University of Patras Department of Mechanical and Aeronautical Engineering Industrial ...

175 Pages·2012·2.81 MB·English

University of Patras
Department of Mechanical and Aeronautical Engineering
Industrial Management and Information Systems Lab
Doctoral Thesis
The Εnvironmental Attribute of Μanufacturing strategy
An Evolutionary Institutional Approach
G. Papachristos
Patra 2012

“The dogmas of the quiet past are inadequate to the stormy present,
the occasion is piled high with difficulty and we must rise with the
occasion. As our case is new so we must think anew and act anew.
We must disenthrall ourselves and then we shall save our country.”
Abraham Lincoln
2nd Annual Meeting of Congress December 1862
“Do not seek to follow in the footsteps of the wise.
Seek what they sought.”
Matsuo Basho 1644 – 1694
“If you improve it, please let us all know.”
J.D.Sterman 23/5/2011 (personal communication)
Acknowledgements
This thesis is a piece of work that carries reflections of personal
traits and competencies formed in interaction with people in
more than a decade.
An expression of gratitude is in order for Drs Adamides,
Karacapilidis and Van den Bergh, all those who supported this,
those who taught me to seek and those that set an example to
aspire or avoid, willingly or unbeknownst to them.
Abstract
This thesis analyses competition and competition in supply chains. It focuses on the case
of coopetition between an Original Equipment Manufacturer (OEM) and retailers, that
collaborate in the forward supply chain and compete in the reverse. The thesis
concentrates on the strategic options available to OEM in order to keep the
remanufacturing operations of the retailer from eroding its market share. It analyses the
impact that OEM strategic responses have on the environmental impact of the entire
supply chain and each actor independently.
The main contribution is in demonstrating the inherent trade offs in such a supply chain
context. In attempting to abate competition, the OEM has a range of options available. It
faces a stale mate: it can neither defend completely against competition, not improve
substantially the environmental performance of the supply chain.
Methodologically the analysis is based on the Resource Based View of theory competition,
sociotechnical systems theory, system dynamics modelling and simulation methodology,
and organizational complexity theory.
Initially the supply chain is analysed through modelling and simulation at the micro level
of the OEM and the retailer. In light of the trade offs inherent in the configuration of the
supply chain, the case for the difficulty of endogenous change towards an configuration
with an enhanced environmental performance is build based on organizational
complexity, and manufacturing theory. Consequently, the problem of change is analysed
at the level of sociotechnical systems theory, where the supply chain is viewed as part of
the overall industrial production system. Drawing on this, propositions about system
intervention are established. Their implications in terms of the environmental performance
of the supply chain are tested at the micro level by modifying appropriately the model.
The results show that a different supply chain configuration of increased environmental
performance is possible.
Table of Contents
Chapter 1
1 Introduction..................................................................................................................................1
1.1 Research Question and Methodology......................................................................................1
1.2 Thesis Structure...........................................................................................................................9
1.3 Contribution...............................................................................................................................10
Chapter 2
2 Perspectives on Industrial Production & Sustainability .....................................................12
2.1 Introduction – Impetus for Change........................................................................................12
2.2 Manufacturing: The Current Paradigm.................................................................................14
2.2.1 The Rise of Manufacturing.........................................................................................14
2.2.2 Threats to Sustainability..............................................................................................15
2.2.3 Issues & Influences on The Manufacturing Paradigm ..........................................16
2.3 Potential Change Directions.....................................................................................................20
2.3.1 Small Scale Innovation................................................................................................20
2.3.2 Large Scale Innovation................................................................................................27
2.4 Factors of Change in Manufacturing .....................................................................................28
2.4.1 The Role of Regulation................................................................................................29
2.4.2 The Role of Technology...............................................................................................32
2.4.3 The Role of Organizations..........................................................................................34
2.5 Synthesis: Why Change in Both Scales is Necessary............................................................40
2.6 Thesis Proposal..........................................................................................................................42
2.7 Summary.....................................................................................................................................42
Chapter 3
3 Remanufacturing Operations Strategies in the Current Institutional Environment.....44
3.1 Introduction .............................................................................................................................44
3.2 Issues in Closed Supply Chains.............................................................................................45
3.3 Competition in Supply Chains..............................................................................................49
3.4 Dynamic resource-based co-opetition in supply chains with remanufacturing
activities: Case presentation and research questions.........................................................52
