Introduction Understanding the Manu factu ring Valu e • Internationalisation and Globalisation Chain – with case examples from China • Capability of Manufacturing Networks • Manufacturing Value Chains? Institute for Manufacturing • From production to production networks • FlhitltkFrom supply chains to supply networks 22nd September 2009 Dr Jagjit Singh Srai =>The Manufacturing Value Chain Contact Jag on: A broad definition [email protected] © Institute for Manufacturing, J.S. Srai 2009 © Institute for Manufacturing, J.S. Srai 2009 Rise and decline of powers Internationalisation • Historical context • Increase in exports and trade • Changing focus of demand © Institute for Manufacturing, J.S. Srai 2009 © Institute for Manufacturing, J.S. Srai 2009 Globalisation: production and trade continues to rise ... Where the Value will be Consumer Spending 2010 ($tn @ market exchange rates) VALUE OF EXPORTS 200 200 180 180 $9.7 160 160 140 140 $8.9 VOLUME OF 120 PRODUCTION 120 100 100 80 80 60 60 40 40 20 20 0 0 1950 1952 1954 1956 1958 1960 1962 1964 1966 1968 1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 Year $1.5 $1.4 $6.3 Value of manuacturing exports (1990 = 100) Volume of world production (1990 = 100) Source: OEF Source: OECD 2003 © Institute for Manufacturing, J.S. Srai 2009 © Institute for Manufacturing, J.S. Srai 2009 Where the Volume will be Centre for International Manufacturing - Research themes Consumer Spending 2010 ($ tn @ PPP exchange rates) Networks: Capability: $9.8 characteristics of network environments Developing system capabilities - network behaviour - process development - network design/configuration - intrinsic capabilities of network forms - network integration and partnering models - transformation strategies $9.1 NETWORKS CAPABILITY $3.4 $15.1 International: crossing national borders to pursue - new markets INTERNATIONAL Key Interrelationships - new resources/capabilities Emerging Trends and futures - new technologies New/Changing Industry structures Source: World Bank & OEF $3.3 © Institute for Manufacturing, J.S. Srai 2009 © Institute for Manufacturing, J.S. Srai 2009 Current Research Programmes A common research approach to ‘Network Design’ • Global Value Networks ‐ mapping value chains, value capture • Research studies have focused on • Production networks –design of MNC manufacturing footprint • Configuration theory – structure/footprint, key elements, archetypes • Global supply networks ‐ re‐configuring SNs for enhanced capability • Capability development – assessment, intrinsic capabilities, through‐life • International engineering networks –network design, through‐life • Visualisation techniques ‐ mapping supply chains, VC analysis • Service operation –integration of multi‐organizational service networks • Radical change –transformation strategies, network re‐design, • Mergers & Acquisitions ‐ delivering integration synergies and value • Continuous improvement – network integration, process maturity • Emerging industries –new supply network models • Futures –new supply network models, changing industry structures, trends © Institute for Manufacturing, J.S. Srai 2009 © Institute for Manufacturing, J.S. Srai 2009 Selected Case Examples A common framework for Configuration elements - a historical perspective Strategic management literature (Chandler ‘62; Rumelt ‘74; Miles & Snow ‘78; Mintzberg, ‘79; Kotter, 95; Miller, ‘96) Operations Management literature ..... Global International International Service Supply Engineering Mfg Production Supply Networks Networks Configuration Networks Networks (Srai 2007, (Srai et al 2009) Elemen ts (Zhang , et al. 2007) (Shi & Gregory 1998) Srai & Gregory 2008) • Production/Manufacturing Networks, 1995+ Supply Network tier geographic structure and shape CIM Network dispersion, Plant role, Multi-organisational resources and roles characteristics; network structure Structure SN Mapping • Supply Networks, 2004+ configurations elements: of eng centres, and geographic rationales for dispersion Service Archetypes Integrating network design • M&A, 2004+ mechanisms • structure, Horizontal/vertical Coordination, coordination; The flow of materials Service supply • including operational and information contracting mode • Engineering, 2004+ operations flow, Operations Flow operational mechanisms; between and within and Processes processes and dynamic response key unit operations Through-life • governance and coordination, coordination mechanisms; product • Service Networks, 2005+ mechanisms lifecycle and Replenishment mode • support infrastructure, knowledge transfer Governance, The role of and • Emerging Industry Networks, 2008+ including authority Dynamic capability governance • relationships, Governance and Service Network structure and building and network mechanisms Coordination governance modes ........ performance evolution between key network • Value Chains, 2009+ measures partners Support, including Support • product architecture engineering tools - - Support Systems Infrastructure and IT systems The role and inter- Partnering modes relationships, Relationships between key network Firm and Network partners Value-sets Product Modularity Service Offering Product SKU profile Outcomes/Effects © Institute for Manufacturing, J.S. Srai 2009 © Institute for Manufacturing, J.S. Srai 2009 Emerging capabilities The Manufacturing Value Chain • Network Configuration analysis ...............understanding footprint dimensions, and link to capability Perspective ...........multiple levels of analysis (common analysis framework) ...............Network design studies (based on c.50+ exemplars!) • From supply chains..... • Operations Strategy (and Policy) • Strategic goals/drivers, • Reconfiguring networks, network optimisation/integration to supply networks... • Location decision, Mobility, Capability assessment • Initial successes to value chains • Tailored network mapping approaches, Value chain analysis methodologies • New Multi-Organisational Network forms (GMVN, MON, EIP) • IJVs, M&As, Internationalisation (west-east, and Emerging Country MNCs) • Network integration, Partnering mode selection • Network Transformation .....from I to II, Mfg to Service, Mature to Emerging • Region/Industry/Sector/Firm level .........Eng/Prodn/Service/SC/VC analysis © Institute for Manufacturing, J.S. Srai 2009 © Institute for Manufacturing, J.S. Srai 2009 Supply Chain International Supply Networks Tier 3 to Tier 3 to - make or buy initial Tier 2 Tier 1 Tier 1 Tier 2 Consumers/ - collaboration mode suppliers suppliers suppliers customers customers End-Customers - partner selection 1 1 - co-operation 2 2 ..... - co-evolution ..... n n 1 1 ustomers suppliers 1 CC 1 n ..... Tier 3 to n Tier 2 n 1 2 Initial Suppliers 1 Consumers / End- Consumers .............. 1n 2 3 2 Tier 3 to n customers Tier ..... ... .... ..... .... n .. n n .......... 1 n ..... Source: New and Payne, 1995. n 1 Source: Lambert and Cooper, 1998 ..... n © Institute for Manufacturing, J.S. Srai 2009 © Institute for Manufacturing, J.S. Srai 2009 Understanding the Manufacturing Value Chain • Value Approach to value chain anal ysis • The meaning of value, value (co-)creation and value capture Context: • The importance of perspective when mapping value chains Internationally dispersed manufacturing and supply networks • Customers, Firms (OEM), Suppliers, Product/Sector Cluster • Policy makers: Regional, National, International Main Processes between network players: Identifying the main Actors Capturing the key Processes • Evolution of Value chains and Trends; • Fragmentation, off-shoring, outsourcing.....requiring a network perspective Network Understanding: • Changing Industry Structures Linkages between innovation chain and suppliers, production, distribution, and service • Industry Life Cycles, Network Disintegration, Network Integration Degree of ‘coupling’ between value chain stages • new Routes to Market Implications for: • Routes to Value capture Enterprises: strategy, network design, network operations management, • Global and Regional trade National policy - firm level, emerging business models and industries. • Disruptive Value chains / Emerging industries? © Institute for Manufacturing, J.S. Srai 2009 © Institute for Manufacturing, J.S. Srai 2009 Approaches to value chain analysis Five GVC Governance Types (Sturgeon 2009) • Unit of Analysis: Market Modular Relational Captive Hierarchy • ‘Product’ focus: G-Profit est; ‘Teardown’ /BOM reports e.g. iPod (Linden et al 2007) End Use Customers Lead Lead • ‘Customer’ focus (Holweg et al 2009) ItIntegra tdted Firm Firm Lead Firm Firm • Unit of Analysis: Firm, supply network, and industry analysis • Porters’ value chain – a firm based model • Value Stream Mapping (Hines and Rich 1997) • Current State and Future State maps (Rother and Shook 1999) Full-package Turn-keyRelational hain Price alue Supplier SupplierSupplier VV CC • Supply Network configuration (Srai and Gregory 2008) • Value creating systems that co-produce value (Norman and Ramirez 1993) • Changing industry structures (Jacobides et al 2007), • GVC Governance models (Sturgeon 2008) Component Component Suppliers and Material and Material Captive • IdIndustry c hllhallenges: Materials SliSuppliers SliSuppliers Suppliers • Location impact; Just-in-Time; Just-in-Sequence; Degree of Explicit Coordination • Firm/Country; conflict of allegiance Low High Degree of Power Asymmetry • Network Design......the global footprint.... R&D, Supply, Prod’n, Distribution, Service Source: Sturgeon, 2009 © Institute