A Prescriptive Model for Supply Chain Integration: an Evolutionary Approach Edición Única

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(2) INSTITUTO T E C N O L Ó G I C O. SUPERIORES DE. CAMPUS. Y DE. ESTUDIOS. MONTERREY. CIUDAD. DE. MEXICO. TECNOLÓGICO DE M O N T E R R E Y .. BIB B I B L I O T E C A A. PRESCRIPTIVE M O D E L F O R SUPPLY C H A I N I N T E G R A T I O N :. EVOLUTIONARY. D O C T O R A D O. EN. A N. APPROACH. ADMINISTRACIÓN. TESIS P R E S E N T A D A. POR. CARLOS EDUARDO CANFIELD. RIVERA. ASESOR. DR.. JUAN. GAYTÁN. JULIO. INIESTRA. 2 0 0 7. ii.

(3) ACKNOWLEDGEMENTS. The. LORD A. The. LORD. is. maketh. me. l e a d e t h. me. my. beside. of. r i g h t e o u s n e s s. Yea, I. of. w i l l. rod. and. Thou. mine. my. cup. Surely the. I. for. in. s t i l l he his. walk. fear. no. thy. s t a f f. s h a l l. not. green. p a s t u r e s :. waters.. leadeth name's. through. want.. Rev.. me. He he. 7.17. in. the. paths. sake. the. v a l l e y. of. the. l i f e :. for. for. they. thou. comfort. t a b l e thou. before a n o i n t e s t. a r t. with. me;. thy. me. me my. in. the. head. presence with. o i l ;. over.. goodness my. e v i l : a. runneth. LORD. David. death,. enemies:. of. the. Shepherd. of. down. soul:. I. p r e p a r e s t. of. days. my. though. shadow. Psalm. l i e. r e s t o r e t h. My. shepherd;. to. He. Is. and and. mercy I. s h a l l. w i l l. follow. dwell. in. me. the. a l l house. the of. ever.. First o f all, I w o u l d like to thank G o d for all the blessings received over this project. H E is the ultimate inspiration that allowed m e to e n d u r e and o v e r c o m e all hardships.. T h i s w o r k is d e d i c a t e d to m y family: my wife A n g e l i c a and m y d a u g h t e r s S t e p h a n i e and K a r e n . A special m e n t i o n is given to my parents: M y father for all his s u p p o r t . M y m o t h e r , w h o w a s not able to see its c o m p l e t i o n , but I am sure she k n o w s .. I a m sincerely grateful for the assistance o f Dr. Pilar A r r o y o and Juan G a y t a n , w h o h e l p e d m e a l o n g the dissertation research and writing p r o c e s s . Special t h a n k s are given to the m a n a g e r i a l staff of PA. w h o s e collaboration in this project w a s invaluable.. A n d m a n y and m a n y t h a n k s to all the people, that through their kind w o r d s and professional and o t h e r w i s e advice, contributed in m a n y w a y s to the c o m p l e t i o n of this d o c u m e n t . In particular to Dr. R o b e r t o R u e d a , Dr. Pedro Grasa, Dr. Enrique Bores, Dr. Julio C e s a r Borja, Dr. C u a u h t e m o c O l m e d o , Dr. E d u a r d o Carbajal and all friends a n d c o l l e a g u e s that m a d e this effort finally c o m e t h r o u g h .. family,.

(4) ABSTRACT. Title of Dissertation: "A Prescriptive Model for Supply Chain Integration: An evolutionary approach ". A u t h o r : C a r l o s E d u a r d o Canfield Rivera Institution: I T E S M C C M D i r e c t o r : Dr. Juan G a y t á n Iniestra R e a d e r s : Dra. Pilar A r r o y o and Dr. Enrique Bores. P u r p o s e : T h e m a i n purpose o f this study is to attain a d e e p e r u n d e r s t a n d i n g about the e v o l u t i o n a r y p r o c e s s that vertically integrated firms need to u n d e r t a k e t o w a r d s supply chain integration. M o r e specifically it a t t e m p t s to a n s w e r t w o general research questions: (a) What are the factors that enable/inhibit the e s t a b l i s h m e n t of supply chain integration practices, in a vertically integrated firm a n d : (b) H o w can a c o n g r u e n t prescriptive model be traced to assist VI firms in their evolution t o w a r d s supply chain integration.. D e s i g n / M e t h o d o l o g y / A p p r o a c h : T h i s study is framed in a research p r o g r a m characterized by t w o c o n c u r r e n t action research projects. T h e core action involving the r e s e a r c h e r in an o r g a n i z a t i o n contributing with m a n a g e m e n t. research to the. solution of real-life p r o b l e m s and a dissertation action research w h o s e main p u r p o s e is to make a distinctive contribution in the field of supply chain integration.. F i n d i n g s : B o t h projects are based on a p r o c e s s maturity a p p r o a c h and c o n s i d e r the gradual e v o l u t i o n of vertically. integrated. firms. through. more. integrated. and. participative a p p r o a c h e s , c h a r a c t e r i z e d by relational e x c h a n g e s . A s a result o f the research s o m e g u i d e l i n e s are p r o p o s e d to help m a n a g e r s in this transition. Supply chain integration is c o n t i n g e n t on external variables that might h i n d e r or foster its evolution. The collateral results o f the c o r e action research project revealed that supply chain integration w a s not only a matter o f technical and tactical issues, but rather o f strong. iv.

(5) considerations. about. hierarchies,. resistance. to. change. and. status-quo.. incentive. m i s a l i g n m e n t , h i d d e n a g e n d a s and lack of a deliberate strategic p r o c e s s a m o n g other p r o b l e m s a l o n g the h u m a n d i m e n s i o n of integration.. O r i g i n a l i t y / v a l u e : A s such, the model contributed to further a d v a n c e m e n t in the field, filling a g a p by c o m b i n i n g present with e m e r g e n t k n o w l e d g e in the process of i m p l e m e n t i n g supply chain integration in a vertically integrated firm.. K e y w o r d s : Action. research. Supply chain. integration. Vertical. integration.. C o n t i n g e n c y a p p r o a c h and Prescriptive m o d e l .. v.

(6) S I N T E S I S (Translation). T i t u l o d e la T e s i s : "Un Modeloprescriptive) de Suministro:. Una aproximación. para la integración. de la. Cadena. evolutiva". A u t o r : C a r l o s E d u a r d o Canfield R i v e r a Institucion: ITESM C C M D i r e c t o r : Dr. Juan G a y t a n Iniestra L e c t o r e s : Dra. Pilar A r r o y o y Dr. E n r i q u e B o r e s . Objctivo:. El. proposito. central. del. presente. documento. es. aumentar. la. c o m p r e n s i ó n acerca del p r o c e s o e v o l u t i v o en el q u e incurren las e m p r e s a s v e r t i c a l m e n t e integradas. en. su. transición. hacia. la. integración. en. cadenas. de. suministro.. Especificamente tiene c o m o p r o p o s i t o resolver d o s p r c g u n t a s g e n e r a l e s : (a) ¿ C u á l e s son los factores que favorecen o limitan la i m p l a n t a c i ó n de prácticas de integración de la cadena en una e m p r e s a v e r t i c a l m e n t e integrada? y; (b) ¿ C ó m o se p u e d e desarrollar un modelo c o n g r u e n t e , d e corte prescriptivo, q u e oriente la actividad d e las e m p r e s a s verticalmente o r g a n i z a d a s en su e v o l u c i ó n hacia d i c h a s formas de integración?. Diseno/Metodologia/Perspectiva:. Este e s t u d i o se inserta en un p r o g r a m a de. investigación c a r a c t e r i z a d o por d o s p r o y e c t o s c o n c u r r e n t e s de i n v e s t i g a c i ó n - a c c i ó n . El proyecto central que involucra al i n v e s t i g a d o r en una o r g a n i z a c i ó n para contribuir con la administración de la m i s m a en la solución conjunta d e un p r o b l e m a real de interes para la m i s m a y un p r o y e c t o de tesis q u e tiene c o m o p r o p o s i t o f u n d a m e n t a l el contribuir al avance en el c o n o c i m i e n t o , en el area de integración de la c a d e n a de suministro. R e s u l t a d o s : A m b o s p r o y e c t o s están b a s a d o s en una p e r s p e c t i v a de m a d u r a c i ó n y consideran una e v o l u c i ó n gradual d e las e m p r e s a s v e r t i c a l m e n t e integradas hacia intercambios mas i n t e g r a d o s y p a r t i c i p a t i v o s con los d e m á s m i e m b r o s de la c a d e n a . Como resultado de esta investigación, se p r o p o n e n guías que p e r m i t e n orientar las decisiones de los a d m i n i s t r a d o r e s para a l c a n z a r la transición d e s e a d a . La integración de la cadena de s u m i n i s t r o , esta en función de variables externas q u e pueden limitar o favorecer su e v o l u c i ó n . L o s r e s u l t a d o s colaterales del p r o y e c t o central mostraron q u e. VI.

(7) los aspectos t é c n i c o s y técticos no eran los únicos a considerar para la integración sino que de forma. aim m a s decisiva. se deben considerar los aspectos j e r á r q u i c o s . de. resistencia al c a m b i o y de s t a t u s - q u o . falta de alineación entre estrategias e incentivos. agendas ocultas y sobre t o d o la carencia de un proceso estratégico deliberado, c o m o parte de lo p r o b l e m a s o r i e n t a d o s en la d i m e n s i o n h u m a n a de la integración.. O r i g i n a l i d a d / c o n t r i b u c i ó n : C o m o tal el m o d e l o c o n t r i b u y e al a v a n c e en el conocimiento en el area de la integración de la cadena. intentando reducir las b r e c h a s . tanto teóricas c o m o prácticas al c o m b i n a r el c o n o c i m i e n t o actual con el e m e r g e n t e . resultado de este trabajo, para el p r o c e s o de implantación de la integración de la c a d e n a de suministro en el c a s o de las e m p r e s a s verticalmente integradas.. P a l a b r a s C l a v e : Investigación-acción. Integración dc la c a d e n a de s u m i n i s t r o . Integracion vertical. Perspectiva de c o n t i n g e n c i a y m o d e l o prescriptivo.. vii.