3.5 Strategic analysis of the case – development of research questions................................54
3.6 Relevant Methodologies ........................................................................................................58
3.6.1 The Resource Based View...........................................................................................58
3.6.2 System Dynamics.........................................................................................................59
3.7 Dynamic resource-based co-opetition in supply chains with remanufacturing
activities: Research approach and assumptions.................................................................60
3.8 The System Dynamics Model: State 1...................................................................................65
3.9 The Competitive and Environmental Effects of Operations Strategies...........................69
3.10 The Effect of Rationing...........................................................................................................72
3.11 The Effect of Initial Recycling Capacity ..............................................................................75
3.12 The Effect of OEM Learning Pace.........................................................................................78
3.13 Sensitivity Analysis ................................................................................................................80
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3.14 Discussion and Concluding Remarks...................................................................................81
Chapter 4
4 Closed Loop Operations Strategies in a Transformed Institutional Environment..........85
4.1 Introduction................................................................................................................................85
4.2 Firm Adaptation: The Suppression of Exploration Under Adverse Performance...........86
4.2.1 The Dynamics of Exploration Suppression...............................................................89
4.2.2 Implications for the Remanufacturing Case..............................................................91
4.3 Impediments to Organizational Performance Improvements............................................92
4.3.1 The NK Model of Organizational Adaptation .......................................................93
4.3.2 Adaptation on Rugged Landscapes.........................................................................94
4.3.3 Implications for the Remanufacturing Case............................................................96
4.3.4 Complex Organizations and Multiple Goals..........................................................96
4.3.5 Implications for the Remanufacturing Case............................................................97
4.3.6 Imitation of Complex Strategies................................................................................98
4.3.7 Implications for the Remanufacturing Case............................................................99
4.3.8 Social & Technical Factors in Inducing Remanufacturing..................................101
4.3.9 The Complexity of Decisions Making....................................................................105
4.4 The Link to Sociotechnical Transitions.................................................................................108
4.4.1 System Wide Propositions.........................................................................................113
4.5 The System Dynamics Model: State 2...................................................................................114
4.6 Results.......................................................................................................................................117
4.7 Conclusions..............................................................................................................................125
Chapter 5
5 Summary & Conclusions .......................................................................................................127
5.1 Summary...................................................................................................................................127
5.2 Insights at the Micro Scale: Supply Chain Actors ..............................................................131
5.3 Insights at the Macro Scale: Policy Makers..........................................................................133
5.4 Future Research Outlook........................................................................................................134
References......................................................................................................................................136
Appendices
1. Model Variables ........................................................................................................................152
2. Modifications of State 1 for State 2 model..............................................................................155
3. Model Equation Listing............................................................................................................156
Publication List.............................................................................................................................161
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List of Figures & Tables
Chapter 1 List of Figures & Tables
Figure 1.1 Considering manufacturing activities at two levels..................................................1
Figure 1.2 Firm strategies, time & organizational scales ............................................................4
Figure 1.3 Change at the macro level – industrial production system transformation...........5
Figure 1.4 Industrial production system transition......................................................................8
Chapter 2 List of Figures & Tables
Figure 2.1 Levels of firm environmental engagement...............................................................26
Figure 2.2 Factors in sustainable supply chain practices...........................................................29
Figure 2.3 Niches of sustainable industrial production.............................................................32
Figure 2.4 Society, technology and organizations......................................................................42
Chapter 3 List of Figures & Tables
Figure 3.1 Current and prospective states of the manufacturing system...............................44
Figure 3.2 Causal loop diagram of the model............................................................................64
