Supply chain constraints, opportunities, and adjustments in emerging markets

Citation

Lorentz, H., Shi, Y., Hilmola, O.-P. and Singh Srai, J. (2012), "Supply chain constraints, opportunities, and adjustments in emerging markets", Benchmarking: An International Journal, Vol. 19 No. 1. https://doi.org/10.1108/bij.2012.13119aaa.001

Supply chain constraints, opportunities, and adjustments in emerging markets

Article Type: Guest editorial From: Benchmarking: An International Journal, Volume 19, Issue 1

Globalisation and increasing international trade of manufactured products and components require supply networks to handle diverse environmental conditions (Buckley and Ghauri, 2004; Narasimhan and Mahapatra, 2004). For firms from developed economies, emerging markets (EMs) are attractive sourcing and offshore manufacturing locations, as well as key centres of demand. However, in many cases, EMs present challenges in terms of supply chain cost and reliability (Arvis et al., 2007).

This special issue concentrates on producing insight into the management, implementation, and adaptation of supply chain networks by companies from developed markets, in the context of their internationalisation processes in EMs. The benefit of focusing on the design and management of supply chains in EMs relates to the big question in international business research (Peng, 2004, p. 106): what determines the international success and failure of firms? Research has shown that “supply chain decisions play a significant role in the success or failure of a firm” (Chopra and Meindl, 2001, p. 17), hence the motivation to dedicate a special issue for this topic, that in broader terms relates to the literature on internationalisation barriers and challenges (Meyer and Peng, 2005; Cuervo-Cazurra et al., 2007), and in practical terms offers a base for benchmarking operations for companies involved in EMs.

In this vein the special issue, published across Benchmarking: An International Journal, Vol. 18 No. 6, 2011 and Vol. 19 No. 1, 2012, sheds light on demand and supply contexts, industry and company practices, as well as other supply chain related issues in some of the key EMs, i.e. Brazil, Russia, India, China, Thailand, Malaysia, and the Asia-Pacific region in general. Here is a brief overview of each of the papers in this special issue.

Gebauer et al. (2011) from University of St Gallen, Switzerland, aims to provide a better understanding of the measures needed for the improvement of logistics performance in the Chinese market. Necessary changes for the achievement of a cutting-edge logistic solution are analysed, and the paper also shows how companies can implement such as solution. As a general observation, the article points out that companies should try to develop logistics solutions for Asia that do consider existing Asian and Chinese constraints instead of taking the logistics practices used in mature markets and trying to adapt them to the Chinese market.

De Souza et al. (2011) focuses on the processes, networks, skills, and practices of service parts logistics organizations in the Asia Pacific region, and proposes a framework for service parts logistics for this area. Relevantly, the proposed framework is recognised as being highly dependent on the general infrastructure provided by each country and their constraints imposed for export and import.

Moser et al. (2011) from EBS Business School, Germany, with Kern and Hartmann from University of Erlangen-Nuremberg, Germany, develop a benchmarking framework for the analysis of the supply network configuration of companies and exemplify its applications in the Indian automotive sector. The analysis of two case companies demonstrates how different supply networks in EMs are depending on the specific strategies and the institutional context. The framework provides a tool for supply chain managers to analyze their current supply networks, identify potential areas for improvement, and learn from more advanced players or from experiences of their own organizations in other EMs.

Kittipanya-ngam et al. (2011) from University of Cambridge, UK, explore the key influential factors and their implications on food supply chain location decisions from a Thailand-based manufacturer’s view. The case study based-research found that, in the food industry, supply chains’ geographical dispersion patterns could be distinguished by four factors: perishability, value density, economic-political forces, and technological forces. Technological forces were found as an enabler for food supply chains’ geographical dispersion whereas the other three factors could be both barriers and enablers.

Sundram et al. (2011) from Universiti Teknologi MARA, Malaysia, explore the effects of different dimensions of supply chain management practices on supply chain performance in the electronics industry in Malaysia. The results offer insights to supply chain management practitioners and policy makers in EMs on the importance of SCM practices to improve the competitiveness of the electronics manufacturing industry.

Research by Milla Laisi, Olli-Pekka Hilmola, and Mikko Sutela from Lappeenranta University of Technology, Finland, elaborates on the changes in Swedish and Finnish companies’ traffic flows and evaluates related future prospects, especially in terms of Russia and China. Traffic between Europe and China, and Europe and Russia will continue to grow in the future. The article points out, that EMs will continue to experience problems with adequate levels of infrastructure, as transportation volumes remain on the positive trend. As a result, companies may need to adjust their logistics structures accordingly in order to operate successfully.

Gabriel Sperandio Milan, Eric Dorion and José Alberto da Rosa Matos from Universidade de Caxias do Sul, Brazil, identify mechanisms, or institutional arrangements, adopted by the distribution channel of a leading Brazilian truck manufacturing company, which generate various conflicts that have a negative impact on the performance of channel operations. Managerial implications of this work include suggestions on improved channel alignment by increasing the level of cooperation in the supply chain, for example in terms of working capital financing and product development.

