Supply chain learning and

leadership and integration

Prof. Jeff Jia
Professor of Supply Chain Management

1
 Agenda
• Key concepts: Supply chain learning; Supply
chain leadership;

• Relationship between SC learning and SC

leadership: Toyota knowledge sharing
network; Tetra Pak recycling chain case studies

• Supply chain integration illustrated with the

Caterpillar case
 What is SC learning? -Volvo case
• Volvo truck transferred its technology to suppliers located in LCC by:
- Introducing new quality-standards and performance-requirements;
- Introducing new management-systems;
- Providing access to world class raw materials, parts, components;
and sub-contracting services;
- Upgrading suppliers’ process technology;

• SC learning: beyond tier 1; Example: Volvo truck’s first-tier suppliers in

China collaborated with the second-tier Chinese suppliers to improve
product quality system and upgrade technology;

• Benefits to Volvo truck: suppliers’ introduction of new technology to

Volvo; Improved market position through the sales of new products to
customers.

Source: Ivarsson and Alvstam (2009); IJTM

 What is SC learning-IKEA example
• Ikea’s supply chain learning (a buyer-driven value chain):
control marketing, sales, distribution & coordinates a large
number of suppliers that manufacture less technology-
intensive finished products, primarily in low-cost countries in
Asia and Eastern Europe;
Challenges: large supply base; under-developed suppliers
• A deliberate and system technology transfer from IKEA;
provide long term technological support to multiple-tier:
- Access to raw materials and components;
- Access to machinery and other production technologies;
- Improved factory layout and organization of production;
- Expansion of existing plants and the building of new
factories.
 Why is SC learning important?
• Nowadays, supply chains compete with supply chains-
Prof. Martin Christopher;

• It takes supply chain collective efforts to reduce cost and

improve efficiency and sustainability;

• SC risk involved if no learning: Mattel case: quality

management not disseminated/learnt by the 2 nd tier supplier-product
recall;

• Sustainability practice not learnt by upstream suppliers

causes problems (e.g., Apple; Nike)
 SC Learning-background

• SCL: “Supply chains as a vehicle for gathering

knowledge and learning for firms” (Spekman et al.,
2002).

• Different terminologies: Inter-firm; dyadic; cross

culture; alliance; relationship; knowledge transfer;

• SC learning defined as: “Multiple supply chain

partners engaged in interaction where learning
occurs and is focused on supply chain issues and
solutions.” (Flint et al., 2008)
 SC learning-continued
• Consensus: SC learning boosts innovation and firm
performance;

• Also, SC learning facilitates the formation of SC dynamic

capabilities (Defee and Fugate, 2010)

• The success of SCM depends on the collective learning

of all members in the chain;

• But easier said than done due to the need of the

learning of members from multiple-tier on a chain.
 Learning in SC SC performance
Drivers
or SCL capabilities
Intra-organizational   Dynamic SCM capabilities
factors P1 P4 Innovation capability;
Learning phases
Inter-organizational Relationship development;
 Set-up phase
factors P3 Capabilities of integration,
 Operating phase
  Collaboration  and process
 Sustaining phase
Environm P6 improvements
ental Indirect  
turbulence effects
P4
Sources Sustainable SC performance
Learning types
Intra-organizational Economic
 Exploratory learning
factors Environmental
P2  Exploitative learning P5
Inter-organizational   Social
factors

Yang, Y., Jia, F. and Xu, Z. (2018). “Towards an integrated conceptual model of supply chain learning: An Extended
Resource-Based View”, Supply Chain Management: An International Journal
Supply chain leadership
 Supply chain leadership
• A SC: “Three or more companies directly linked by one or
more of the upstream and downstream flows of products,
services, finances, and information from a source to a
customer” (Mentzer, 2001, p. 5);

• The focus on integration in the SCM literature raises an

interesting, yet often unanswered question: “Who is
responsible for ensuring that integration within the supply
chain is effectively implemented and managed?”

• The integration doesn’t happen spontaneously but may be

partially due to the active leadership and influence of one
organization within the supply chain (e.g., Volvo, IKEA; TP…).
 Supply chain leadership
• Sun Tzu (544-496 BC): Therefore, leaders
(generals) who understand strategy preside
over the destiny of the people, and determine
the stability or instability of the nation (II
Waging war, Art of the War).