(8) ACKNOWLEDGEMENTS. Ill. ABSTRACT. IV. SiNTESIS ( T R A N S L A T I O N ). VI. LIST OF A B R E V I A T I O N S. XII. LIST O F G R A P H S. XIV. LIST O F T A B L E S. XV. LIST OF F I G U R E S. XVI. LIST OF M E N T A L M A P S. XVIII. LIST OF M E N T A L M A P S. XVIII. PREFACE. 1.. INTRODUCTION. 1.1.. The new terms of competition:. XIX. 20 20. 1.2. Implementation problems of Supply Chain Management (SCM) and Supply Chain Integration (SCI) initiatives. 21. 1.3.. The purpose of the present research. 22. 1.4.. Research Questions. 23. 1.5. Unit of analysis and study settings: Productos Alimenticios: The vertically integrated group Supply chains under study. 23 24 25. 1.6.. Project description and deliverables. 26. 1.7.. Relevance and significance of research. 28. 1.8.. Dissertation Outline. 29. 2.. THEORETICAL F R A M E W O R K FOR SCI. 33. 2.1. The notion of Supply Chain Supply Chain: A definition for the present study. 33 34. 2.2.. 35. Supply Chain Management. viii.

(9) Supply Chain Management: A definition for the present study. 38. 2.3. The Strategic Nature of SCM: Perspecli\ es on Competiti\ e Adv antage SCM and strategy Insights on the strategic nature of SCM. 39 39 43 44. 2.4. The antecedent for Supply Chain Integration: Vertical Integration Main Theoretical perspectives about Integration The strategic choice: Vertical Integration (VI). 45 46 48. 2.5. Supply Chain Integration The e\ol\ ing path towards SCI Anteceding SCI frameworks in the literature A contingency approach towards SCI Supply Chain Integration and performance: a strategic approach SCI a unified approach, ground for the present work. 51 52 56 57 59 60. 3.. T H E M U L T I - D I M E N S I O N A L T R A N S I T I O N F R O M VI T O S C I. 62. 3.1. Organizational Integration in the present study Perspectives on Organizational Integration Organizational Integration: Working definitions for the present study Stages of Organizational Integration. 62 62 63 63. 3.2. Information integration in the present study Perspectives on Information integration Working definitions for Information Integration and its managerial implications Incidence of Information and Communication Technology (ICT) in SCI Stages of Information Integration. 70 70 70 72 73. 3.3. Coordination structure integration in the present study Perspectives on Coordination Structure Coordination Structure Integration: Working definition Stages of Coordination Structure. 76 76 77 78. 3.4. A reciprocal approach to the study of SCI The interacting dimensions in the present study. 82 83. 4.. METHODOLOGY. 85. 4.1. Action research Comprising Action Research in the present study Nature of the research: Paradigm Selection Role of Prc-undcrstanding in AR. 85 85 86 88. 4.2. The subject of study: A detailed account of PA Access Negotiation: A detailed perspective on Productos Alimenticios Mapping the supply chains under study Chain Number 2: Sugar Cookies in 1 Kg cardboard boxes. 89 89 90 92 94. 4.3. Data Collection Methods Observation Interviews Documentary work. 96 96 97 98. 4.4.. 98. Data Analysis Methods. ix.

(10) 4.5. Application of Research Methods in the Present AR The Fieldwork at PA. 98 98. 5. A N A L Y S I S OF T H E R E S U L T S : T H E I M P L E M E N T A T I O N OF T H E A R CYCLES 103 5.1.. Pre-understanding in this study. 105. 5.2. The first AR cycle The first stage of the AR project: Planning The second stage: Action in the AR project Observation and reflection stages Observation and reflection in the DARP Monitor meta-step:. 108 109 117 122 126 127. 5.3. Reinforcing the research process: The second AR cycle The second CARP cycle at PA The action, observation and reflection stages in the second DARP cycle The design of the Prescriptive Model for SCI Final Reflection in the C A R P. 127 129 140 141 149. 6.. T H E P R E S C R I P T I V E M O D E L IN A C T I O N. 152. 6.1. Description of the model A contingency approach to SCI in the model The multi-dimensionalitv of integration in the model. 152 153 154. 6.2.. 155. Operating the model. 6.3. Five steps toward implementation of SCI in the VI firm under the guidelines of the prescriptive model. 156. 6.4. Model implementation at PA The first step: The diagnostic phase The second step: Strategy Formulation The third step: Subject, content and extent of integration Key Model Prescriptions for FA The fourth and Fifth steps: Evaluation and consolidation. 158 158 169 169 175 176. 6.5. Congruence Validation of the Prescriptive Model at FA The bottom runway The top runway The influence of contingency variables Key results in the AR project. 176 176 177 177 179. 6.6. Assessing the quality of the present AR projects Reliability and Validity Reliability and Validity in qualitative research Criteria forjudging quality in AR projects Quality Criteria for the CARP at Productos Alimenticios Quality criteria for the DARP at Productos Alimenticios. 180 181 181 181 182 185. 7.. CONCLUSIONS A N D R E C O M M E N D A T I O N S. 188. 7.1.. Initial Considerations. 188. 7.2.. Summary of Research Findings. 190. X.

(11) Incidence of factors on supply chain integration Designing and implementing a prescripts c model for SCI Qualiu of the Research. f. I >0 192 196. 7.3.. Theoretical contributions. 197. 7.4.. Limitations, delimitations and implications for further study. 198. APPENDIX A: F I E L D W O R K A T P R O D U C T O S ALIMENTICIOS. 200. Topic Guide 0: P R E - U N D E R S T A N D 1 N C STAGE. 201. Topic Guide 1: ACCESS N E G O T I A T I O N WITH PA. 208. Topic Guide 2: P R E L I M I N A R Y DATA C O L L E C T I O N A T PA. 213. Topic Guide 3: D O C U M E N T A R Y W O R K. 221. A P P E N D I X B: C O M M U N I C A T I O N S S U M M A R Y W I T H P R O D U C T O S ALIMENTICIOS. 227. 1) Cover Letter. 228. 2) Presentation Document. 229. 3) Electronic communication with PA. 232. BIBLIOGRAPHY. 248. xi.

(12) LIST O F A B R E V I A T I O N S. Action Research ( A R ) Asociacion M e x i c a n a d e Industriales d e G a l l e t a s y Pastas A . C . ( A M E X I G A P A ) Business Processes ( B P ) Business-to business ( B 2 B ) Business-to-consumer ( B 2 C ) Collaborative P e r f o r m a n c e S y s t e m ( C P S ) Collaborative P r o g r a m s o f F o r e c a s t i n g and R e p l e n i s h m e n t ( C P F R ) Competence-Based V i e w ( C B ) Competitive A d v a n t a g e ( C A ) Consumer-to business ( C 2 B ) Consumer-to-consumer ( C 2 C ) Continuous R e p l e n i s h m e n t P r o g r a m s ( C R P ) Core Action Research Project ( C A R P ) Data Envelopment T e c h n i q u e ( D E A ) Deliveries in Dull on T i m e ( D I F O T ) Dissertation Action R e s e a r c h Project, ( D A R P ) Efficient C o n s u m e r R e s p o n s e M o v e m e n t ( E C R ) Electronic data Interchange ( E D I ) Fabrica de A l i m e n t o s ( F A ) Financial A c c o u n t i n g S t a n d a r d s Board ( F A S B ) Information and C o m m u n i c a t i o n s T e c h n o l o g y ( I C T ) Information Integration (IS) Information T e c h n o l o g y (IT) Instituto Nacional de Geografia, Estadistica e Informatica ( I N E G I ) Instituto T e c n o l ó g i c o y d e E s t u d i o s S u p e r i o r e s de M o n t e r r e y ( I T E S M ) Integrated Solution P r o v i d e r (ISP) Key Performance Indicators ( K P I ) Materials requirements P l a n n i n g ( M R P ) Organizational Integration (OI) Original Equipment M a n u f a c t u r e r s ( O E M ) Performance M e a s u r e m e n t S y s t e m s ( P M S ). xii.

(13) Product D i s t r i b u t o r s h i p (PD) Productos A l i m e n t i c i o s ( P A ) Resource Based View of the Firm ( R B V ) Securities and E x c h a n g e C o m m i s s i o n ( S E C ) Standard Industrial Classification ( S I C ) Small and M e d i u m Enterprises ( S M E ) Strategic Business Unit ( S B U ) Supply Chain (SC) Supply chain: S n a c k s in c a r d b o a r d e x h i b i t o r s of 4 . 4 7 Kg ( S C # 1 ) Supply C h a i n : S w e e t C o o k i e s ( S C # 2 ) Supply Chain Integration (SCI) Supply Chain P l a n n i n g S y s t e m s ( S C P ) Supply Chain M a n a g e m e n t ( S C M ) Supply Chain Orientation ( S C O ) Sustained C o m p e t i t i v e A d v a n t a g e ( S C A ) The Association for O p e r a t i o n s M a n a g e m e n t ( A P I C S ) Transaction C o s t s E c o n o m i c s ( T C E ) Vendor M a n a g e d Inventories ( V M I ) Vertical Integration (VI). xiii.

(14) LIST O F GRAPHS. GRAPH 6.4-1: INITIAL D I A G N O S T I C OF AS-1T-IS C O N D I T I O N S FOR SCI A'l" FA 163 GRAPH 6.4-2: M O N T H L Y SALLS OF S W E E T COOKIES (CODE 311501) IN MEXICO BIE. IN EG I 167 GRAPH 6.4-3: VOLATILE D E M A N D A N D A D E C R E A S I N G T R E N D SOURCE: B A S E D ON FA S SALES DATA 168. xiv.

