Hybrid production system: perspectives in supply chain risk management.

AutorWolfshorndl, Diego Aparecido
  1. Introduction

    The management of supplier companies as part of the same customer's business, coordinated and aligned to make products more competitive, to improve the service provided and to increase the customer's loyalty, is a consolidated concept as competition no longer occurs only between competing companies, but between supply chains (SC). On the other hand, the magnitude generated by such management makes operations more vulnerable to the external environment, thus exposing the organization to a greater number of risks (Lambert & Cooper, 2000; Christopher & Peck, 2004; Wolfs, Takakura, Rezende, Vivaldini, & Antoniolli, 2015).

    The SC risk can be categorized as rupture and operational ones, with the former being related to circumstances such as natural calamities, terrorist attacks and labor strikes and the latter caused by high uncertainty and lack of coordination between supply and demand (Sreedevi & Saranga, 2017).

    The possibility of operational risks can be manifested in the so-called hybrid production systems, in which production is focused to meet confirmed orders and stock formation, that is, make-to-order (MTO) and make-to-stock (MTS) (Yousefnejad & Esmaeili, 2018). According to Beemsterboer, Land, and Teunter (2016), a key point in the planning of hybrid production systems is to define what should be met for stock and what is intended for the orders. These same authors state that this type of planning is a challenge because the decisions being made regarding MTO and MTS systems are different. Furthermore, these decisions may affect suppliers, customers and other supplier chain members.

    SCs operate within an integrated scenario with groups of interdependent companies and entities, even within a single organization. Therefore, the risks are not isolated. Risk identification should involve different stakeholders, including the sought of interdependent interactions between the risks occurring in the entire SC. Therefore, the main objective of the supply chain risk management (SCRM) is to manage the risks by considering the interdependence of its agents. Performance measurements in the SC help narrow the scope of significant risks by disregarding the non-significant ones. Therefore, the company can achieve relevant strategies for mitigating and correlating the risks when adopting a management system that focuses on its network of risks (Qazi, Dickson, Quigley, & Gaudenzi, 2018).

    In this context, this paper aims to identify which risks can impact the productive planning in the MTS-MTO hybrid production system in order to understand, considering the scope of SCRM, this correlation and its relevance. For doing so, a mixed methodological approach (qualitative and quantitative) was applied through a case study of a large Brazilian automaker.

    The relevance of this work is due to the fact that it was carried out in a large automobile manufacturer, considering its importance in the adoption of innovative practices, and particularly, regarding the SC (Pires & Castilho, 2015). This study is characterized for combining SCRM and hybrid production systems, which are not always present in organizations. Studies on risks in SCs and hybrid production systems are aimed at assessing these themes individually, as the works by Chang, Ellinger, and Blackhurst (2015) regarding the risk mitigation in SC and Soman, Van donk, and Gaalman (2004, 2006, 2007) regarding the MTS-MTO hybrid production systems. Studies emphasizing the importance of SCRM (Blos, Quaddus, Wee, & Watanabe, 2009; Blome & Schoenherr, 2011; Zhang, Kim, Springer, Cai, & Yu, 2013; Wolfs et al. 2015), including in the automotive industry (Thun & Hoenig, 2011), can be also found in the literature. However, some authors state that there are a few studies on hybrid MTS-MTO production systems, especially regarding the SC (Soman et al., 2004; Zhang et al., 2013). Therefore, the present study seeks to fulfill this theoretical gap by establishing a relationship between the SC risks resulting from the adoption of hybrid production systems.

    This paper was structured in eight sections, with the first being the introduction. Sections 2 and 3 provide a literature review on SC risks and hybrid MTS-MTO productive systems, whereas Section 4 addresses the theory and presents hypotheses and propositions. Section 5 discusses the methodology and organization of the study and Section 6 presents the automaker with focus on production planning and SC risks. Section 7 assesses the data and presents considerations about them, and finally, Section 8 presents conclusions and suggestions for future research.