Figure 3.3 Stock and flow structure.............................................................................................66
Figure 3.4 Supply chain topology................................................................................................68
Figure 3.5 The effect of rationing on sales and remanufacturing............................................73
Figure 3.6 The effect of rationing on competitiveness..............................................................74
Figure 3.7 The effect of rationing on utilization.........................................................................74
Figure 3.8 Supply chain environmental indicators with capacity for the scenarios
investigated.....................................................................................................................75
Figure 3.9 The effect of initial recycling capacity on the competitiveness of the OEM and
the retailer for small and large markets, stable and growing..................................77
Figure 3.10 Environmental impact of the supply chain with OEM recycling capacity.........77
Figure 3.11 The effect of the OEM’s production learning on the competitiveness a) of the
OEM, and b) of the remanufacturer (small and large markets, stable and
growing............................................................................................................................78
Figure 3.12 The effect of the OEM’s production learning pace on the a) remanufacturing
capacity built and b) total quantity of used products remanufactured (in small
and large initial markets, stable and growing)..........................................................79
Figure 3.13 The effect of the pace of production learning on the environmental
performance of the supply chain (for small and large initial markets, stable and
growing) ..........................................................................................................................79
Table 3.1 Table: A selection of relevant strategy and operations literature............................51
Table 3.2 The system dynamics model’s output variables........................................................70
Table 3.3 Calculation of aggregate environmental output variables.......................................70
Table 3.4 Sensitivity analysis.........................................................................................................81
Chapter 4 List of Figures & Tables
Figure 4.1 Interaction among complexity and organization decisions for exploration and
exploitation.....................................................................................................................86
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Figure 4.2 Causal loop diagram: The suppression of exploration..........................................90
Figure 4.3 Conceptual representation of NK landscape..........................................................94
Figure 4.4 Outsider knowledge transfer in sociotechnical regimes.....................................112
Figure 4.5 Stock and flow diagram of state 2 model..............................................................116
Figure 4.6 Supply chain environmental performance............................................................118
Figure 4.7 Total inflow to the system stable market...............................................................118
Figure 4.8 Total supply chain disposed material....................................................................120
Figure 4.9 Total supply chain profit in growth market..........................................................121
Figure 4.10 OEM profit in growth market.................................................................................122
Figure 4.11 Total retailer profit in growth and stable market.................................................122
Figure 4.12 Environmental performance in state 2 with collection % and returns to OEM
..........................................................................................................................................................123
Figure 4.13 Total system inflow in state 2 with collection % & returns to OEM..................124
Figure 4.14 Figure Total disposed material in state 2 vs collection % & returns to OEM...125
Table 4.1 State 1 vs State 2 assumptions.....................................................................................115
Table 4.2 Comparative results for stable markets.....................................................................117
Table 4.3 Comparative results with 7% market growth rate...................................................117
iv
Chapter 1 Introduction
1.1 Research Question & Methodology
Climate change and environmental degradation are more than just an interesting research
topic. Their effects are manifest, in the natural and the social world, at the individual and
the collective level. They have been researched in scientific forums, made headlines in
newspapers and received a lot of attention in the public debate. Climate change is
occurring and it has been convincingly linked to anthropogenic activities (IPCC, 2007).
This has brought a shift in our perception about the impact of human activities. It has
placed a responsibility on humans both at an individual and a collective level. For
businesses, in particular, environmental management is becoming a significant strategic
parameter that goes beyond publishing annual carbon footprint accounts and actions
under Corporate Social Responsibility programs or even promotional activity intended to
stir eco-consumerism.
Firms, particularly those operating in the manufacturing sector, through their
manufacturing activities, resource management and use, have an impact on other firms,
on their supply chains, and on the natural environment and human welfare. This impact
can be considered at two scales using different approaches (Figure 1.1):
i. At the micro level of the individual firm and its supply chain by using an operations
strategy perspective to analyse the way that firm resources and capabilities are
deployed to achieve business objectives and maintain competitive advantage (Slack &
Lewis, 2002).
ii. At the macro level of the prevailing paradigm of the industrial system by using
sociotechnical transition approaches in order to contextualise the assumptions under
which firm operations strategy is formed (Geels, and Schot, 2007).
Macro Scale: Transition
Industrial System Approaches
Production
Activities
Micro Scale: Business
Supply Chain Strategy
Figure 1.1: Considering manufacturing activities at two levels