The impact of vertical integration on inventory turnover and operating performance

This paper investigates how vertical integration may influence inventory turnover and firm operating performance. A causal model is developed to investigate the effects of vertical integration on three types of inventory, namely raw materials inventory (RMI), work in progress inventory (WIPI) and finished goods inventory (FGI). The model tests the interactions between inventory types and the consequences of inventory turnover performance on various aspects of firm performance including costs and profitability. In particular, path analysis supports systematic differences with respect to how vertical integration affects RMI, WIPI and FGI. Vertical integration has a positive effect on RMI and FGI turnover but no significant effect on WIPI turnover. FGI contributes to a reduction in supporting processes costs which causes an improvement in return on sales (ROSs). Vertical integration impacts ROS directly.     

Too much of a good thing: The impact of product variety on operations and sales performance

We examine the impact of product variety decisions on an operational measure – unit fill rate – and on sales performance. Results are estimated using weekly data over three years from 108 distribution centers of a major soft drink bottler. Our results show that fill rates are negatively associated with product variety at a diminishing rate. In addition, we examine the total effect of product variety on sales including both the direct effect and the indirect effect through operations performance. The total impact of product variety on sales initially is positive, although at a diminishing rate. However, beyond a certain level, increased product variety actually results in lower sales; that is, “too much of a good thing”. Thus, the findings provide a comprehensive understanding of the impact of product variety on operations and sales performance.     

The impact of a firm's make, pseudo-make, or buy strategy on product performance

The bulk of the product architecture and make-buy choice literature deals with product architecture changes from integral to modular form. This development is often associated with a firm's tendency to change from a make to a buy strategy. However, a few studies investigate the change of product architecture in the reverse direction - from modular to integral form - and the subsequent change in the firm sourcing decision from a buy to a make strategy. These studies hold to the presumption that a firm following a make strategy will outperform firms following a buy strategy in dealing with integral product architectures. Based on the knowledge-based view, we argue for the viability of a sourcing strategy between the pure make and buy strategies - a pseudo-make strategy. We also argue that as product architecture changes from a modular to integral form, firms adopting this pseudo-make strategy are likely to show better product performance than firms following a pure make or buy strategy due to the relative knowledge advantages of the pseudo-make strategy in dealing with the integral product architecture. We examine the impact of the make/pseudo-make/buy strategies on product performance in the U.S. bicycle derailleur and freewheel market from 1980 to 1992 and provide theoretical and managerial implications of our results. Our findings highlight an important distinction between the pseudo-make and make-buy strategies that has not previously been fully appreciated in the extant literature, and as a result increases our understanding of why some firms do not switch strategies from a buy to a make strategy when product architecture changes from modular to integral form as previously expected.     

The impact of supply chain integration on performance: A contingency and configuration approach

This study extends the developing body of literature on supply chain integration (SCI), which is the degree to which a manufacturer strategically collaborates with its supply chain partners and collaboratively manages intra- and inter-organizational processes, in order to achieve effective and efficient flows of products and services, information, money and decisions, to provide maximum value to the customer. The previous research is inconsistent in its findings about the relationship between SCI and performance. We attribute this inconsistency to incomplete definitions of SCI, in particular, the tendency to focus on customer and supplier integration only, excluding the important central link of internal integration. We study the relationship between three dimensions of SCI, operational and business performance, from both a contingency and a configuration perspective. In applying the contingency approach, hierarchical regression was used to determine the impact of individual SCI dimensions (customer, supplier and internal integration) and their interactions on performance. In the configuration approach, cluster analysis was used to develop patterns of SCI, which were analyzed in terms of SCI strength and balance. Analysis of variance was used to examine the relationship between SCI pattern and performance. The findings of both the contingency and configuration approach indicated that SCI was related to both operational and business performance. Furthermore, the results indicated that internal and customer integration were more strongly related to improving performance than supplier integration.     

