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1、EXPLORING SUPPLY CHAIN MANAGEMENT IN EMERGING MARKETS Harri Lorentz* *)Logistics, Turku School of Economics, 20500 Turku, Finland E-mail: harri.lorentztse.fi, Tel: +358 2 4814 244; Fax: +358 2 4814 280 ABSTRACT Purpose of this paper To explore the nature and implications of supply chain management i
2、n emerging markets (EM), (1) by elaborating on the theoretical construct of EM contextual supply chain constraint, (2) by proposing a classification of EM contextual supply chain constraints, and (3) by putting forth testable propositions related to the EM contextual supply chain constraints. Design
3、/methodology/approach The paper is conceptual in nature, while it additionally draws on the authors previous empirical research on the topic. The approach may be considered systemic in nature, as the relationships of firms supply chain processes with contextual characteristics and change processes a
4、re considered. Findings The paper proposes that EM contextual supply chain constraints spring either from the characteristics of institutions, networks or infrastructure. The degree to which a foreign company is affected by a constraint, depends on the role of supply chain management in the firms bu
5、siness model. EM contextual supply chain constraints are proposed to result in suboptimal supply chain configurations, delayed or cancelled internationalisation, and lower performance. Research limitations/implications Future research opportunities are proposed: the propositions should be validated
6、and illustrated with further research in a variety of EMs. What is original/value of paper It is argued that the attempt towards theory generating research on the nature and implications of supply chain management in EMs is novel. For the benefit of researchers, propositions are introduced and possi
7、ble research agenda is presented. Keywords: supply chain management, emerging markets, constraints, internationalisation, propositions 1.INTRODUCTION At the moment, relatively few companies attempt to take full advantage of the consumer potential in for example the markets of Brazil, Russia, India a
8、nd China, i.e. the BRIC (McKinsey Quarterly, 2004). Fully tapping on these markets would for example mean a need to expand focus from the relatively easy strategy of establishing presence in the few major urban centres and serving the affluent minority. One of the few examples of attempts to broader
9、 market coverage is P Rahman Lee et al., 1997), which underlines the role of demand dynamics in uncertainty generation (Prater et al., 2001). Geary et al. (2002) add control uncertainty to the earlier identified supply, demand, and own process uncertainties, emphasising the role of information flow
10、in transforming customer orders to production targets and further into supplier raw-material requests. The complex material flow is argued to be the leading indicator of supply chain uncertainty among other symptoms by Childerhouse and Towill (2004). Applying certain rules for the simplification of
11、the flow, holds key to the integration of the supply chain (Childerhouse Kotabe Narasimhan Hilmola et al., 2008; Lorentz et al., 2006; Lorentz et al., 2007; Lorentz Lorentz 2008). Based on these researches, this paper draws some general conclusions and introduces additional theoretical insight. As t
12、he research designs have been described at length in the previously mentioned articles, detailed elaboration will not be attempted here. Only concise summaries are given in the next section. However, a timeline, depicting the iterative process between theory and empirical data is presented, providin
13、g also a way to evaluate the research process (Figure 3.1). Although the process seems to start from a theoretical base, the origins most probably lie in empirical experience, as the author was involved in Finnish food industry operations in Russia and the Baltic States in 2002 and 2003. Since that
14、time, theoretical and secondary information based pre-understanding was developed (see Lorentz et al., 2006), in order to prepare for the pilot case study conducted in St. Petersburg in late 2005, analysing foreign food manufacturers distribution in Russia and elaborating on the implications to supp
15、ly chain management and demand planning specifically. The refined and more in-depth results of this endeavour have been reported in Lorentz et al. (2007). Half a year later the author was involved in a project financed partly by the Finnish Ministry of Forestry and Agriculture (MFA), which led to th
16、e understanding of the role of supply chain factors in food industry location decision making (Lorentz, 2008). Encouraged by the so far gathered data, the author engaged in conducting a multiple case study that targeted three Finnish food manufacturers in the Russian market. Interviews and other dat
17、a gathering took place in both Russia and Finland, with significant iteration in late 2006. Preliminary and theoretically oriented conclusions of this research have been published in Lorentz and Ghauri (2007), and empirical results are forthcoming. The conclusions of this work point out the varying
