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SHS Web of Conferences 28, 01116 (2016) DOI: 10.1051/shsconf/20162801116 RPTSS 2015

An approach to the Choice of a Supply Model in Conglomerates Operating at the Markets of Machine-building

Gennady D. Antonov1,2, a, Olga P. Ivanova1,2,3

1National Research Tomsk Polytechnic University, 634050, Lenin Avenue, 30, Tomsk, Russia 2Kemerovo Institute of Qualification Improvement and Retraining, 650060, Michurina str., 13a, Kemerovo, Russia 3Kemerovo State University, 650060, Krasnaya str., 6, Kemerovo, Russia

Abstract. Strategic and managerial analysis shows that currently many conglomerates including those in the machine-building industry do not have established approaches to formation of a management system for their primary activity; some problems of purchasing model choice methodology lack theoretical development. In the given work the authors specify the list, the characteristics and the combination of estimated macrofactors influencing the choice of the principal supply model for the purposes of forming an optimal purchasing system of conglomerates. Supply management functions are distributed within the supply system of the holding

Introduction all, associated with centralization optimization and decentralization of purchasing functions. Conglomerates are capable of better exploitation of sources of values dealing with various areas in a more efficient way than it is done by specialized Analysis of the methods of corporate . At the same time the conglomerates face the purchasing systems problem of company structuring and running for the purposes of the best exploitation of these sources of In the works [3-8] the scientists describe the following values. In spite of the theoretical argumentation for the approaches developed as a result of research aimed at conglomerates consisting of multiple subdivisions and studying the state and methods of building corporate empirical evidence of their efficiency, research shows purchasing systems in some of the USA and that combining advantages of decentralization and Western Europe: coordination is still a problem for conglomerates [1]. 1. An approach based on the combination of two Henry Mintzberg [2] highlights two structural macrofactors: homogeneity of companies (similarity of peculiarities of conglomerates including a number of such characteristics as purchased assortment, capital subdivisions which limit decentralization and their funds used, climatic conditions, common suppliers, etc.) ability to adapt. First, limitation of decentralization and development of a purchasing structure at every reveals itself in limiting the freedom-to-operate of company; subdivision managers by the headquarters in case of 2. An approach supposing purchasing a model choice variations in the subdivision activities. Second, the depending upon the combination of such factors as problems of coexistence of different inside cultures and development of a purchasing function and corporate management systems of various subdivisions, an coherency revealing itself in closeness of company opportunity of differentiation according to their business management systems for the companies included into the requirements face management standardization at the , similarities in their business culture, subdivision level implemented by means of common existence of corporate ideology and politics; monitor systems, processes of development control, 3. An approach reflecting dependence of financial corporate culture. Besides, analysis of conglomerates results of the corporation on functioning practice, including those at the markets of under the conditions of certain fullness of supply machine-building industry, provides evidence that we functions and a degree of finished product uniqueness. need solution of problems of choosing a corporate model Depending on the paired combination of macrofactor of corporate purchasing management, which are, first of data assessment the practicability of centralization, a Corresponding author: [email protected]