Strategic supply management: The relationship between supply management practices, strategic orientation and their impact on organisational performance

A theoretical model is presented for conceptualising the relationship between the management of supply, strategic orientation at the business-unit level and their proposed link with firm performance. The shortcomings of existing approaches in accounting for the wide variety of purchasing practices in a comprehensive supply management framework are discussed as well their alignment with strategic orientation. The paper concludes by presenting a model and propositions concerning firm-level supply management, strategic orientation and firm performance.     

Production in advance versus production to order: The role of downstream spatial clustering and product differentiation

In every production process, suppliers have to decide whether an item should be produced and stored as inventory before an explicit purchase order is received (production in advance), or whether it should be produced only after such an order is received (production to order). We study the determinants of this firm-level choice. We present a simple conceptual framework to derive predictions that we subsequently test in the empirical analysis. We argue that an increment in buyers’ spatial concentration benefits production in advance more in homogenous industries than in differentiated ones, while the benefits for production to order are larger as product differentiation increases. Consequently, the propensity to adopt one of the two production modes, following an increase in the number of local downstream buyers, changes according to the degree of product differentiation of the goods. Relying on a large data set of Italian manufacturing firms, we find empirical support to our ideas.     

The effect of performance measurement systems on firm performance: A cross-sectional and a longitudinal study

Performance measurement (PM) systems have been popularized over the last 20 years and the operations management literature is replete with discussion of metrics and measurement systems. Yet, a comprehensive nomological network relating types of PM system uses to organizational capabilities and performance is lacking. Furthermore, there is scant empirical evidence attesting to the explanatory efficacy of PM systems as it relates to organizational performance. We view PM system uses through the lenses of the Resource Orchestration Theory (ROT) and explore specific relationships of underlying variables by relying on the Organizational Information Processing Theory (OIPT). Resting on the extant literature, we identify two types of uses which include Diagnostic Use (the review of critical performance variables in order to maintain, alter, or justify patterns in an organizational activity) and interactive use (a forward-looking activity exemplified by active and frequent involvement of top management envisioning new ways to orchestrate organizational resources for competitive advantage) and relate them along with their interaction (i.e., dynamic tension) to organizational capabilities. We further link capabilities to target performance, which subsequently impacts organizational performance (operationalized through both perceptual and objective financial performance measures). The nomological network is tested via a cross sectional study (386 Italian firms) while the efficacy of PM systems to explain organizational performance is examined by using longitudinal panel data approaches over a 10 year period. There is sufficient evidence to suggest that the use of PM systems leads to improved capabilities, which then impact performance. Contrary to the extant literature, however, we discovered that Diagnostic Use appears to be the most constructive explanatory variable for capabilities. On the other hand, in light of a longitudinal study, we also uncovered that Diagnostic Use experienced depreciating returns as far as objective financial measures are concerned. Also, when high levels of Diagnostic Use were coupled with low levels of Interactive Use, they produced the lowest levels of organizational capabilities. Conversely, high levels of both types of PM system use generated extraordinary high levels of capabilities. There is sufficient evidence to suggest that organizations cannot rely merely on Diagnostic Use of PM systems. We also learned that the effects of PM systems (measured via adaptation) fade unless high learning rates are applied. We offer detailed recommendations for future research which have theoretical as well as empirical implications.     

The impact of SARS on China's human resources: implications for the labour market and level of unemployment in the service sector in Beijing,Guangzhou and Shanghai

In this paper, we examine the effects of SARS (Severe Acute Respiratory Syndrome) on China's human resources, its labour-market and its level of employment and unemployment, looking specifically at what was one of its economically most vulnerable points, the hotel industry. The paper hypothesizes that the greatest impact would be on human resources in the service-industries and on particular sub-sectors, such as employment in hotels, located in three main cities in the PRC, in Beijing, Guangzhou and Shanghai, catering to both overseas as well as domestic tourism. It tentatively concludes that the almost dramatic demand and supply ‘shocks’ may have directly affected both the demand for and the supply of labour in the sub-sector, with discernable employment consequences.