• Application to Supply Chains – leaders must

design SC strategy to lead the supply chain
members to new levels of excellence.
 Supply chain leader
• SC leaders are traditionally described as a firm that
outperforms industry competitors, a source of
industry best practices and individual thought
leaders;
• Now, the concept is much broader and behavour
based instead of power based;

• Traditional leadership theory: emphasise special

qualities or traits of leaders (leader-centric view);

• Now it is increasingly holistic, relationship-oriented

view (consider both leader and follower’s views).
 Video: Transactional and
transformational leadership (4 minutes)

Robert E. “Dusty” Staub

American experienced consultant on

leadership

https://www.youtube.com/watch?v=SqOjtO-g6QI
 Supply chain leadership-rationale
• Rationale for SC leadership: One organization must
assume the leadership role to take the responsibility for
strategic supply chain decisions (Lambert et al., 1998);

• Transactional vs. transformational SC leadership;

 Transactional leadership: use rewards/punishments to
control the behaviour of followers (e.g., leader’s or
follower’s identify);

 Transformational leadership: developing and

communicating a collective vision and inspiring
them to look beyond self-interests (e.g., promote a SC
identify)
Supply chain leadership defined as:
• “A relational concept involving the supply
chain leader or more supply chain follower
organizations that interact in a dynamic,
co-influencing process. The supply chain
leader is characterized as the organization
that demonstrates higher levels of the four
elements of leadership in relation to other
member organizations”. (Defee et al., 2010: 766)
• A relational perspective of SC leadership.
 4 elements of SC leadership
1. The ability of one organization to influence
the actions of another organization;
2. Leader’s practice or action can be identified
and distinguished from follower
organizations;
3. SC leader: creates a vision of a better future
for the supply chain;
4. Leaders and followers in the SC co-influence.
 SC leader- how
How do we Develop Supply Chain Leadership?

• General Patton – “No effective decision was ever

made from the seat of a swivel chair.”
• You have to get out of the office and walk the
process.

• Talk to the workers – what are their concerns?

• Talk to the customers – what are their concerns?
• Talk to the suppliers – What are their concerns?
 How do you Develop Supply
Chain Leadership?

• SC Leaders have to provide:

-- supply chain vision
-- supply chain strategy
-- SC identify
-- clearly understood missions
-- set goals – realistic and achievable
 Supply Chain Followership
• “Without followers, there can be no leaders.”
(Kelly, 1992);
• Transformational vs. transactional followership
(Defee et al., 2009);

• 2 dimensions: critical thinking and way of

engagement;
• The fit between leadership and followership
types matters.
Followership-continued (Kelly, 1992)
 Relationship between SC
leadership and SC learning
 SC leadership and SC learning
• Transformational leadership team and learning
orientation information processing capabilities
cycle time in a purchasing context; (Hult et al.,
2000)

• Learning will not occur itself but needs careful

designing and facilitating i.e., leadership. But the
leadership role may change over time from an ‘up-
front role’ to a ‘stand-back’ role in which other
members actively take part (Lambrechts et al., 2012)
 A research project: Supply chain learning of
sustainability: the role of SC leadership
Research questions: “How do supply chain learn
sustainability in multi-tier supply chains in China?”; “What
is the role of SC leadership?”
Three cases: IKEA’s better cotton initiative; Tetra Pak’s
recycling supply chains; Nestlé's modernisation of dairy
farms;
60+ interviews (43); multiple supply chains for each case;
 large amount of archival data; internet resources
4 academic articles; 3 teaching cases; one in prep (SC
followership)
Resource Orchestration Theory (ROT)
 ROT is an extension of resource-based theory (RBT)
 RBT focus on the ‘what’ of resources, whist ROT focus on
‘how, why, when’ (Esper and Crook, 2014)
 “Possessing resources alone does not guarantee the
development of competitive advantage.” (Sirmon et al.,
2011: 1391)
 ROT could be elaborated in three aspects at a firm level:
Breadth (resource orchestration across the scope of the
firm); Depth (resource orchestration across levels of the
firm); and Project life cycle (resource orchestration at
various stages of firm maturity) (Sirmon et al., 2011).
 Resource
orchestration in
breadth
(Internal breadth: set
Supply chain learning up new functions;
content External breadth:
work with third party)

