Aligning supply chain design with manufacturing strategies in developing regions

Abstract

Managing supply chains effectively is a complex and challenging task, due to the current business trends of increasing outsourcing of manufacturing activities to developing regions to gain competitive advantage from being close to customers, making available low and/or high skilled labour, participating in local government initiatives, and reducing transportation cost and production delivery lead times. This paper explores how a manufacturing enterprise, when sourcing production facilities to developing regions, chooses manufacturing strategies to reduce uncertainty rather than to gain competitive advantage according to how the enterprise obtains orders from its customers. The paper aligns the design of supply chain with the choice of manufacturing strategy by incorporating some of the most important design dimensions of uncertainties with production operations in developing regions. The result from empirical research of 34 international manufacturing joint ventures (IMJV) located in different developing regions shows that their choice of strategy is limited to manufacturing efficiency design with strong focus on cost advantage. This paper argues that these IMJV must follow contrasting supply chain design according to their focus on either product innovation as the primary objective for competitive advantage or on cost efficiency.

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