(15) LIST OF T A B L E S. TABLE 3.1-1: STAGF.S OF O R G A N I Z A T I O N A L IN I EGRATION 65 TABLE 3.2-1: STAGES OF I N F O R M A T I O N INTEGRATION 74 TABLE 3.3-1 STAGES OF C O O R D I N A T I O N S T R U C T U R E 79 TABLE 3.4-1: A MATRIX FORM S U M M A R Y OF H I E INTERACTING D I M E N S I O N S OF SCI: A RECIPROCAL A P P R O A C H 84 TABLE 4.2-1: INDUSTRIAL CLASSIFICATION OF PRODUC'l OS A L I M E N T I C I O S A C C O R D I N G TO SIC CODES A D A P T E D FROM INFORMATION PRESENTED BY W/'D P A R T N E R S WORLD SCOPE IN LEXIS NEX1S A C A D E M I C UNIVERSE. A C C E S S E D ON 26 MARCH 2007 91 TABLE 4.5-1: C H R O N O L O G I C A L ACTIVITY LOG FOR THE AR PROJECT AT PA 102 TABLE 5.1-1: C H R O N O L O G I C A L A C C O U N T FOR ACTIVITIES UNDER THE PREUNDERSTANDING STAGE 106 TABLE 5.2-1: C H R O N O L O G I C A L A C C O U N T FOR A C C E S S NEGOTIATION (.-FY ACTIVITIES) WITH PA 110 TABLE 5.2-2: C H R O N O L O G I C A L A C C O U N T OF Till- PLANNING STAGE IN THE F I R S T A R CYCLE 114 TABLE 5.2-3 C H R O N O L O G I C A L A C C O U N T OF THE DATA COLLECTION PROCESS IN THE FIRSTAR CYCLE 119 TABLE 5.2-4 : C H R O N O L O G I C A L A C C O U N T FOR O B S E R V A T I O N AND REFLECTION ACTIVITIES IN IIIE CARP 124 TABLE 5.3-1: C H R O N O L O G I C A L A C C O U N T FOR ADDITIONAL DATA COLLECTION AND ANALYSIS 130 TABLE 5.3-2: C H R O N O L O G I C A L A C C O U N T OF II IE PROCESS OF C A R P ' S K N O W L E D G E TRANSFER TO PA 131 TABLE 5.3-3 CHRONOLOGICAL A C C O U N T OF THE C O M P L E M E N T A R Y D O C U M E N T A R Y WORK 132 TABLE 5.3-4: P R O D U C T O S ALIMENTICIOS INTERESTS A D A P T E D FROM T H O M S O N FINANCIAL. " T H O M S O N EXTEL C A R D S D A T A B A S E " IN LEXIS-NEXIS A C A D E M I C UNIVERSE. ACCESSED ON THE 2 7 OF M A R C H . 2007 138 TABLE 5.3-5: EXPECTED V A L U E S FOR C O N T I N G E N C Y V A R I A B L E S INFLUENCE 149 TABLE 5.3-6: C H R O N O L O G I C A L A C C O U N T OF TI IE FIELD-WORK RELATED ACTIVITIES 150 TABLE 6.4-1: AS-IT-IS DIAGNOSTIC OF O R G A N I Z A T I O N A L INTEGRATION IN SC#1 A N D SC#2 160 TABLE 6.4-2: AS-IT-IS DIAGNOSTIC OF I N F O R M A T I O N INTEGRATION IN SCJ1 AND SC#2 161 TABLE 6.4-3 AS-IT-IS DIAGNOSTIC OF C O O R D I N A T I O N S T R U C T U R E INTEGRATION IN SC#1 AND SCJ2 162 TABLE 6.4-4: INTERACTIONS BETWEEN C O N T I N G E N T VARIABLES A N D M A N A G E R ' S INQUIRIES. THE CASE OF PA 172 TABLE 6.4-5: RESULTS OF THE PRESCRIPTIVE M O D E L IN THE CASE OF FA 175 TABLE 6.5-1: THE INFLUENCE OF C O N T I N G E N C Y V A R I A B L E S 179 TABLE 7.2-1: EXPECTED INFLUENCE OVER SCI OF C O N T I N G E N T VARIABLE SUNDER THE PRESENT STUDY 192 t h. xv.

(16) LIST O F F I G U R E S FIGURE 1.6-1: THE RELATIONSHIP BETWEEN CARP A N D DARP. A D A P T E D FROM ZUBLRSKERRIT AND PERRY (2002. P. 177) 28 FIGURE 2.2-1 SCM F R A M E W O R K IN ( L A M B E R T A N D COOPER. 2000. P.70) 37 FIGURE 2.2-2: THE 3-S F R A M E W O R K FOR SCM. A D A P T E D FROM C.1ANNAK1S AND (.'ROOM (2004) 38 FIGURE 2.2-3 DIAGRAM OF SCM. B A S E D ON MENTZER FT AL. (2001) 39 FIGURE 2.3-1 THE DELTA MODEL. A D A P T E D FROM 1IAX A N D WILDE (2001. P.10) 43 FIGURE 2.3-2: THE N O I ION OF STRATEGIC ITT 44 FIGURE 2.4-1 VERTICAL SCOPE OF AN INDUSTRY IN N U G E N T AND 11AMBLIN (1996) 49 FIGURE 2.4-2: DIMENSIONS OF VERTICAL INTEGRATION. A D A P T E D FROM HARRIGAN (1985) 50 FIGURE 2.4-3: A CONTINGENCY A P P R O A C H T O VI. HARRIGAN (1985) 51 FIGURE 2.5-1: RECIPROCAL APPROACH TO U N D E R S T A N D THE INTERACTING D I M E N S I O N S OF SC COLLABORATION A D A P T E D FROM (SIMA I UPANG A N D SR1DHARAN. 2005)....57 FIGURE 2.5-2: A CONTINGENCY A P P R O A C H TO SUPPLY CHAIN INTEGRATION A D A P T E D FROM BAGC111 AND SK.IOETT-LARSEN (2002B) 58 FIGURE 3.1-1: DIMENSIONS OF O R G A N I Z A T I O N A L INTEGRATION 64 FIGURE 3.2-1: INFORMATION INTEGRATION DIMENSION 73 FIGURE 3.3-1: COORDINATION S T R U C T U R E INTEGRATION 78 FIGURE 3.4-1: INTERACTING DIMENSIONS OF" SUPPLY CHAIN INTEGRATION 82 FIGURE 4.1-1: ACTION RESEARCH CYCLE I M P L E M E N T A T I O N . (COUGIILAN A N D COUGHLAN. 2002) 87 FIGURE 4.2-1: PA'S STREAM OF' O P E R A T I O N S . FA IN I III VALUE CHAIN 92 FIGURE 4.2-2: SC NUMBER 1 ( C A R D B O A R D EXHIBITORS) 93 FIGURE 4.2-3: SC N U M B E R T W O (SUGAR C O O K I E S ) 95 FIGURE 5.2-1: DIAGRAM SHOWING THE ACTIVITIES COMPRISING THE PLANNING STAGE IN THE FIRST AR CYCLE 111 FIGURE 5.2-2 DIAGRAM SHOWING THE G E N E R A L ACTIVITIES COMPRISING THE ACTION STAGE IN THE FIRST AR CYCLE 118 FIGURE 5.2-3 DIAGRAM SHOWING THE G E N E R A L ACTIVITIES COMPRISING THE OBSERVATION AND REFLECTION STAGES IN THE FIRST AR CYCLE 122 FIGURE 5.3-1: THE STAGES DIMENSION OF SCI A D A P T E D FROM ( H A R R I G A N . 1985). SC #1 134 FIGURE 5.3-2: THE STAGES DIMENSION OF SCI A D A P T E D FROM ( H A R R I G A N . 1985). SC #2 134 FIGURE 5.3-3: THE BOTTOM RUNWAY FOR II IE P R O P O S E D PRESCRIPTIVE M O D E L (EVOLUTION) 142 FIGURE 5.3-4: THE TOP RUNWAY FOR H I E P R O P O S E D PRESCRIPTIVE MODEL FOR SCI (VI DISINTEGRATION) 143 FIGURE 5.3-5: THE PROPOSED PRESCRIPTIVE MODEL FOR SUPPLY CHAIN INTEGRATION 145 FIGURE 5.3-6: MULTI-DIMENSIONALITY IN THE PROPOSED PRESCRIPTIVE MODEL 147 FIGURE 5.3-7: A CONTINGENCY A P P R O A C H IN THE PROPOSED PRESCRIPTIVE M O D E L . . . 148 FIGURE 6.1-1: THE BOTTOM R U N W A Y R A N G E S FROM I IN A R T I C U L A T E D FUNCTIONS THROUGH EXTERNAL INTEGRATION STEVENS (1989) 152 FIGURE 6.1-2: THE TOP R U N W A Y . FROM VI THROUGH SCI. N O T A MATTER OF" CHOICE BUT ONE OF DEGREE 153 FIGURE 6.1-3: SCI INTENSITY IS M E A S U R E D A C R O S S THREE D I M E N S I O N S : ORGANIZATION. INFORMATION A N D C O O R D I N A T I O N S T R U C T U R E 155 FIGURE 6.3-1 PROPOSED FIVE STEPS FOR SCI 156 FIGURE 6.4-1: FA REVEALED A HIGH LEVEL OF" VI IN S C # 1 &2. UNDER P A ' S VERTICAL CONTROL 159 FIGURE 6.4-2: P O R T E R S FIVE FORCES D I A G R A M FOR THE B A K E D P R O D U C T S INDUSTRIAL SEGMENT 166 FIGURE 6.4-3: THE PROPOSED S T A N D FOR SCI IN THE CASE OF l-ABRICA DE ALIMENTOS 174. XVI.