© The Authors, published by EDP Sciences. This is an open access article distributed under the terms of the Creative Commons Attribution License 4.0 (http://creativecommons.org/licenses/by/4.0/). SHS Web of Conferences 28, 01116 (2016) DOI: 10.1051/shsconf/20162801116 RPTSS 2015 decentralization or a hybrid purchasing model approach as it is to a leads to a wrong (cooperation, shared purchasing controlled by the choice of the supply model. leading buying agent of one of the companies) is determined. The advantages of the given approaches include not only easiness and application of only two Results generalized parameters in each of them but also the Basing on the considered approaches, taking their application of a simple scale of factor assessment: high- advantages and disadvantages into consideration, let us low. formulate the rules of selecting the principle model of When estimating the opportunities of applying the supply organization in a conglomerate by means of given approaches to determining the purchasing model specifying the list, combinations and characteristics of in a conglomerate we should analyze the result of the use the estimated macrofactors. The specified list and of mentioned factors choice rules. Thus, for example, characteristics of macrofactors are presented in Table 1. application of the first approach, based on the As in a conglomerate homogeneity of subdivisions, a combination of homogeneity of the companies and priori low application of the given factor is senseless. development of a purchasing structure in every company We should estimate the possibility of synergy from the to determine the model of purchasing management in a combination of different branches subdivision potentials conglomerate, brought us to the following conclusions. for new, unique, competitive products First, in respect to a conglomerate there arises the including machine-building one. We consider it possible necessity of correcting the factor “homogeneity of the to estimate both fullness and development of the supply company”. It is reasonable to apply only the similarity of function as an integrated macrofactor. Development of such characteristics as purchased assortment, climatic the supply function to a certain extent is impossible conditions and common suppliers for a conglomerate, without fullness of applied subfunctions of supply. Thus, including the one in machine-building industry. Second, from five macrofactors considered for selecting a according to the rule of supply, the model choice for the corporate supply model we highlight three: corporate given approach, high homogeneity of the companies and coherence, development and fullness of supply function, a well-developed supply function determines the uniqueness of a manufactured product. necessity of decentralization as decentralized supply services are capable of ensuring the purchasing process Table 1. The list and the characteristics of the factors of on their own and, thus, are more likely to ignore the selecting a supply model for a conglomerate operating at the supply subdivision in the corporate centre. Therefore, the machine-building industry market given approach does not take into consideration the opportunity of obtaining advantages from supply Macrofactor Factor Factor characteristic centralization due to consolidation of purchase amount, i.e. reducing purchasing prices and costs associated with decentralized supply services operating. According to the rules of choice in the second approach Corporate Independence of Limited independence (a combination of factors “corporate coherence” and coherence subdivisions of subdivisions “development of supply function”), in case of having the Having a Complexity of strategic corporate planning for a corporate strategy, similarity of organizational structures strategy conglomerate of the companies, i.e. having high corporate coherence Single Complexity of and development of supply function (for example when implementing single each subdivision has its own supply subdivision), the policy accounting policy process of purchasing should be centralized. Thus the Single A possibility of given approach does not take into account the personnel conducting single peculiarities of supplying the subdivisions of a policy. personnel policy and conglomerate, such as wide purchased assortment which Single system implementing the is especially characteristic of supply market of machine- of . general diversified system of education building subdivisions. Planning of Planning of financial According to the rules of supply, the model choice in activities results and growth areas the third approach (combination of factors – fullness of at the conglomerate supply functions and the degree of finished product level. uniqueness) means that supply centralization is Common use of Using single advantageous for manufacturing relatively widespread or the same corridors (internal and raw products, whereas decentralization – for transport external) in the situation manufacturing of a unique product. Within a corridors of spatial unity, spatial conglomerate, product characteristics in terms of juxtaposition uniqueness/abundance differ for every subdivision. The Developme The quality of As a rule, with respect given aspect, first of all, is characteristic for corporations nt and supply function to different subdivisions fullness of execution it is highly estimated as which include machine-building subdivisions. Besides, supply Providing supply decentralization specialized supply services of subdivisions, as a rule, functions* workers of determines the necessity complete the whole and not narrow range of supply supply services of development of all functions. Due to this fact application of the given

2 SHS Web of Conferences 28, 01116 (2016) DOI: 10.1051/shsconf/20162801116 RPTSS 2015

with office supply functions, The choice of a supply model (centralized, equipment and provision with office decentralized, hybrid (mixed)) of a conglomerate information equipment, information, supposes analyzing the possible variants of the given Technical and technology. macrofactors combination obtaining low or high support of assessment (Table 2). The hybrid (mixed) model is the supply corporate supply preferred model in most variants of the activities Development of Supply (first factor combination. Thus, to ensure the application of the marketing of all supplier market approaches to the choice of a principle model of supply function research), as a rule, management in a conglomerate we specified the list, the requires improvement characteristics and the combination of the estimated in many conglomerates macrofactors. Development of Complexity of transport transport introduced for Table 2. The choice of the principle model of supply on the logistics a conglomerate. base of the macrofactor estimation and combination Different sophistication for separate Factor estimation (low level, high level) A preferred subdivisions depending Corporate Development Uniqueness model of upon their industry coherence and fullness of of the supply classification. a supply product Efficiency of As a rule, there is function the duplication of low level low level low level Decentraliz organizational functions, problems of ation and functional supply functions low level low level high level A hybrid structure distribution within the model (a corporate supply system combinatio Readiness for Depends upon the n of development corporate strategy, decentraliz qualification of ation with specialists, formation and the system of of groups employee motivation. uniting Variety of Largely depends upon several methods and the qualification of buying skills applied procurement specialists. agents) when high level low level low level Centralizati purchasing on Qualification of As a rule, requires low level high level low level Decentraliz supply improving. ation specialists* high level high level high level A hybrid Uniqueness A strategy of Diversification model with of the the corporation contributes to the the product concerning opportunity of developed purchasing combining industries corporate companies/mer for manufacturing a manageme ging with the unique competitive nt centre companies product. high level high level low level A variant having a of a hybrid different centre- product range coordinate An opportunity Diversification d model of combining contributes to the low level high level high level A hybrid (synergy) of opportunity of model (a subdivisions combining industries combinatio potentials for for manufacturing a n of manufacturing unique competitive decentraliz a unique product. ation with product* formation High dynamics Requires high of groups of the qualification of uniting technological procurement specialists, several progress in the development of the buying industry marketing function in agents) supply, educational high level low level high level Centralizati systems in the on subdivision. Combination of the given macrofactors allows * - means that the factor was added or specified by the determining the principle supply model (centralization, authors. decentralization, hybrid (mixed)).