Focal company Multi-tier

knowledge supply chain
resources structure
Resource
orchestration in
Supplier depth
learning (Multi-tier supply
complexity chain governance
mechanism: direct,
indirect, don’t bother)

Supply chain learning stages (resource orchestration along project lifecycle)

Set up Operating Sustaining

In order to facilitate their supply chains to learn sustainability, MNCs tend to orchestrate in breadth
by internally setting up new functional departments and externally working with third parties, and
orchestrate in depth working directly with their extreme upstream suppliers adopting varied
governance mechanisms on lower-tier suppliers along the project lifecycle. The resource
orchestration in breadth and depth and along the project lifecycle results in changes of supply
chain structure.
Gong et al. (2018). Supply chain learning of sustainability in multi-tier supply chains: A resource
orchestration perspective”, IJOPM
Conclusion: Combined effect of supply chain leadership and governance mechanisms affects both
supply chain structure and supply chain learning; MNCs change their supply chain structure to
facilitate supply chain learning.

Jia, F., Gong, Y., and Brown, S. (2019). “Multi-tier sustainable supply chain management: The role of
Supply chain leadership”, International Journal of Production Economics, 217, 44-63 26
 Tetra Pak

Tetra Pak is the world’s leading food packaging and processing

company.
By the end of 2014
• Operates in more than 170 countries;
• Employs more than 23,000 staff;

• Net sales reached 11.04 billion Euros;

• 6 dedicated R&D (research and development) units;

• 57 owned and operated production plants worldwide.

Tetra Pak Regions
Tetra Pak’s SSCM strategy

Recycle rate achieved Recycle rate target for

20% in 2010, 28% in 2020, 40%
2015
Turning used cartons into an asset
 How to create a Used Beverage Carton (UBC)
recycling chain in China?

• The most common Tetra Pak carton is 74% paper, 22% polyethylene
and 4% aluminium;
• Environmental Department is looking for your help;
• The recycling technology is available in other markets, however too
expensive for China;
• Apply the supply chain learning concept in the steps.
 Four stage supply chain learning model

Implementing stages Tetra Pak

- Detailed survey/study of the end of life of UBCs in China;

Supply chain mapping
- Identify potential recyclers.

- Inspire potential recyclers to engage in the recycling business and

select the suitable recyclers;
Awareness building - collaborate with collection company and provide trainings to
collectors;
- Marketing campaigns to raise consumer awareness.
- Facility support, factory waste support to help recyclers start
business;
Capacity building - Collaborate with external partners on recycling technology to
enhance the recycle value;
- Encourage recyclers to set up their own recycle networks.

- Give discount on factory waste based on recyclers’ performance;

Capacity sustaining
- Plan to provide support based on recyclers’ development plans.
 Implementing steps (learning stages)

1) Supply chain mapping;

Primary materials New products New products New products

1st tier Dairy/Juice End
suppliers Tetra Pak Retailers consumers
companies

Recovered materials
Recovered materials
ials

s
Re

ial
d mater
co

ter
ve

ma
red

red
ma

Recovere

ve
ter

co
ial

Re
s

Secondary products Recovered Recovered

Other manufacturers materials materials Waste
Recyclers pickers
Collectors
 Implementing steps (learning stages)

2) Awareness building;

- “He talked with me the future of my company, the future of paper industry, what
could be the future trends. Companies need to stand from a multi win or win-win
point to think the question, if we the small companies could collaborate with the
multinational company, it is like a small boat with aircraft carrier”, said Jun Yang,
Funder and CEO of Fulun.