(17) FIGURE 6.5-1: C O N G R U E N C E OF" THE PRESCRIPTIVE MODEL FOR FA : AN S C H E M A T I C PERSPECTIVE. 179. xvii.

(18) LIST O F M E N T A L M A P S. MENTAL MAP 1: A S U M M A R I Z E D VIEW OF THE PRL-UNDERS'LANDING STAGE 107 MENTAL MAP 2: A S U M M A R I Z E D VIEW OF THE FIRST AR CYCLE 112 MENTAL MAP 3: A S U M M A R I Z E D VIEW OF T HE ACTION STAGE IN THE FIRST AR CYCLE 121 MENTAL MAP 4: A S U M M A R I Z E D VIEW OT' THE OBSERVATION A N D REFLECTION ST AGES IN THE FIRST AR CYCLE 125 MENTAL MAP 5: S U M M A R I Z E D VIEW OF THE MONITORING META-STEP 128 MENTAL MAP 6: A S U M M A R I Z E D VII-W OF THE DESIGN OF A PRESCRIPTIVE MODEL FOR SCI 136 MENTAL MAP 7: A S U M M A R I Z E D VIEW OF THE PROCESS OF SKETCHING THE PRESCRIPTIVE M O D E L FOR SCI 145. xviii.

(19) PREFACE. This dissertation has four parts, divided into seven chapters. The first part deals with the. nature. of. the. problem. as. it. relates. with. external. pressures. towards. disintegration and the need o f precise g u i d e l i n e s that could orient m a n a g e r s of vertically integrated firms in their effort t o w a r d s supply chain integration. T h e main p u r p o s e of this research is to d e e p e n u n d e r s t a n d i n g a r o u n d SCI as it relates to VI firms.. The second part r e v i e w s the literature along the n o t i o n s of supply. chain. management and vertical and supply chain integrations. T h e claim that firms need to expand their boundaries, t r a n s c e n d i n g adversarial transactions and e n g a g e in relational exchanges is supported. M o r e o v e r section three deals with the notion that integration is a multi-dimensional. concept, and for the present study. is characterized. by three. proposed d i m e n s i o n s , n a m e l y : Organizational, information and coordination structure integration.. The third part supports the use o f Action Research as the appropriate m e t h o d o f research, as well as explains the p r o c e s s for data collection and analysis. And in Section five it analyzes the actual data as collected in both the C A R and D A R projects, and concludes by establishing a prescriptive m o d e l o f SCI, based on a p r o c e s s maturity approach.. The part n u m b e r four c o n s i d e r s the actual i m p l e m e n t a t i o n o f the m o d e l in the case of PA a vertically integrated g r o u p that operates in the food retail sector, and includes the conclusions, limitations and implications for further research.. The primary e m p h a s i s of this dissertation lies in further a d v a n c e m e n t s in the field of SCI nevertheless, the solution o f an organizational p r o b l e m , basically the adoption of a supply chain p e r s p e c t i v e in the operation o f a VI firm, is c o n c u r r e n t with the main purpose.. xix.

(20) 1.. Introduction. For a better u n d e r s t a n d i n g of the significant c h a n g e s that mold the s c h e m e of competition today, a brief review of the historical b a c k g r o u n d of p r o d u c t i o n. and. organizational relationships is d e e m e d appropriate.. The decades of the 1960s and 1970s, saw c o r p o r a t i o n s focused on. function. optimization. Firms w e r e organized u n d e r vertical hierarchies. E x c h a n g e s with v e n d o r s were mainly adversarial. Very few strategic partners. M a n u f a c t u r i n g planning. relationships w e r e established,. s y s t e m s concentrated. but only. on materials. with. requirements. ( M R P ) . S o m e firms, due to market failures and uncertainty, decided. produce its own inputs or c o n t r o l / o w n its distribution c h a n n e l s . Vertical. to. Integration. (VI) and virtual m o n o p o l i e s s e e m e d to be reasonable strategic decisions at the t i m e .. Notwithstanding as a result of ferocious competition in the d e c a d e s o f the 1980s and 1990s, the profitability. of North-American. pressure, reflecting m a r k e t - s h a r e. manufacturers. c a m e under. loss to o v e r s e a s p r o d u c e r s . A m e r i c a n. shifted their strategic priorities in three w a y s :. severe. companies. F r o m low-cost production to quality,. flexibility, short lead time and d e p e n d a b l e delivery; i m p l e m e n t e d n e w t e c h n o l o g i e s and philosophies of production m a n a g e m e n t (Johnston, 1994: H o l m b e r g . 2 0 0 0 ) and began the search for better o p p o r t u n i t i e s. to increase c o m p e t i t i v e n e s s ,. (Lonsdale,. 1999;. Mclvor, 2000) leading the w a y to w h a t w a s called the o u t - s o u r c i n g m o v e m e n t ( R a o and Young, 1994; Mason. Cole et al.. 2 0 0 2 ) .. The analysis b e t w e e n costs and m a n u f a c t u r i n g c o n d i t i o n s in-house c o m p a r e d with capabilities available from external suppliers reinforced the idea that m a n y items in the value chain. could be o u t s o u r c e d or subcontracted at lower total costs ( B r o w n .. 1997). By the early 1990s, reengineering, total quality m a n a g e m e n t , d o w n s i z i n g , and outsourcing, among others, b e c a m e c o m m o n practices in the m a r k e t - p l a c e .. 1.1. The new terms of c o m p e t i t i o n : Even though such efforts. a i m e d at o p t i m i z i n g the p e r f o r m a n c e. of certain. processes, firms soon d i s c o v e r e d that the p e r f o r m a n c e a d v a n t a g e s obtained from such. 20.

(21) methods quickly e r o d e d as c o m p e t i t o r s i m p l e m e n t e d similar a p p r o a c h e s . Eventually organizations realized that single firm o p e r a t i o n s w o u l d not result in a p p r e c i a b l e system improvements, therefore i n d u c i n g firms to seek a closer coordination and integration with suppliers and c u s t o m e r s that w a s possible through adversarial relations, in order to remain competitive (Deffee and Stank 2 0 0 5 ) .. Today. is. a. fact. that. organizations. confront. a. dynamic,. complex. and. unpredictable e n v i r o n m e n t . C h a n g e s such as increasing global c o m p e t i t i o n , c o m p l e x i t y and uncertainty, n e w m a n u f a c t u r i n g p h i l o s o p h i e s , m e r g e r s and acquisitions, d o w n s i z i n g and outsourcing trends, d e r e g u l a t i o n , e n v i r o n m e n t a l a w a r e n e s s , innovation and greater use of information t e c h n o l o g y and value a d d e d activities in the supply chain, have caused a profound impact over firm behavior and p e r f o r m a n c e .. Under the new t e r m s of c o m p e t i t i o n , the m a n a g e m e n t shift therefore is to recognize that competition n o w d o e s not longer take place a m o n g individual businesses, but between entire value chains. T h e c o m p e t i t i v e imperative, w h i c h by any m e a n s is a matter of choice, b e c o m e s : finding the best w a y to get the right products, at the right place, at the right time for the right price for c o n s u m e r s . This c h a l l e n g e is beyond the basis for enterprise success and definitively b e c o m e s the key to survival.. .. The new terms of global c o m p e t i t i o n have forced c o r p o r a t i o n s , particularly those historically organized around vertical hierarchies, to reorient their high-level strategies, from. independent. operations. characterized. by. adversarial. transactions. towards more articulated strategic p a r t n e r s h i p s . It can be generally alleged that the road to success now depends on a s s e m b l i n g a t e a m of c o m p a n i e s that can rise a b o v e a r n f s length relationships and w o r k t o g e t h e r to deliver greater value for c o n s u m e r s (Taylor, 2003).. 1.2. Implementation p r o b l e m s of Supply Chain M a n a g e m e n t. (SCM). and. Supply Chain Integration (SCI) initiatives. During the past few years, supply chain e x c e l l e n c e , optimization, and integration have become the focus and goal o f m a n y o r g a n i z a t i o n s w o r l d w i d e . S C M and SCI h a v e received great attention in the past d e c a d e s . Both t e r m s a p p e a r frequently in both, the. 21.

(22) trade press and b r o c h u r e s for leading professional p r o g r a m s , yet reality s h o w s that very few companies h a v e e n g a g e d. in S C I . Indeed, few. c o m p a n i e s h a v e adopted. and. disseminated a formal S C M definition. Even fewer h a v e meticulously m a p p e d out their supply chains so that they k n o w w h o their suppliers" suppliers or customers" c u s t o m e r s really are. Thus, a legitimate question arises: How do companies supply chain integration. today?. define. and. approach. ( F a w c e t t and M a g n a n , 2 0 0 2 ). Implementation o f S C M is not w i t h o u t p r o b l e m s . Interestingly e n o u g h , on o n e hand there are m a n y a c a d e m i c and t r a d e publications, e m p h a s i z i n g the. successful. application of S C M initiatives. Y e t on the other hand, there are empirical. studies. reporting many difficulties in S C M i m p l e m e n t a t i o n , ( M e n t z e r et al.. 2 0 0 0 ; Fawcett and Magnan, 2002).. The. above-mentioned. situation. is amplified. in the a b s e n c e. of. theoretical and empirical d e v e l o p m e n t s linking the c o r r e s p o n d i n g strategic m a n a g e m e n t notion of vertical integration with the applied c o n c e p t of supply chain. integration.. Svenson (2005) argues that given the scarcity o f theoretical d e v e l o p m e n t on successful SCM implementation, m a n a g e r s need further a c a d e m i c support at explaining, h o w can a vertically integrated firm e n g a g e in the p r o c e s s of supply chain integration? And even more, they lack contextual and practical g u i d e l i n e s that could orient their efforts at achieving such necessity.. As it has been s h o w n a b o v e , vertically integrated (VI). firms,. u n d e r strong. competitive and environmental pressures for disintegration and differentiation, have the urge to evolve t o w a r d s m o r e participative SC a p p r o a c h e s . Yet, there are forces both external (environmental) and internal (managerial opposition to c h a n g e ) , that delay, to say the least, such evolution. For that matter, practitioners and m a n a g e r s alike h a v e a strong need for a framework, linking c o r p o r a t e strategy with effective supply chain management that eventually could guide the integrative efforts o f VI. firms.. 1.3. The purpose of the present research. The main purpose o f this study is to attain a d e e p e r u n d e r s t a n d i n g a b o u t the [evolutionary process that vertically integrated firms need to u n d e r t a k e t o w a r d s supply ;hain integration. More specifically three particular objectives are proposed:. 22.