The articles in the special issue, while highly relevant in individual terms, give valuable insight also collectively. An emergent common theme gravitates towards the dichotomy of constraints and opportunities for the design and management of supply chains in EMs. Indeed, this cost-benefit oriented thinking is visible in the past literature on EMs, which, perhaps to an increasing degree in the post financial-economic crisis environment, presents both lucrative opportunities in terms of both demand and supply, but also a range of challenges for execution. In an attempt to point out opportunities for further research, a concise overview of past key research contributions is given, followed by conclusions.

As a result of their literature review on cross-cultural logistics, Luo et al. (2001) propose that logistics is culture, economic system, and infrastructure related. They also conclude that abstract research is largely missing in this field, and that empirical research lacks analytical rigour. Whether we improve the state of EM focused supply chain research in this special issue is left to the readers to decide. More recently, Lalwani et al. (2007) have made research efforts in the area of contextualising supply chains or manufacturing operations in uncertain or unfamiliar environments, and Lorentz (2009), based on a case study, concludes that the taxonomy of contextual supply chain constraints in EMs consists of the following classes: infrastructure, institutions, and networks. These seem to emerge also from the special issue articles. The impact of contextual constraints on supply chain management may be felt on an operational or strategic level. Relevantly for the latter, Khanna et al. (2005) identify three strategic choices for multinational companies in dealing with challenges in EMs: adapting the strategy, changing the context, and staying away. Indeed, evidence on divestment and withdrawal due to supply chain issues has been reported in the literature (Lorentz and Hilmola, 2010).

However, by only focusing on the negative implications of the EM context on supply chain management, one risks the loss of perspective and readiness on benefitting from the fundamental trait of EMs, namely the ongoing, although varying and perhaps higher than average rate of change. This perspective has been emphasised in the work of Lorentz and Ghauri (2010), who underscore the importance of detecting and benefitting from the possible positive evolution of the EM operating environment, and even actively developing opportunities for the implementation of best SCM practices, with partners but also industry wide, that result in competitive advantage for the firm.

As is apparent from the special issue articles as well as from prior literature, the context specific constraints and opportunities require adjustments from firms in terms of supply chain strategy and operation. Ongoing change in EMs means this effort can resemble the challenging task of shooting at a moving target. The administrative cost of managing supply chains in EMs should therefore not be underestimated. Further research, with abstract orientation and rigorous analysis, should therefore concentrate on:

• •

  validating the EM supply chain constraint-opportunity taxonomy;

• •

  clarifying the implications of constraints and opportunities for firms (e.g. in terms of logistics costs, service levels, investment/FDI, and supply chain strategy); as well as

• •

  exploring the nature of typical strategic or operational adjustments for firms.

Performance should be set firmly as the dependent variable in order to maintain extreme managerial relevance.

Figure 1 Framework for the analysis of supply chain adjustments for the EM context

As a practical insight derived collectively from the special issue papers and the prior literature, we suggest a simple framework for the analysis of supply chain adjustments for achieving fit with the EM context (Figure 1).

The suggested framework draws on the SCM process model of Lambert et al. (1998), with a suggestion that a firm should first identify or prioritise the key processes that underlie its supply chain or business strategy (Korpela et al., 2001). The next step involves the identification and examination of key process enablers, specifically in the cross-cutting broad categories of EM properties, relevant from the SCM point of view, i.e. infrastructure, institutions, and networks (Lorentz, 2009). This phase of the feasibility study should go deeply to operational level, and recognise the changing nature of EMs as well, hence allowing the viewing of current constraints as future opportunities for adjustments. If the cost of adjustment or its impact on a business model is estimated as too high or detrimental, a market avoidance or withdrawal strategy may be implemented. The suggested analysis framework depicts the diverse range of supply chain variables that may have to be adjusted in order to achieve operational level fit with the EM context.

Summarising, our perspective on managing supply chains in EMs is aligned with the contingency approach to strategy and management (Clegg et al., 1996; Mills et al., 1995), i.e. we argue that the optimal supply chain strategy and operation is contingent upon the external context in EMs. As the EM environment is by definition dynamic, implying high levels of uncertainty for decision making (Duncan, 1972), practitioners are seen to benefit from analysis frameworks that facilitate greater understanding on achieving fit with the context.

In closing, we want to thank our distinguished reviewers who, despite their busy schedules, unselfishly committed some of their time for this undertaking.

Due to an administrative error on the part of Emerald Group Publishing the articles of this special issue have been published across two separate issues of Benchmarking: An International Journal. A brief description of each article can be found in this editorial and two special issue articles have been published in this issue, Vol. 19 No. 1, 2012. The remaining five articles can be found in Benchmarking: An International Journal Vol. 18 No. 6, 2011. Emerald apologises to the Guest Editors, authors, and readers for this error and any confusion it has caused.

Harri Lorentz, Yongjiang Shi, Olli-Pekka Hilmola, Jagjit Singh SraiGuest Editors