-“Later we realize we need to find small companies who wish to be pioneers and
have a development potential, who has a passion for environmental protection”,
said Carol Yang, former Vice Present and Cluster Leader of Corporate
Communications at Tetra Pak China.
 Implementing steps (learning stages)

3) Capacity building;

- Develop recyclers: equipment support; discounted material; develop new

technology to enhance the value;

- Recycler conference;

- Educate collectors by collaborating with collection company;

- Educate consumers.
 Implementing steps (learning stages)
3) Capacity building

- “According to the different conditions of each recycle partner, we provide specific trainings
or hire the related experts to provide a consulting project to solve the corresponding
issues. For instance, the recycle partner in Beijing, because the restrictions of the local
environment policy, it is very difficult for it to expand too large, so its key point is on the
upgrading of the current technology, how to implement those environmental policies. We
are looking for the related experts, improve its capability and optimize, not to develop new
technologies, focus on its energy usage, water usage and etc. While on the other hand,
the recycler at Zhejiang province is at a developing stage, it has needs in purchasing and
utilizing new facilities, then we could let our purchasing department to contact experts who
have the experience of the new facilities at other countries to provide some help, another
perspective it may need some advice on investment and financing, we could then
according to our understanding either by introduce banks or funds to help.” Said Jiayu
Wan, Cluster Environmental Director.
 Implementing steps (learning stages)
- “Now I didn’t consider the small collect companies. I am
4) Capacity sustaining
looking for sanitation companies, and the incineration plant
- Formal contract
under sanitation companies. Because this is the trend, you
- Third party audit
cannot waste the energy to run it… the cartons must
- The price of factory waste concentrated”. Said Jun Yang.
- Continuous support - “(if not meet the target) Tetra Pak will reduce support, when
- Recyclers set up their own recycling you apply for projects at next year, it will reduce the support,
network including the factory waste material it considers your
performance.”

- “Relatively speaking, we are outsiders, we are standing far and high, we could help them to see the trend
for this industry, we could tell them which direction they should go”; “sometimes it is unavoidable, many
recyclers are small companies, they may at many time content with their current situation. They may think
I have a capacity of 20,000 tons, I have a profit rate of 10%-20% is good enough. Then I will tell them
where is the industry growth area, what it will going to be look like, if you hold this opportunity, your
business may double etc”.
Tetra Pak: creating a recycling chain in
China
Raw materials
Dairy
suppliers Tetra Pak Distributors Consumers
company
(paper, Al, Pol)

Raw materials Tetra Pak

Dairy
suppliers Environment Distributors Consumers
Engineering company
(paper, Al, Pol) Team

Secondary Recycle Collect

Collectors
Market company company

Reconceptualization of Tetra Pak’s supply chain before and

after implementing recycling chain
 Tetra Pak’s multi-tier supply chain structure
Recyclers: direct approach, provide
Tetra Pak supply chain knowledge to these

Stage 1 recyclers

Collection company: direct to

Collection indirect, support collection companies

Tetra Pak Recyclers Company Collectors Consumers
Stage 2 in the beginning, gradually rely on

recyclers

Collectors: indirect to don’t bother,

provide basic trainings to collectors in

Collection the beginning, gradually rely on

Tetra Pak Recyclers Collectors Consumers
Company
Stage 3 recyclers/collection companies

Consumers: direct approach,

awareness building on environmental

protection (marketing approach)

Tetra Pak’s recycle achievement
Tetra Pak China's UBC recycle amount and recyle rate
180.0 30.0%
28.0%
26.5%
160.0 25.1%
25.0%
140.0

120.0 18.4% 20.0%

100.0 15.6%
15.0%
12.9% 167.3
80.0
151.3
10.5% 139.4
60.0 10.0%
113.9

6.0% 92.0
40.0
70.2
4.0% 5.0%
20.0 44.9
1.8%
0.8% 23.8
1.8 4.9 13.0
0.0 0.0%
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Weight (1,000 Tones) Recycle rate (%)

 Toyota case: High performance knowledge
sharing network (SCL)
• 3 dilemmas: 1) how to motivate self-interested
members to participate learning network; 2) how to
avoid ‘free rider’ problem; 3) how to maximize the
efficiency of knowledge transfer;

• Overview: Toyota’s knowledge network is effective at

knowledge sharing, in part, because a strong network
‘identity’ has emerged and the network has
established rules (network norms) that support
coordination, communication, and learning.
 Toyota case: knowledge sharing network
• Create a network identify: Toyota Group’s
philosophy called ‘coexistence and co-
prosperity’; facilitate knowledge transfers
among network members.