(23) 1. Understand the main facilitators and inhibitors that affect VI firms in the p r o c e s s of supply chain integration.. 2. Propose a prescriptive m o d e l that could guide m a n a g e r s of VI firms, in their efforts to achieve strategic supply chain integration.. 3. Attempt to validate the c o n g r u e n c e o f such model and its applicability in the contextual setting of '"Fdbrica. de Alimenlos". vertically integrated firm "Productos. (FA). Alimenticios". a subsidiary o f a large (PA) in the M e x i c a n food. retail industry.. 1.4. R e s e a r c h Q u e s t i o n s. The main questions addressed in the present research are:. 1. What are the factors that e n a b l e S C I ? W h a t factors inhibit the establishment of SCI practices in a VI firm? , and h o w can t h e y be o v e r c o m e ?. 2. How can a congruent prescriptive model be traced to assist VI firms for their successful evolution t o w a r d s supply chain integration?. 1.5. U n i t of a n a l y s i s a n d s t u d y s e t t i n g s :. In the present study the unit o f analysis. is a vertically. integrated. firm,. undertaking a supply chain integration process. T h e strategic context o f the study o f the ;Vl firm is defined by its a p p a r e n t a d h e r e n c e to a specific value discipline: In this case, Land following Treacy and W i e r s e m a (1993), either operational excellence or c u s t o m e r Intimacy. That is, whether the realized strategy o f the firm a p p e a r s to fall into o n e o f the Value categories mentioned a b o v e ( M i n t z b e r g , 1978).. |ftje specific contextual setting for the application of a prescriptive model for supply jhain integration is the food retail sector in M e x i c o . Retail is important because o f the. 23.

(24) dramatic changes that have t r a n s f o r m e d its l a n d s c a p e in recent t i m e s . T h e nature of retail competition. itself. has. changed,. with. an. increase. in. business. range. and. concentration. From b e i n g a local activity, retailing for s o m e c o m p a n i e s has progressed through the national, international and in certain cases to a global scale. W a l - M a r t and Carrefour, n u m b e r 1 and 2 as w o r l d w i d e leaders in their activity, have. successfully. adopted S C M initiatives that h a v e contributed t o w a r d s w i d e n i n g the g a p between t h e m and the rest, and lead the w a y for long o v e r d u e imitations on behalf of c o m p e t i t o r s .. The interest in the food retail sector resides in the c o - e x i s t e n c e of world class retailers, -global leaders in S C M. initiatives- with. large VI firms, mainly. family. business, that struggle trough evolution t o w a r d s S C I . C o n t r a s t i n g with the full extent of SCI, the VI firm lags on S C M initiatives and continuously attempts to delay integration.. Interestingly e n o u g h , the strategy adopted by this later type of c o m p a n i e s has been to resort to distribution c h a n n e l s , with low d e g r e e s of integration, actually similar to their own. There is no need to mention that this survival strategy is temporary and only useful for deferring b u s i n e s s failure.. Large vertically integrated firms are c o m m o n in the food and b e v e r a g e s industry in Mexico. For the present research Fdbrica. de Alimentos. a fully-owned subsidiary o f a. large VI public group in the M e x i c a n food industry n a m e d Productos. Alimenticios. is. considered a firm with a proper profile to be selected as the unity o f analysis for this study.. Productos yllimenticios: The vertically integrated group. Productos. Alimenticios. is a large M e x i c a n corporate group, d o m i n a n t in the. pasta industry and with a stronghold in the flour processing, grain mill products, bakery, manufacturing processed foods and p a c k a g i n g . It is a public c o m p a n y -with substantial family ownership- that exhibits a vertical control corporate strategy, based on full ownership of firms c o m p r i s i n g their c o r r e s p o n d i n g value chains.. T w o important subsidiaries of PA are considered in this research. FA is part o f the biscuit division and o p e r a t e s in the baked s n a c k s industrial s e g m e n t . And. Product. —Distributorship PD, that o p e r a t e s the distribution o f m o s t of the c o r p o r a t i o n ' s products. 24.

(25) Supply chains under study. Two supply c h a i n s w e r e selected containing Snacks. in cardboard. exhibitors. distributing various and differentiated. for this study. Supply chain n u m b e r. 1.. of 4.47 Kg is dedicated to m a n u f a c t u r i n g and baked snacks, individually w r a p p e d , for sale. through PA's distribution subsidiary PD.. Supply chain N u m b e r 2, n a m e l y Sweet. Cookies. in I Kg cardboard. boxes. manufactures the simplest type of baked products w h i c h are distributed t h r o u g h t w o channels. In the first channel and using PA's. brand n a m e , FA sells the product to PD. and delivers directly in appropriate w a r e h o u s e s , which in turn w h o l e s a l e to regional distributorships as in SC #1 a b o v e , with the exception of international sales that include large scale retailers.. The second channel is directed by a world-class retailer. - the focal firm- w h o in turn provides the operation g u i d e l i n e s and p r o c e d u r e s to be followed by FA, m a r k e t i n g the baked products under the retailer's generic brand n a m e for d o m e s t i c c o n s u m p t i o n .. FA operates very differently under the t w o c h a n n e l s that c o m p r i s e SC # 2 . In the first channel all transactions b e t w e e n suppliers and c u s t o m e r s are adversarial. But on the second channel, the w o r l d - c l a s s retailer e m e r g e s as the focal firm and establishes SCM initiatives leaving FA to a role of simply another supplier, part of the chain.. It is convenient to e m p h a s i z e that for the present research, the unit o f analysis is the vertically integrated firm and as such only the supply c h a i n s w h e r e FA b e c o m e s the focal firm would be studied, that is Supply C h a i n n u m b e r 1 (Cardboard Supply Chain n u m b e r t w o (Sweet. Cookies). and. distributing through PD.. Under the notion o f the value discipline context of both SCs is operational. Exhibitors). excellence,. (Webster. 1994). the strategic operation w h e r e firms intend to lead the industry. both in price and c o n v e n i e n c e ( T r e a c y and W i e r s e m a , 1993). T h a t is, competition takes place with solid brands and strong c o r p o r a t e reputation as pre-requisites for high levels. 25.

(26) of efficiency in production and distribution, particularly in c h a i n s d o m i n a t e d by a world-class retailer, as it s e e m s to be the norm in the m a r k e t - p l a c e .. These t w o SCs w e r e selected as subjects o f the present study b e c a u s e they arc representative of big family b u s i n e s s e s , organized through vertical hierarchies that today are struggling to remain c o m p e t i t i v e u n d e r the new market c o n d i t i o n s . PA until now has managed to delay integration, yet today it is found at the crossroad for d e c i d i n g its next step. There are p e n d i n g c h a n g e s and decisions to be m a d e and PA has decided to review its whole strategic a p p r o a c h , and closely c o n s i d e r e d integration.. Both the m a n a g e m e n t and research t e a m s are in the process of r e v i e w i n g , designing and implementing an organizational c h a n g e t o w a r d s a SC a p p r o a c h. and. further through supply chain integration. T h e project initiates with the d e v e l o p m e n t of a SC balanced performance m e a s u r e m e n t system, and c o n c l u d e s with the proper design of a prescriptive model of SCI, w h e r e VI firms find s o m e guidelines about how to e n g a g e in such integration process. It is important to m e n t i o n that the present research project, becomes a first-hand opportunity to reflect and orient, from within the. firm,. such. desired transformation.. 1.6. Project description and deliverables. The concurrence of events being, the nature o f the problem, the. questions. envisioned, the purpose of the present study and a b o v e all the imperative of the firm to engage in organizational c h a n g e , t o w a r d s an articulated a p p r o a c h to SCI p r o v i d e the ground for selecting Action Research ( A R ) as the a p p r o p r i a t e research m e t h o d .. AR is initially characterized by four fundamental. issues, which are clearly. .reflected in the study (Coughlan and C o u g h l a n , 2 0 0 2 ; Eden and H u x m a n . 2 0 0 2 ) :. 1. AR refers to research in action. A scientific approach is used for the resolution, in this case, of an organizational problem jointly with those who directly experience it. 2. AR is participative. Here management participates in the solution of the problem, instead of simply being the object under scrutiny.. 26.