3 SHS Web of Conferences 28, 01116 (2016) DOI: 10.1051/shsconf/20162801116 RPTSS 2015

Forming of mixed (hybrid) model of supply in material resources conglomerate, diversified , providing Regulatio Adjusting of delivery Branch houses functioning efficiency demands distribution of supply n of dates, forms of management functions between a organization, material payment to the branch holding companies, and branch trade houses. The resources suppliers etc. solution of this task should be based on the combination Enforcing Controlling of Branch trade houses and suppliers contractual of function centralization and decentralization, providing coordinati commitments, the possibility for development and maintenance of ng monitoring of internal competition between trade houses and supply delivery dates departments; and optimization of holding company Controlling of Branch trade houses supply system arrangement. Holding supply system is material resources use Supply department viewed as an interrelated complex of branch trade at the place of houses, supply departments and a corporate center – production supply department in the diversified holding An incoming quality Branch trade houses management company. Development and maintenance and content of of internal competition between branch trade houses and delivery control Controlling of Branch trade houses supply departments demand development of tactical production supply operating functions on this level, as well as a part of Recovery of claims to Branch trade houses administrative functions. Supply management functions the suppliers and distribution and management subjects can be seen in transportation table 3. Holding supply Supply department Table 3. Supply management functions distribution in a system efficiency conglomerate holding company analysis, elaboration of measures, aimed at Function Function subject A supply system supply coordination matter subject, performing a and its efficiency function Planning External and internal Supply department environment research, Conclusion items market research Thus, modernization of the considered methods of Material resources Branch trade houses corporate supply systems development in respect to forecasting and Supply department conglomerates, particularly the ones operating at the requirement machine-building market results in authors suggesting an determination Production supplies Branch trade houses approach to the choice of an optimal supply model in a optimization Supply department conglomerate. To be more precise the authors formed the Materials requirement Branch trade houses matrix of the macrofactor combination influencing the planning choice of the principle supply model (centralization, Operational supply Branch trade houses decentralization, hybrid (mixed)). The list, the planning characteristics and the combination of the estimated Administr Gathering information Branch trade houses macrofactors were specified. We suggested a model of ative on a necessary Supply department distribution of supply management functions between product supply system subjects within a holding company, based Taking part in trade Supply department on the combination of function centralization and fairs, selling decentralization, providing the possibility for exhibitions, auctions etc. development and maintenance of internal competition Analysis of resource Branch trade houses between trade houses and supply departments, and demand satisfaction Supply department optimization of holding company supply system sources for the arrangement. purpose of selecting an optimal source Conclusion of Branch trade houses References business on delivery with 1. R. Grant, Contemporary Strategy Analysis (Piter, suppliers Saint-Petersburg, 2008) Organizing of supply Branch trade houses 2. H. Mintzberg, Designing Effective Organizations delivery (Prentice-Hall, Englewood Cliffs, NJ, 1983) Organizing of storage Branch trade houses 3. J. David, Y. Hwang, J. Reneau, Arizona State facilities Supply department University (1999) Providing of holdings, Branch trade houses 4. H. Fearon, M. Leanders, Centre for Advanced factories, workshops, Purchasing Studies (Tempe, Arizona, 1996) work sections, work places with necessary

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5. F. Rozenmeijer, Technische Universiteit Eindhoven (2000) 6. Information on http://www.purchasing.com/articit/2221156- Sappi_looks_on_PAPER.php (access date: 10.01.2012) 7. L. Belov, Logistics today, 2, (2010) 8. L. Belov, Logistics and supply chain management, 6, (2009) 9. A. Schmitt, S. Sun, L. Snyder, Z.-J. Shen, Omega, 52, (2015) 10. T.Vallet-Bellmunt, M. Martínez-Fernández, J. Capó-Vicedo, Industrial , 40, (2011) 11. F. Wiengarten, P. Humphreys, C. Gimenez, R.McIvor, International Journal of Production , 171, 3 (2016) 12. I. Manuj, J.T. Mentzer, International Journal of Physical Distribution & Logistics Management, 383, (2008)

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