salient attributes of individual suppliers and their relationships with the buyers. Five types of agency-based factors are discussed. These factors – information asymmetry, goal conflict, risk aversion of suppliers, length of relationship, and task characteristics – can be expected to influence how firms design and manage their quality management systems for supply chains. Practical implications – A better understanding of the distinction between outcome-based and behavior-based approaches helps managers evaluate which approach is best suited to managing the quality of their suppliers. The propositions pertaining to the key factors provide managers with some guidelines about the critical conditions they should consider when building their firm's supply chain quality management system. Originality/value – Having an effective quality management system of a supply chain is essential for maintaining a smooth supply of high quality products and services to customers. However, little is known about how a firm should design this supply chain quality management system. The paper addresses this gap by applying agency theory to examine the two essential approaches to managing supplier quality and to explore the critical factors that should be taken into account when considering the appropriate approaches for different suppliers.
Article
This research identifies and tests key factors that can be associated with time to recall a product. Product recalls due to safety hazards entail societal costs, such as property damage, injury, and sometimes death. For firms, the related external failure costs are many, including the costs of recalling the product, providing a remedy, meeting the legal liability, and repairing damage to the firm's reputation. The recent spate of product recalls has shifted attention from why products are recalled to why it takes so long to recall a defective product that poses a safety hazard. To address this, our research subjects to empirical scrutiny the time to recall and its relationship with recall strategies, source of the defect and supply chain position of the recalling firm. We develop and verify our conceptual arguments in the U.S. toy industry by analyzing over 500 product recalls during a 15-year period (1993–2008). The empirical results indicate that the time to recall, as measured by difference between product recall announcement date and product first sold date, is associated with (1) the recall strategy (preventive vs. reactive) adopted by the firm, (2) the type of product defect (manufacturing defect vs. design flaw), and (3) the supply chain entity that issues the recall (toy company vs. distributor vs. retailer). Our results provide cues that could trigger a firm's recognition of factors that increase the time to recall.
Article
As just-in-time delivery has become increasingly commonplace and customer demands continue to tighten, the importance of fast, reliable delivery performance cannot be overstated. This is particularly true for organisations competing internationally, where the complexity of the supply chain must be managed within a global network. A conceptual model is presented that identifies three basic dimensions of this complexity. Results support the linkage of uncertainty with performance, however, no evidence was found that increased technological intricacy or more complicated organisational systems hamper delivery performance. Managers appear to have adopted mechanisms to accommodate these last two dimensions of complexity.
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