(27) 3.. AR is concurrent with action. Because organizational change takes place at the same time when there are developments in the body of knowledge. 4.. AR is a sequential approach to problem solving. Members of the research and management teams jointly participate the solution of the problem and in the research process itself, through various cycles of sequential steps of planning, action and evaluation. On one hand, the current market c o n d i t i o n s and on the other, the. stated. objectives a b o v e , imply the e n g a g e m e n t o f the firm under study, in a reflection p r o c e s s around its present VI strategy and the necessary steps - a c t i o n - required to include S C M initiatives in its operation and attempt to e v o l v e through further stages of integration, in order to remain c o m p e t i t i v e . T h i s d e m a n d s the interaction of the m a n a g e m e n t and research t e a m s in a collaborative process of c h a n g e in the organization, under different roles. Practitioners under their organizational. roles, plan, design and e x e c u t e. intended c h a n g e , w h e r e a s r e s e a r c h e r s act as facilitators of the action and. the. reflection. within an organization a t t e m p t i n g to u n d e r s t a n d both the p r o c e s s and the impact o f such change, with a view to replication at a n o t h e r setting and with an ultimate perspective o f contributing to theoretical a d v a n c e m e n t in the field ( C o u g h l a n and C o u g h l a n , 2 0 0 2 , p.227). Therefore action research is selected as the proper m e t h o d o l o g y to respond to the research questions. T h e present study is framed in a research p r o g r a m characterized by two concurrent action Research. Project. research. projects. in SCI. T h e first is the Core. Action. ( C A R P ) , involving the researcher in an organization, with the specific. purpose of contributing with m a n a g e m e n t to the solution o f a real-life p r o b l e m , n a m e l y the joint design of a S u p p l y C h a i n P e r f o r m a n c e M e a s u r e m e n t System ( P M S ) for PA based on balanced m e a s u r e s .. And second, the Dissertation. Action. Research. Project,. (DARP) (Zuber-Skerrit. and Perry, 2002) w h e r e the c a n d i d a t e w o u l d c o n c e n t r a t e on the thesis-writing, and its main purpose would be to m a k e a distinctive contribution to k n o w l e d g e , in the context of the strategic evolution o f vertically integrated firms t h r o u g h S C I .. T h e relationship b e t w e e n C A R P and D A R P is graphically s h o w n in Figure 1.61 bellow. Bearing the latter in m i n d , the project w o u l d be d e v e l o p e d in at least t w o. 27.

(28) reinforcing c y c l e s o f four sequential p h a s e s : Plan. act. observe and reflect in both AR projects. condu*one. from ftoMwork (1 i t draft). oonduwra of thesis. Figure 1.6-1: The relationship between CARP and DARP. Adapted from (Zuber-Skerrit and Perry, 2002). T h e deliverables, in the c a s e o f the C A R project are: A SC based p e r f o r m a n c e measurement system o p e r a t i n g in the case o f FA and in the D A R Project, a p r o p o s e d prescriptive m o d e l for SCI a p p l i c a b l e to VI firms with s o m e g u i d e l i n e s about its implementation and the co-validation of m a i n e l e m e n t s in the first stages of SCI in the case of the firm under study.. 1.7. Relevance and significance of research. The study o f the integration o f VI firms is important for several reasons: First the. study. has. theoretical. implications. in. the. field. of. integration. and. SCM. implementation in the sense that there is a g a p in research, a t t e m p t i n g to explain the evolution of a VI firm into m o r e articulated forms of integration.. Second, the p r o p o s e d m o d e l w o u l d provide n e w descriptive and prescriptive tools for practitioners and m a n a g e r s alike, for attempting SCI, considered to be a pre requisite for successfully i m p l e m e n t i n g S C M initiatives.. 28.

(29) Third, by a n a l y z i n g the a d o p t i o n of integration by VI firms in e m e r g e n t m a r k e t s , the study w o u l d p r o v i d e richer contextual information about the d e v e l o p m e n t of S C M activities.. Fourth, the contextual setting is relevant. Retail landscape has dramatically changed in the last few years, and is n o w characterized by high concentration, e x t e n s i v e use of information t e c h n o l o g i e s and successful S C M initiatives. N e v e r t h e l e s s , and not only in e m e r g e n t m a r k e t s but e v e r y w h e r e , highly integrated firms, articulated small and medium enterprises ( S M E ) and large VI firms (quite a few f a m i l y - o w n e d ) c o n c u r in the retail m a r k e t - p l a c e . C o m p e t i t i o n favors the coordination of the former and vertically integrated firms w o u l d only strive for survival in the m e d i u m range.. And last, the study w o u l d yield readily contextual and applicable k n o w l e d g e in SCI in the case of the M e x i c a n food retail industry, with focus on suppliers.. 18. Dissertation Outline. A s a result o f the D A R p r o j e c t this study w o u l d be structured a l o n g the following lines. T h e first c h a p t e r is a general introduction for this project. T h e chapter begins with an introduction to the p r o b l e m under study from a historical perspective where the c h a n g e in b u s i n e s s d y n a m i c s gives place to competition t h r o u g h. supply. chains instead o f firms. Vertically integrated firms have the urge to evolve, from a r m s length transactions t o m o r e collaborative relationships and partnerships. It r e c o g n i z e s that m a n a g e r s and practitioners lack a framework linking SCI with strategic d e c i s i o n s and overall p e r f o r m a n c e , laying the g r o u n d w o r k for this research.. M o r e o v e r , the c h a p t e r defines the p r o b l e m u n d e r study, the associated objectives and research q u e s t i o n s , the unit o f analysis and the settings o f the present study. It further explains t h e research p r o g r a m in supply chain integration, w h i c h is m a d e o f t w o concurrent projects: T h e c o r e action research and the dissertation action. research.. Expressly states the r e l e v a n c e and significance of this study.. C h a p t e r t w o . references t h e theoretical framework for supply chain integration. It deals with definitions o f s u p p l y chain, supply chain orientation and supply chain. 29.

(30) m a n a g e m e n t . It is a r g u e d that such c o n c e p t s are widely used - a n d m i s u s e d - in the literature, leading to a certain level of confusion. T h i s chapter p r o v i d e s. working. definitions in use for this study.. T h e strategic p e r s p e c t i v e o f S C M is also addressed in this s e c o n d chapter. T h e relationship b e t w e e n S C M and c o m p e t i t i v e a d v a n t a g e is observed through the lens of strategic d e c i s i o n s in the firm. Strategy is defined as a pattern in a stream o f decisions, over-riding the conflict b e t w e e n intended and realized strategy.. Further the notion o f vertical integration is introduced. T h i s c o n c e p t is analyzed under t w o m a i n s c h o o l s o f t h o u g h t , transaction c o s t s e c o n o m i c s ( T C E ) and the resource based view o f the firm ( R B V ) . T h e s e perspectives are c o m p l e m e n t e d through the core c o m p e t e n c e s a r g u m e n t and m o r e o v e r vertical integration is defined as a multi-faceted construct m a d e o f four related d i m e n s i o n s : breadth, stages, degree and forms.. Supply chain integration follows from the notion that its theoretical foundation was initially based on t h e e c o n o m i c and financial theories o f vertical. integration,. therefore. theory.. considering. SCI. as. an. application. and. extension. of. VI. A. c o m p l e m e n t a r y p e r s p e c t i v e for SCI s t e m s from the w o r k s of Porter ( 1 9 8 5 ) on its v a l u e chain a p p r o a c h and the c o n c e p t of transvection devised by A l d e r s o n ( 1 9 5 7 ) . It is argued through the chapter, that SCI follows an e v o l v i n g path. Based on the literature, a positive relationship b e t w e e n SCI and p e r f o r m a n c e is established.. C h a p t e r three r e c o g n i z e s that SCI. is itself a multi-faceted. construct,. and. describes h o w for the p r e s e n t study, this c o m p l e x notion is identified and s u m m a r i z e d to establish three articulated d i m e n s i o n s : O r g a n i z a t i o n a l ; information and c o o r d i n a t i o n structure. H e n c e , such d i m e n s i o n s c o m p r i s e several stages, w h i c h are articulated and interact to e n h a n c e the intensity o f S C I .. T h e VI f i r m ' s m a n a g e m e n t must recognize t w o issues: i) T h a t the e n g a g e m e n t in a SCI p r o c e s s i m p l i e s a d v a n c e m e n t a l o n g the three articulated d i m e n s i o n s -which are clarified as part o f this c h a p t e r - and ii) the need o f a specific f r a m e w o r k that could assist them in the identification o f the c o n c u r r e n t steps to a c h i e v e such a d v a n c e m e n t .. 30.

(31) Chapter four details the design of the study, describing and m a k i n g sense of the methods used for this research. Basically action research ( A R ) which is suitable for analyzing and i m p l e m e n t i n g organizational c h a n g e s trough supply chain studies. T h e nature o f the research, the paradigm selection, the data collection and analysis m e t h o d s are discussed in this chapter.. Chapter five explicitly d e a l s with the data analysis p r o c e s s . It e x p l a i n s the interaction of the literature review, the research t e a n f s. e x p e r i e n c e as SC consultants, the. data. gathered and the reflection p r o c e s s generated as part of A R and c o n c l u d e s with a prescriptive m o d e l for e v o l v i n g through SCI for VI firms.. T h e resulting m o d e l is based on an evolutionary a p p r o a c h and presents t w o runways. On o n e hand SCI implies the transition from adversarial transactions to relational e x c h a n g e s and on the other the t h r o u g h p u t from vertical disintegration to supply chain integration. Integration intensity is m o d e l e d after a c o n t i n g e n c y a p p r o a c h , where the c o n t i n g e n t. variables are: T h e focal. company's. bargaining. power,. the. industry, business e n v i r o n m e n t and the product t y p e .. T h e m o d e l r e c o g n i z e s that the firm m u s t diagnose the operation o f its present VI strategy and reflect about the necessity to adopt a supply chain orientation in order to begin with the. implementation. of any. SCM. initiative, as a m e a n. to. overcome. organizational c h a n g e resistance.. Chapter. six e x p l a i n s the operation. application at Fabrica. de Alimentos. of the prescriptive. a subsidiary o f Productos. model. Alimenticios,. through. its. a large VI. publicly held g r o u p in M e x i c o . T h e firm is studied in its strategic context and the m o d e l is validated on its c o n g r u e n c e .. The guidelines for supply chain integration in Fabrica. de Alimentos. are set forth. as part of this research p r o g r a m and the chapter further d i s c u s s e s its generalization potential in other VI firm related settings.. In C h a p t e r seven, the m a i n c o n c l u s i o n s , delimitations, and the implications for further research of the present study are set forth, followed by the a p p e n d i c e s A and B. 31.

(32) comprising information about the field-work at FA and a detail o f c o m m u n i c a t i o n s among the w o r k i n g c o m m i t t e e .. 32.