• Through 4 network level processes:

1) Supplier association(kyohokai);
2) Toyota’s operations management consulting division
(OMCD)-critical advice;
3) Voluntary small group learning teams (jishuken);
4) Inter-firm employee transfers (shukko)
 Toyota case: 1. Supplier association
• Rationale: 1) Promote ‘mutual friendship’; 2) the ‘exchange of technical
information’ between Toyota and its parts suppliers; 3) socialising event;

• Top management meet every other month with regard to production plans,
policies, market trends, etc.

• The ‘topic’ committees on cost, quality, safety, and general affairs are
designed to facilitate knowledge sharing on topics that are critical to all
members; Topics selected with suppliers;
- e.g., Quality committee meet 6 times a year; quality management
conference held each year;

• The PR-Sports committee (which primarily sets up golf events and

baseball activities) is designed to facilitate social interaction among
members i.e., informal socialisation.
Purpose: develop ties and promote multilateral knowledge transfer.
2. Toyota’s Operations Management Consulting
Division (OMCD)
• Established in 1960s to help solve operational
problems both at Toyota and at suppliers;
• 6 senior executives and 50 consultants (internal)
provide onsite assistance; act like internal
consulting firms;

• Free to suppliers;
• Impressive results: 75% inventory reduction;
productivity increase 125%; comparing to 6% and
8% before OMCD was involved.
 Toyota case: 3. Voluntary learning teams
• In 1977, OMCD organized a group of roughly 55–60 of its key suppliers
(providing over 80 percent of its parts in value) into ‘voluntary study groups’;
• Each supplier group consists of roughly five to eight suppliers, some of
whom use similar production processes (e.g., stamping, welding,
painting);

• Group suppliers together based upon: 1) geographic proximity; 2)

competition (direct competitors are not in the same group); and 3)
experience with Toyota (each group has at least one affiliated Toyota
supplier (40-70%);
• Later, group suppliers based on skill level in the US (orange, green,
blue, purple)
• The group representatives spent 4 months on each supplier acting as
consultants to the plant.
Purpose: promotes tacit knowledge sharing within groups.
Toyota case: 4. Inter-firm employee transfers
• Important mechanism for creating a network identity
and transferring knowledge from Toyota to suppliers;
• Toyota transfers approximately 120–130
individuals per year to other firms in the supply
Chain;
• The transferred individuals not only bring
particular technical knowledge with them, but
more importantly they bring with them a
knowledge of Toyota’s personnel, systems, and
technology.
 Toyota case: Network ‘rules’ for knowledge protection and value appropriation

• To overcome the two dilemmas: a) protecting or

hiding valuable knowledge; b) avoiding free riding;
• By simply eliminating the notion that there is ‘proprietary
knowledge’ within certain knowledge domains (e.g.,
production-related knowledge considered network
property);
• Creates a norm of reciprocal knowledge sharing within the
production network; open plants to each other: the ticket
of entry into the network;
• Toyota helps suppliers without any immediate
expectations (e.g., cost) but in the long run, it pays off.
Supply chain integration
 Supply Integration Defined
• SC integration: Professionally managing
suppliers and developing close working
relationships with different internal groups;

• Purpose of supply chain integration

– To become more closely integrated with other
internal and external functions in order to
develop capabilities that will lead to improved
competitive performance (2 aspects).
 Elements of Supply Integration
• People coming together to develop strategy or
solve problems;

• Different people bringing different points of view

to table;

• Team members often located all over the globe;

so, need to develop common understanding of
end goals or purposes.
 People will provide Inputs on:
• Information
– About sales & supply markets
– About plans and requirements (e.g., specification)

• Knowledge and expertise

– Product and service knowledge and technology;
– Process knowledge and understanding “how to
make it work”.
People will provide Inputs on-continued

• Business advantages
– Favorable cost structures which benefit customers
– Economies of scale, which help reduce cost

• Different perspectives
– “Fresh eyes” approach
– Synergy
 Integration with internal stakeholders
Overview
• Consists of many communication flows increasing
exponentially;
• Need to develop global agreements (e.g., how to
communicate);