18、success rate in establishing and developing supply chains in Russia and as a result, the capturing of business opportunities in the market. In general, this inductive and iterative research process has resulted in the development of several supply chain constraint related propositions about SCM in e
19、merging markets. Theoretical Empirical 20042005200620072008 Pre-understanding towards pilot study Pilot case- study (Rus) MFA project Case-study (Rus) Theoretical refinement Discussion and correspondence with industry and country experts Case-studies (Fin) Theory-data reflection Conclusions (proposi
20、tions) Figure 3.1 Stylised depiction of the inductive research process in time 4.PROPOSITIONS CONCERING SUPPLY CHAIN CONSTRAINTS IN EMERGING MARKETS One of the main conclusions of the previously described research process is that the inability to transfer supply chain strategy and SCM advantages fro
21、m home/mature markets across national borders to emerging markets, may be a relevant problem (Cuervo-Cazurra et al., 2007), and accentuated in those cases where SCM is the core, or a crucial component of the firms business model. That is, supply chain strategy has a vital role in facilitating busine
22、ss strategy. As was elaborated on previously, the implications of these situations in general business management level, have been explored by Khanna et al. (2005), leading to disinvestment at worst. As a result of this exploratory research, propositions, applicable to perhaps emerging markets in ge
23、neral, are presented that pertain specifically to the causes of the inabilities, i.e. constraints, and their possible implications to company decision making in terms of internationalisation, as well as to supply chain design and planning (configuration and policies). Proposition 1: Emerging markets
24、 as an operating environment imply diverse, and external to the internationalising firm, contextual supply chain constraints that affect supply chain strategy implementation and execution. These constraints may be classified into three categories, namely institutions, networks and infrastructure (co
25、ntextual supply chain constraint classification). The empirical research that has preceded this paper (see Figure 3.1) provided highly relevant examples that fit well to the suggested classification, such as lengthy distribution channels (network), retail sector diversity (network), missing or inacc
26、essible high quality raw material suppliers (network), insufficient logistics services capacity and quality (network), business culture adverse to collaboration and planning (institutions), and low comprehension level of SCM concepts and practices (institutions). Also infrastructure related issues,
27、such as congested roads in urban areas, poorly functioning border crossing points, insufficient port capacities were identified as constraints for establishing and managing supply chains in Russia. Proposition 2: Contextual supply chain constraints in emerging markets cause relatively higher supply
28、chain uncertainty for internationalising firms. The constraints encountered in the previously described empirical work seemed to be a major cause for low visibility in supply chain, planning inability, investment delays, relatively high logistics costs, and increased inventories; all symptoms of sup
29、ply chain uncertainty. For example in one manufacturers case, the simultaneously utilised (due to scale economies) two generic distribution channels, namely direct (to modern retail chains) and indirect (to traditional retail via 1-2 middlemen), were markedly different in terms of sales dynamics and
30、 therefore forecasting performance, implying uncertainty for supply chain planning (Lorentz et al., 2007). The constraint originating uncertainty results in high induced and transaction costs, as reported in Arvis et al. (2007). Proposition 3: Contextual supply chain constraints, related to emerging
31、 markets, play a role in the speed and timing of the firms internationalisation process, especially in cases where supply chain strategy plays a crucial role in the realization of firms business strategy (i.e. supply chain dependency1). SCM in emerging markets may be intimately connected with intern
32、ationalisation, as strategic market serving / location decisions must be supported by material, information and finance flows, depending on the industry off course. Cost-benefit analysis determines the strategies for 1 Supply chain dependency: firms business model is dependent on the supply chain, i
33、.e. the supply chain is the core or an important part of the firms business model. Essentially, the firm being competitive or customer orientated is based on the supply chain strategy being aligned with the firms business strategy (e.g. Fisher 1997), and possibly an advantage in the sphere of market