(33) 2. T h e o r e t i c a l F r a m e w o r k for SCI. Supply C h a i n and S u p p l y C h a i n M a n a g e m e n t are not only umbrella t e r m s for different u n d e r s t a n d i n g s o f such c o n c e p t s , but also allow the application o f different research m e t h o d o l o g i e s ( S e u r i n g et al.. 2 0 0 5 ) . T h e b a c k g r o u n d of these t w o p a r a m o u n t concepts -not only in m a n a g e m e n t and logistics but in m a n y other disciplines- can be traced back to historical and theoretical d e v e l o p m e n t s in the field.. 2.1. T h e n o t i o n o f Supply Chain T h e c o n c e p t o f Supply. Chain ( S C ) d e v e l o p e d from the historical evolution of. manufacturing into m o r e specialized and c o m p l e x o p e r a t i o n s . ''In the earliest of the supply would. chain. establish. responsiveness. concept, control. by owning. firms. sought. over. the. each. element. to achieve. chain. and. vertical obtain. of the chain". the. integration, desired. versions. that is, a firm efficiency. and. ( L a L o n d e and Masters. 1994,. p.39).. T h e d e p e n d e n c e on suppliers, at first and c o n s u m e r s later, developed into a chain of diverse links b e t w e e n o r g a n i z a t i o n s , brought together to fulfill the c u s t o m e r s ' final demand.. Forrester ( 1 9 5 8 . p . 3 7 ) introduced the theoretical notion o f S C . H e recognized that successful industrial c o m p a n i e s n e e d e d to understand the integrative nature o f organizational relationships arising from the interaction b e t w e e n flows o f information, materials, m o n e y , labor and capital e q u i p m e n t .. Researchers and m a n a g e r s alike d e m a n d a clear u n d e r s t a n d i n g o f the notions o f supply chain and supply c h a i n m a n a g e m e n t .. V a r i o u s definitions. emphasize. some. characteristics of the s u p p l y chain, yet t h e r e is a need for an integrated w o r k i n g c o n c e p t .. For e x a m p l e , Handfield a n d N i c h o l s ( 2 0 0 2 ) focusing on functionality along the chain, define SC a s including all activities associated with the flow and transformation of goods from the raw m a t e r i a l s stage, t h r o u g h to the end user, as well as the associated. 33.

(34) information flows.. Further Oliver and W e b b e r ( 1 9 9 2 ) , state that a supply chain should. be v i e w e d as a single entity that is "'guided by strategic d e c i s i o n - m a k i n g . ". T h e A P I C S D i c t i o n a r y d e s c r i b e s the supply chain as: 1) the processes initial. raw. across. supplier. that enable. materials. to the. ultimate. user companies;. the value. chain. consumption. of the finished. and 2) the functions. to make products. within. and provide. from. product. and outside services. the. linking. a. company. to the. customer. ( C o x and B l a c k s t o n e . 2 0 0 1 ) . ( C o x . B l a c k s t o n e et al., 1995; L u m m u s and V o k u r k a . 1 9 9 9 ) L u m m u s and V o k u r k a ( 1 9 9 9 ) define SC as the n e t w o r k o f entities t h r o u g h w h i c h material flows. A m o n g such entities suppliers, carriers, m a n u f a c t u r i n g sites, distribution c e n t e r s , retailers, and c u s t o m e r s are included. F u r t h e r m o r e , Q u i n n ( 1 9 9 7 ) defines the supply chain as all activities associated with m o v i n g g o o d s from the r a w materials production. stage t h r o u g h scheduling,. warehousing,. customer. to the order. end. user,. processing,. service. and. including inventory. moreover. sourcing. and. management,. procurement, transportation,. it also e m b o d i e s the. information. s y s t e m s n e c e s s a r y to m o n i t o r all of t h o s e activities.. A s the literature reveals, t h e r e is a consistent lack o f clarity in the definition of such c o n c e p t s as a c o n s e q u e n c e of its indiscriminate use in various disciplines yet, there have been m a n y a t t e m p t s to conciliate on such differences (Harland, 1996).. Supply Chain: A definition for the present study For the p r e s e n t study, following M e n t z e r et al. ( 2 0 0 1 , p.4) defined " ...as a set of three or more entities (organizations the upstream and downstream them], from. a source. to a customer".. c o m p l e x i t y : A direct supply and. customers;. An. flow of products,. chain. extended. or individuals). services, finances,. supply c h a i n is directly involved in. and information,. [or all of. T h e a u t h o r s further distinguish three d e g r e e s of - c o m p r i s e d by the focal firm and the f i r m ' s suppliers. c/?o/«-including. supplier's. suppliers. and. customer's. c u s t o m e r s - ; A n d the ultimate chain including all participants in the value chain.. T h e a b o v e - c i t e d definition implies that c u s t o m e r s and suppliers should w o r k together, yet in their o w n best interest, to trade and interact -based on their functions and capabilities- first a m o n g t h e m s e l v e s a n d eventually, in the creation of g o o d s or services r e q u e s t e d by final d e m a n d .. 34.

(35) T o d a y , definitely supply c h a i n s exist, and firms are part of o n e or m a n y o f t h e m . M o r e o v e r t h e i r inclusion is not a decision to be m a d e on their o w n . T h e participation of a c o m p a n y in a particular supply chain is defined by either, suppliers and m i d d l e and high-end m a n u f a c t u r e r s. -e.g. Original. Equipment. Manufacturers. ( O E M ) and. final. goods p r o d u c e r s - or both, or by c u s t o m e r s that buy such p r o d u c t s or services.. 2.2. S u p p l y Chain M a n a g e m e n t. T h e t e r m Supply. Chain. Management. has received great attention. in both. literature and practice. R e s e a r c h in the field of S C M has evolved from its core c o n c e r n s around logistics/ o p e r a t i o n s p r o c e s s e s t h r o u g h the incorporation of theoretical c o n c e p t s and. research. in. strategic. management,. industrial. organization,. institutional. and. production e c o n o m i c s -transaction costs-, inter-organizational relationships, k n o w l e d g e m a n a g e m e n t and s y s t e m s t h e o r y ( G i a n n a k i s and C r o o m . 2 0 0 4 . p.29).. In the early literature, J o n e s and Riley (1985) defined S C M as the p l a n n i n g and control o f total materials. flow. from. suppliers t h r o u g h c u s t o m e r s . Later. literature. referred to the m a n a g e m e n t , not only of materials flow, but of both materials. and. ' information flows. H o u l i h a n ( 1 9 8 5 ) a r g u e s that the explicit p u r p o s e of S C M is to meet customer service objectives, w h i l e at the same time, m i n i m i z i n g inventory, r e d u c i n g i waste and related c o s t s . U n d e r l y i n g this goal has been the need to boost c o m p e t i t i v e n e s s ! and profitability in increasingly t o u g h e r global m a r k e t s . t" A review o f the supply c h a i n m a n a g e m e n t literature during the late 1980s and the early 1990s r e v e a l s the i n t e r c h a n g e a b l e use of n e o l o g i s m s : logistics network sourcing,. supplier-base. reduction,. and inter-organizational. management,. integration.. In the. late 1990s, to s o m e extent, s u p p l y c h a i n m a n a g e m e n t supplanted the term " l o g i s t i c s " (Rogers and L e u s c h n e r , 2 0 0 4 ) . S C M is c o n s i d e r e d to be a multi-faceted c o n c e p t and the tasks around. its i m p l e m e n t a t i o n. are quite c o m p l e x . It has been used by. various. disciplines to represent different m e a n i n g s . T h e broad scope o f S C M e n h a n c e s the difficulty o f. finding. a suitable definition. It generates confusion therefore. possibilities in research, a n d f o r m i n g barriers for its successful. limiting. implementation. by. managers.. 35.

(36) The origin of the term "supply chain management". is thought to reside in the. work of consultants during the early 1980s. Oliver and Webber (1992) discussed the potential. benefits. of integrating the. internal. business. functions. of. purchasing,. manufacturing, sales and distribution along the organization, yet the concept was extended beyond the firm's boundaries to include "upstream" "downstream". production chains and. distribution channels. Yu et al. (2001) consider that SCM emphasizes the. overall and long-time benefit of all parties on the chain through cooperation and information sharing. Harland (1996) describes a four-stage supply chain typology delimiting the main uses for the concept of SCM and classifies such approaches and definition attempts accordingly:. 1.. T h e internal. supply. chain which. integrates b u s i n e s s functions. involved. in Ihe flow. of. m a t e r i a l s a n d i n f o r m a t i o n , ( S t e v e n s . 1989; O l i v e r and W e b b e r . 1992: H o u l i h a n . 1985). 2.. T h e m a n a g e m e n t o f a d y a d with i m m e d i a t e s u p p l i e r s . ( C h r i s t o p h e r .. 1992: W'omack. and. J o n e s . 1994). 3.. T h e m a n a g e m e n t o f a c h a i n o f b u s i n e s s e s i n c l u d i n g s e c o n d tier s u p p l i e r s and c u s t o m e r s ( H a y e s a n d W h e e l w r i g h t . 1 9 8 4 ; M a c b e t h and F e r g u s o n . 1984).. 4.. T h e m a n a g e m e n t o f a n e t w o r k o f i n t e r c o n n e c t e d b u s i n e s s e s involved in t h e ultimate provision of p r o d u c t and s e r v i c e p a c k a g e s required b y end c u s t o m e r s ( H a k a n s s o n and S n e h o t a , 1995). Lambert and Cooper (2000) developed a conceptual framework, as graphically presented in Figure 2.2-1 emphasizing the interrelated nature of SCM. It consists of three closely interrelated elements: the supply chain network structure, the supply chain business processes, and the supply chain management components. The supply chain network structure consists of the member firms and the links between these firms. Business processes are the activities that produce a specific output of value to the customer. The management components are the managerial variables by which the business processes are integrated and managed across the supply chain.. The first element in Lambert's framework represents a key decision issue in SCM and answers the question with whom should the firm integrate? : The second element answers the question about what business processes must be integrated? ; And third, what level of integration is desired across the SC?. 36.