  2. Risk management in supply chain

    Uncertain environments lead to a high risk in SC, and the more complex the chain, the higher the risk. Constant changes in product supply and manufacturing requirements, frequent introduction of new items and low standardization of products and services are the main drivers of SC complexity. The argument is that the SC's susceptibility to risk is increased by supplier dependence, supplier concentration, global supply, focus on cost and lack of coordination among partners. However, studies still try to identify mechanisms to deal with these vulnerabilities and to mitigate the SC risk. The SC flexibility is usually considered as a key solution to the growing uncertainty and competitiveness in the market. The studies conducted by Ponte, Costas, Puche, Pino, and La Fuente (2018), Monostoria (2018) and Rezapour, Srinivasan, Tew, Janet, and Mistree (2018) demonstrated how SC flexibility has contributed to improve the business performance in the face of uncertain environments, stating that this behavior provides greater robustness to SC. This argument is supported by Sreedevi and Saranga (2017), for whom SC flexibility and manufacturing process help reduce the risks for supply and production, respectively.

    The production process management involves the organization's ability to perform and coordinate various tasks related to operational activities (e.g. logistics and operation planning) linked directly to the organizational knowledge (the so-called skills routines) and used to respond to unpredictable events affecting the SC. Another important aspect directly linked to these activities is the chain's ability to withstand turbulence, interruptions and unforeseen events. This approach, corroborated by Brusset and Teller (2017), reinforces the idea that an SC capable of providing and delivering products and services under such circumstances is characterized as resilient. Resilience has broader implications than control of SC risks. However, the current inter-organizational information systems facilitate to share information in real-time and allow organizations to be coordinated more effectively across the network. An example of this kind of system is the advanced planning system or advanced planning and scheduling (APS).

    Rezapour et al (2018) broaden this discussion on resilience by stating that SC performance is affected by two types of risk: risk of disruptions, which distort and affect the supply network by inactivating certain production facilities or transport routes, and risk of variations in the performance of an installation, which reduces the efficiency of the supply network flow aimed to meet the demands. But the mitigations of strategic and operational risks to neutralize the impacts of ruptures and variations, respectively, are correlated. Within this context, organizational robustness and resilience are aimed to mitigate disruptions at a strategic level, whereas reliability is aimed to mitigate the variations at an operational level.

    Reflecting the previously mentioned concepts, SCRM can be understood as being the identification and management of SC risks through a coordinated action among chain members to reduce vulnerability. Several risk management structures were proposed by using different terminologies. However, there is a consensus that SCRM involves five sequential stages, namely: risk identification, evaluation, analysis, treatment and monitoring (Qazi et al , 2018).

    Sreedevi and Saranga (2017) point out that timely mitigation of the adverse effects of uncertainty is crucial for an effective SC operation. For these authors, companies should consider investing in the SC agility and responsiveness in order to quickly respond to market fluctuations and manage the risk of disruption. They also report the importance of combining supply resources with a company's operating environment in order to keep up with the changing business requirements. In this context, they include chain flexibility as one of the main levers to reduce such risks, especially in the industry. In the manufacturing process, one of the most important components of SC flexibility is the company's ability to control production resources and to manage uncertainty in order to meet the customer's needs.

    The SC and manufacturing risks are not independent in a strategic approach, although the existing literature on risk management tends to ignore this relationship and assess separately the impact of these risks. According to Rezapour et al (2018), the risk mitigation in these areas includes redundancy or flexibility to ensure that the SC is robust, resilient and reliable. It is important to note that chains are exposed to the demand and supply risks, with the former resulting in ruptures of the downstream SC operations. These ruptures manifest themselves in the physical distribution of products to the customer and create a mismatch between actual and forecast demands, making the coordination of SC inadequate. The bullwhip effect (i.e. the amplification of demand volatility in the upstream side of the SC) is a characteristic of this phenomenon. The possible negative consequences of the demand risks are costly shortages, obsolescence and inefficient capacity utilization. Supply-side risks include supplier business risks, capacity problems, technological changes...

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