• Issue: GS of internal functions and activities (e.g.,

HRM outsourcing);
• Identifying requirements for global success (e.g., in a
non-domestic context)
 How to achieve internal integration?
Various mechanisms:
• Cross-functional teams
• Information systems (IS)
• Integrated performance objectives and measures
• Process-focused organization
• Co-location of suppliers and customers
• Buyer or supplier councils
• Steering committee (e.g., heads of functional
departments)
Communication Flows and Linkages
Quality
Assurance

Engineering Operations

Purchasing
Legal and
Accounting and
Environmental
Finance
Safety

Marketing and
Suppliers
Sales
 Integration with operations
• Traditional close relationship through direct
support of supply management;

• Development of global operations strategy;

Sales and Operations Plan (S&OP);

• Often co-located;

• Supply management reports to OM director

(sometimes).
 Integration with Quality Assurance
• Increasing in importance: supply
management-quality linkage;

• Carried out joint supplier quality training and

development; Supplier process capability
studies;

• Joint corrective action planning with suppliers.

 Integration with Engineering
• One of the most important, yet challenging, linkages;

• Working together on joint product and process

development activities;

• Co-locating buyer in engineering;

• Co-locating engineers to work in supply management

(e.g., Mother care: designers in the IPOs)
 Integration with Engineering-continued
Engineering expects supply management to:
• Looking for new sources of technology;
• Ongoing and direct communication;
• Identifying, assessing, and qualifying technically-
capable suppliers;
• Dealing with quality risks in new products (jointly).

Supply management expect engineering:

• Ongoing technical support and service.
 Integration with Accounting and Finance

• Much communication is tactical and electronic;

• Highly focused on cost reduction;

• Inbound material requirements to accounting;

• Reconciliation of P.O.s, invoices, and receiving

documents;
 Integration with Marketing/Sales

• Voice of the customer;

• New product ideas;

• Sales forecasts  production plans (e.g.,

supply management acts as conduct between
sales and production).
 Integration with Environmental Management,
Health, and Safety
• Environmental management system
– Supplier environmental sustainability
– ISO 14000
– Hazardous waste handling and transportation

• Health & Safety issues

– Health and Safety at Work Act 1974 (UK); Occupational
Safety and Health Administration (OSHA) (US);
– SA8000 certification (International)
 Critical Role of Cross-Functional Sourcing
Teams
• Consist of various internal functional areas
and, increasingly, suppliers;
• Specific tasks;
– Supplier selection
– New product design
• General tasks:
– Reducing purchased item costs
– Improving quality
 Cross-Functional Teams
Time Frame
Finite Continuous
Full-Time

Move from project Assigned permanently to

to project specific team with evolving
or changing responsibilities

Personal
Commitment
Support a specific team
assignment in addition to Ongoing support of team
regular responsibilities; assignments in addition to
Disband after completion regular responsibilities

Part-Time
 Benefits of CFTs
• Reduced time to complete tasks;
• Better identification and resolution of problems;
Increased innovation;
• Joint ownership of decisions;
• Enhanced communication among functions or
organizations.
• Realizing synergies by combining individuals and
functions; Need to build internal relationships
through teams (e.g., trust building, commitment
and navigate functional boundaries).
 When to Form a CFT
• Facing a complex or large-scale business
decision;
• CFT is likely to make better quality decision;

• Assignment directly affects firm’s competitive

position;
• No single function has sufficient resources to
solve problem.
External integration
 External Integration with suppliers
• Supply management is the external face of
organization to its supply base;
• Acts as liaison on multiple fronts;
– Raw materials
– New technology
– Supply market information
– Services
• With stakeholders: 1) Suppliers; 2)
government; and 3) local communities
 Integration with Suppliers-continued

• Primary external linkage; maintain open and

continuous communication with suppliers;

• Supplier selection and management;

• Non-supply management functions should not

deal with suppliers without knowledge of
supply management.
 Interaction with Government
• International countertrade issues;
• Negotiation with foreign governments at
different levels and where there is institutional
void (e.g., weak law); on resources and
infrastructure (e.g., land and water);

• Compliance with foreign laws regarding

contracts and suppliers;
• Consult with appropriate agencies regarding
regulatory compliance (e.g., TP: 8 ministries).
 Interaction with Local Communities

• Control of substantial budget which could

affect local economies;

• May affect certain social goals:

– Sourcing from local suppliers
– Awarding contracts to minority suppliers
– Ethical issues