34、ing is coupled with an advantage in the sphere of supply chain (Jttner et al. 2007). Additionally, due to specialisation advantages and lack of resources, vertical integration to vital production inputs or distribution may not be a viable option; therefore the firm is due to its business model, depe
35、ndent on the existence and functionality of the supply chain. entry or staying out, as well as the timing of supply chain design related expansionary investments. A matrix is proposed that may be used to position a contextual supply chain constraint in terms of its severity, with the following axes:
36、 (1) impact on the firms supply chain dependent business model / strategy, and (2) cost of contextual supply chain constraint mitigation/elimination. It follows, that the severity of the constraint increases, as the degree of the impact and cost is increased (Figure 4.1). Figure 4.1 Severity of emer
37、ging market supply chain constraints to a firm In quadrant 1 of the matrix, impact on the firms business model is high, while the cost of mitigating or eliminating the constraint is low. It may be suggested that in such a case, a firm should enter with reduced form operations, and quickly invest in
38、mitigating or eliminating the constraint in order to consequently launch full scale operations. Infrastructure related constraints in cases where the target market government is willing to improve important logistics infrastructure as the outcome of the firms short-term lobbying efforts, may serve a
39、s an example of type 1 severity. In quadrant 2, the impact on the firms business model is low, while the cost of mitigating or eliminating the constraint is also low. In these situations, expansion in the market should not be delayed, but depending on the costs and benefits of investments, the const
40、raint should be mitigated or eliminated as supply chain operations commence. The situation where collaborative supply chain partners lack understanding of some logistics and supply chain concepts, and the training measures designed to overcome these deficits can be implemented relatively cost-effici
41、ently, would serve as an example of type 2 severity. In quadrant 3, the impact on the firms business model is low, while the cost of mitigating or eliminating the constraint is high. Firms that find themselves in these kinds of situations should perhaps enter and expand in the market despite the con
42、straint, while actively seeking opportunities to mitigate or eliminate the constraint as conditions evolve, i.e. engage in network oriented opportunity development processes. The problem of low visibility due to lengthy distribution channels in the case of functional products with relatively stable
43、demand is a prime example of type 3 severity. With the emergence of direct channel alternatives, this constraint may be overcome with lower cost, in comparison to establishing direct relationship with fragmented and traditional retail that lacks the capabilities for any kind of supply chain collabor
44、ation. Finally, in quadrant 4, the impact on the firms business model is high, while the cost of mitigating or eliminating the constraint is also high. Delaying entry and expansion related investments should be considered in these situations, while carefully monitoring the evolution in conditions in
45、 order to determine the changes in the constraints degree of severity. Consequently strategies may be revised and investments planned and executed when the time is right. The non-existing or weak supply base could be presented as an example of type 4 severity, especially in certain branches of the f
46、ood industry, where high quality and fresh production inputs must be secured with the help of a breakdown free cold chain, or despite seasonal production level variation. Additional example would be the automobile manufacturing, where just-in-time philosophy may require suppliers located in close pr
47、oximity, willing to reengineer their processes to fit the manufacturers requirements. It may be challenging to develop such a supplier base in an otherwise suitable location. The degree of impact on supply chain dependent business model naturally varies on a case-by- case basis. Therefore generalisa
48、tion in terms of examples is difficult. However it is argued that the strategies to mitigate or eliminate the constraints, largely fall into the category of demand supply network (DSN) opportunity development as presented in Lorentz and Ghauri (2007), in which the focal company attempts to achieve a
49、 suitable position in its respective DSN by seeking and utilising opportunities for such positioning, in order to facilitate business strategy realisation. The proposed relationship of internationalisation and supply chain constraints has important contact points with prior economics and IB literature (see Bernanke, 1983; Anderson & Gatignon, 1986) Proposition 4: Contextual supply chain constraints in emerging markets affect supply chain design decisions of internationalising firms, resulting in suboptimal configurations. This is closely related to Proposition