(37) SCM Framework 3) W h a t l e v e l o f i n t e g r a t i o n a n d management should be applied f o r e a c h p r o c e s s link. 2 ) SC Business Processes 2 ) What processes should be linked w i t h e a c h of these SC members?. 1 ) Who are the key suppliers with w h o m t o link?. Lambert&Cooper 2000. Figure 2.2-1 SCM framework in (Lambert and Cooper, 2000, p.70). In an effort t o incorporate unity in t h e discussion o f S C M , M e n t z e r et al. (2001) argue that t h e n u m e r o u s definitions o f S C M can be classified into three categories, namely: a management implementation. philosophy. of a management. 1999a), and a set of management. (Ellram and C o o p e r , 1990; Shapiro. 2 0 0 4 ) , philosophy processes. the. (Russell, 2 0 0 1 ; Handfield a n d N i c h o l s ( S e n g u p t a and T u r n b u l l , 1996).. T a n ( 2 0 0 1 ) t r a c e s t h e e v o l u t i o n o f S C M a r o u n d t w o different paths:. Purchasing. and supply activities; a n d t h e transportation and logistics functions with focus on integration, visibility, c y c l e t i m e reduction and streamlined c h a n n e l s .. Giannakis and Croom (2004, p.28) proposed the emergence of S C M as a new discipline, s u p p o r t e d b y v a r i o u s research a v e n u e s , and that it c a n be characterized following. [the. 3-SJ t h r e e d i m e n s i o n s o f interest to supply chain scholars and. practitioners: The synthesis. of the business. and resources. network;. the characteristics. of. 37.

(38) synergy. between. operational. different. decisions. actors. related. in the. to the control. network;. and. the. of the production. synchronization. and delivery. of. of goods. all and. services.. Synthesis: Business and Resources network. COMMON GOALS. S. •Waste Elimination Synergy: Of Actors in 'Increased efficiency networks. s s. Figure2.2-2:The 3-S Framework. Synchronization of operational decisions In the network. for SCM, adapted from Giannakis and Croom (2004).. N o t w i t h s t a n d i n g t h e a b o v e - m e n t i o n e d diverse perspectives, Tan et al. ( 2 0 0 2 ) assert that k n o w l e d g e a b o u t S C M has m a t u r e d and eventually m e r g e d into a unified body of literature with a c o m m o n goal of waste elimination and increased efficiency.. Supply Chain Management: A definition for the present study M e n t z e r et al. ( 2 0 0 1 ) differentiate Supply. Chain Orientation. ( S C O ) from Supply. Chain m a n a g e m e n t . On o n e hand, S C O is a construct closer to the first categorymanagement p h i l o s o p h y - a n d a pre-requisite for S C M . T h e r e f o r e , S C O is defined as the recognition activities. by an organization involved. in managing. of the systemic,. strategic. the various flows. implications. in a supply. chain.. of the. tactical. O n the other hand,. SCM is m o r e closely related w i t h the overt m a n a g e m e n t actions directed t o w a r d s implementing such m a n a g e m e n t p h i l o s o p h y .. F r o m that s t a n d p o i n t in this study, and following M e n t z e r et al. ( 2 0 0 1 , p. 18) SCM will be defined as ...the systemic, functions within a particular purposes of improving. company. strategic. coordination. and across businesses. the long-term performance. of the traditional. business. within the supply chain, for the. of the individual. companies. and the supply. 38.

(39) chain as a whole, in a consistent m a n n e r with definitions also found on C S C M P (2005) and W i s n e r ( 2 0 0 3 ) .. Systemic coordination The Focal Organization. Supplier^. Customer. Finacial. Supplier. Institutions/ Markets. End. Primary. Customer. Supplier Material Flows Services and information Flows. Figure 2.2-3 D i a g r a m of SCM, based on M e n t z e r et al. (2001). 2.3. T h e Strategic N a t u r e of SCM:. "The challenges. associated. with getting a product. or service to the right. place at the right time intensified. as competition. today's manufacturing. one of the key challenges. environment,. efficient and contribute. to high effectiveness". in the 1990s did. In is to he both. (Zailani and Rajagopal,. 2005), p.379).. Perspectives on Competitive .Advantage Early literature on c o m p e t i t i o n serves a n t e c e d e s the d e v e l o p m e n t o f the concept of Sustained C o m p e t i t i v e A d v a n t a g e ( S C A ) . A l d e r s o n (1937) hinted at a basic tenet o f SCA, that a fundamental. aspect o f c o m p e t i t i v e adaptation is the specialization. suppliers to m e e t v a r i a t i o n s in b u y e r ' s d e m a n d .. of. T h i s author w a s o n e of the first to. recognize that firms should strive for u n i q u e characteristics in order to distinguish themselves from c o m p e t i t o r s in the e y e s of the c o n s u m e r .. f /istorical Perspective. 39.

(40) T h e idea o f S C A surfaced w h e n Day (1984) suggested t y p e s o f strategies that may help to "sustain. the competitive. advantage".. Barney (1991). argued that a firm is. said to h a v e a sustained c o m p e t i t i v e a d v a n t a g e when it is i m p l e m e n t i n g a value creating strategy not s i m u l t a n e o u s l y being i m p l e m e n t e d by any current or potential c o m p e t i t o r s and w h e n these o t h e r firms are unable to duplicate the benefits of this strategy.. A m o r e formal definition o f S C A can be found in Hoffman ( 2 0 0 0 . p. 102): SCA is the prolonged simultaneously. being. benefit. of implementing. implemented. by any current. inability to duplicate the benefits of this. SCI. some. unique. or potential. value-creating competitors. "An. strategy. not. along with the. strategy.". relevance in theory and practice. T h e c o n c e p t s of c o m p e t i t i v e n e s s and competitive p e r f o r m a n c e have a s s u m e d increasing i m p o r t a n c e as a result o f seminal contributions by Porter (1985) and Peters and W a t e r m a n ( 1 9 8 2 ) . T h e actual term "SCA". e m e r g e d in 1985. w h e n Porter d i s c u s s e d. the basic types o f c o m p e t i t i v e strategies firms can possess (low-cost or differentiation) to achieve S C A .. A t t a i n m e n t o f c o m p e t i t i v e positions in m a r k e t s d e p e n d s on a variety o f factors, among t h e m : increased productivity, m a r k e t share, e c o n o m i e s of scale, k n o w l e d g e , unique and v a l u e a d d e d p r o d u c t s leveraged by distinct c o m p e t e n c e s , to mention s o m e . Each and every factor to be c o n s i d e r e d has been studied as a source of S C A . w h i c h is a central topic in the field o f strategy and relates to the long term sustainable privileges, that result in s u p r a - n o r m a l profits and rents over the competition.. T h e r e are t w o initially d o m i n a n t perspectives in the field o f strategy, a c c o u n t i n g for the explanation o f differences in p e r f o r m a n c e across firms.. The. first,. the industry. structure. view. -mostly associated with the w o r k. of. Michael Porter- using the industry as its unit o f analysis, argues that rents are primarily a function. of. a. firm's. membership. in. an. industry. with. favorable. structural. characteristics. (That is, barriers to entry and relative bargaining p o w e r of the. firms,. among others).. 40.

(41) T h e s e c o n d o n e . the resource-based and m o r e m a n a g e m e n t - o r i e n t e d Competence-Based. view of the firm ( R B V ) and its less formal. derivative, the concept of core c o m p e t e n c i e s ,. (or. View C B ) h a v e b e c o m e the leading research p a r a d i g m s in the field. of strategic m a n a g e m e n t .. R B V synthetically c o n s i d e r s the firm, its unit of analysis, as a collection of resources. For that m a t t e r those firms that are able to a c c u m u l a t e resources. and. capabilities that are rare, v a l u a b l e , non-substitutable and difficult to imitate will a c h i e v e a competitive a d v a n t a g e over firms and will earn extraordinary rents (Wernerfelt. 1984; Rumelt 1991). F r o m the m a r k e t i n g perspective a similar a r g u m e n t can be found in (Day. 1984; Day and W e n s l e y , 1988).. M e a n w h i l e ( C B ) , e x t e n d s the a b o v e - m e n t i o n e d a r g u m e n t to incorporate the idea that in order to b e c o m e successful, the firm has to be in a position to m a k e use o f the available resources m o r e effectively and efficiently than its c o m p e t i t o r s ( T e e c e . Pisano et al., 1997).. A key difference b e t w e e n R B V and C B is the chain of causality (Freiling, 2 0 0 4 ) . RBV c o n c l u d e s that superior r e s o u r c e s will cause p e r f o r m a n c e differences companies. C B. prefers. a more. subtle reasoning w h e r e. homogeneous. among. assets. and. heterogeneous r e s o u r c e s are the starting point of the chain. H o w e v e r , the resource endowment is not e n o u g h in o r d e r to explain p e r f o r m a n c e differences. T h e firm itself has to be in a position to m a k e use o f these resources in a goal- and m a r k e t - o r i e n t e d way. This is only possible in case o f available action-related c o m p e t e n c e s .. Critical r e s o u r c e s e x t e n d b e y o n d the firm's b o u n d a r i e s . Dyer (1996) found that productivity gains in the v a l u e c h a i n w e r e possible w h e n trading partners are w illing to make relation-specific i n v e s t m e n t s and c o m b i n e resources in u n i q u e w a y s .. More in line with recent d e v e l o p m e n t s in business d y n a m i c s , both in theory and practice, a third p e r s p e c t i v e the relational. view. argues that idiosyncratic. linkages are a s o u r c e o f "relational r e n t s " and S C A ( D y e r and Singh,. inter-firm 1998). T h e. relational v i e w focuses on a d y a d / n e t w o r k as a unit o f analysis and c o n s i d e r s four. 41.