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Abstract
The study empirically explores the supply strategies of European manufacturing rms within the third edition of the International
Manufacturing Strategy Survey. Four clusters are identied on the basis of the supplier selection criteria and the integration
mechanisms adopted. Two clusters are similar to the Lean and the Agile models, while the other two are more traditional supply
strategies, even if they present some advancement compared to the arms-length supply model. The strategies are then described in
terms of contingent and structural factors and manufacturing performance. Lean and Agile strategies outperform the other clusters
on many dimensions, while no signicant difference emerges between the two in terms of performance.
r 2005 Elsevier Ltd. All rights reserved.
Keywords: Supply strategy; Lean; Agile
1. Introduction
In todays competitive environment, the management
of purchasing and supply has become a key issue for
most companies, leading to the recognition of its
strategic relevance (Dyer, 1996; Carter and Narasimhan,
1996; Narasimhan and Das, 1999; Mol, 2003). Recent
studies expressed the need for the denition of a supply
strategy, extending concepts developed in the eld of
manufacturing and operations strategy to the management of upstream relationships (Harland, 1996; Harland
et al., 1999). Supply strategies are generally dened on
the basis of either supplier selection criteria or integration mechanisms. Some authors consider supplier
selection criteria as the link between the competitive
strategy of the buying rm and the supply strategy, in
the sense that they align supply with competitive
Corresponding author. Tel.: +39 02 2399 2801;
fax: +39 02 2399 2720.
E-mail addresses: raffaella.cagliano@polimi.it (R. Cagliano),
federico.caniato@polimi.it (F. Caniato), gianluca.spina@polimi.it
(G. Spina).
1478-4092/$ - see front matter r 2005 Elsevier Ltd. All rights reserved.
doi:10.1016/j.pursup.2004.11.001
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2. Research background
Both evidence from the eld and widely recognised
contributions in the literature (Venkatesan, 1992; Quinn
and Hilmer, 1994; Quinn, 1999) agree that in the last
decades more and more activities have been externalised, leading rms to concentrate on a limited set of
tasks that contribute, together with many other companies, to the production of increasingly complex systems.
Thus, company performance no longer depends only on
the effectiveness and efciency of internal processes, but
is instead strongly inuenced by inter-company processes, that is, the processes that involve activities
performed by subjects belonging to different companies
(e.g. Stevens, 1989).
In particular, the role of purchasing has evolved
dramatically in the recent past, due to both the increased
level of outsourcing and the globalisation of the business
environment, requiring the development of advanced
supply management capabilities (e.g. Kraljic, 1983;
Olsen and Ellram, 1997). In this context, purchasing is
considered more relevant than in the past, to the point
of achieving strategic importance (e.g. Dyer, 1996;
Carter and Narasimhan, 1996; Narasimhan and Das,
1999; Mol, 2003).
2.1. Supply strategy
The need to dene supply management strategies is
widely recognised in the literature (e.g. Watts and Hahn,
1993; Harland, 1996; Harland et al., 1999; Krause et al.,
2001). Also, the process and the content of supply
strategy are debated by a number of scholars. Among
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high quality. This model prescribes long-term relationships between customers and suppliers, based upon a
close integration of both physical and information ows,
adopting practices such as EDI exchange, cost transparency, JIT with Kanban, co-design, etc. A similar model
is network sourcing, proposed by Hines (1994), which is
based on Japanese automotive industry and puts high
emphasis on supplier coordination, supplier development and the creation of a tiered network.
An alternative model, which also received great
attention, is Agile supply (Christopher, 2000; Van Hoek
et al., 2001; Christopher and Towill, 2002). This model,
developed in industries such as apparel and personal
computer, characterised by high volatility and uncertainty of demand, focuses on achieving high responsiveness to the market through the management of a
dynamic supply network. The main goals are speed of
delivery, exibility and quality, which can be achieved
through dynamic partnerships, rich information sharing
and the coordination of physical ows without rigid
investments, in order to allow rapid reconguration.
The adoption of a supply model is the translation into
practice of a supply strategy. However, existing contributions either compare different strategies dened on
a single dimension or describe a single model through
multiple dimensions, but mainly on the basis of case
evidence, or compare different models from a theoretical
perspective. Despite the existing contributions, however,
literature still lacks an extensive empirical analysis of
alternative supply strategies based on multiple dimensions, which instead could provide a more complete
picture of the levers available to managers for shaping
the supply strategy in different contexts and to align it
with company goals.
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Table 1
Geographical distribution of the sample
Country
Country
Belgium
Denmark
Germany
Hungary
Ireland
Italy
14
30
23
30
25
53
4.9
10.6
8.1
10.6
8.8
18.7
Norway
Netherlands
Spain
Sweden
UK
27
12
15
19
36
9.5
4.2
5.3
6.7
12.7
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Table 2
Industry distribution of the sample
N
ISIC
Industry
381
382
383
384
385
80
87
67
25
25
28.2
30.6
23.6
8.8
8.8
284
Total
100
Table 3
Variables used in the analysis
Area
Supply strategy
Supplier selection criteria
Integration mechanisms
Manufacturing performance
Variable
Scale
Average
Quality of products/services
Delivery performance
Lowest Price
Supplier potential development
Logistic costs
Willingness to share information
Physical proximity
Legal and contractual terms
Agreements on delivery frequency
Information sharing on forecasts and production plans
Supply base redesign
VMI or consignment stock
Kanban systems
Co-location of plants
4.44
4.32
3.80
3.40
3.08
2.90
2.80
2.74
3.78
3.30
2.84
2.38
2.19
1.78
Industry
Size
Purchasing costs on total manufacturing costs
Domestic purchases
Purchases in Europe
Global purchases
ISIC code
Categorical
%
%
%
%
57.7%
54.0%
30.5%
15.5%
Volume exibility
Manufacturing conformance
Delivery speed
Delivery reliability
Manufacturing lead time
Mix exibility
Procurement lead time
Procurement cost
(1
(1
(1
(1
(1
(1
(1
(1
deteriorated5
deteriorated5
deteriorated5
deteriorated5
deteriorated5
deteriorated5
deteriorated5
deteriorated5
improved)
improved)
improved)
improved)
improved)
improved)
improved)
improved)
3.76
3.63
3.63
3.61
3.61
3.60
3.33
3.30
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The factor analysis on integration mechanisms conrmed the existence of two different dimensions:
157
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Table 4
Conrmative factor analysis
Dimension
Factor
Variable
Factor loading
Factor average
Cronbachs alpha
Supplier selection
criteria
Operational
performance
Quality of products/
services
Delivery
performance
Logistic costs
0.612
3.94
0.614
0.644
0.562
Lowest price
Collaboration and
potential
performance
Integration
mechanisms
Information sharing
Chi-square
d.f.
p-value
CFI
NFI
NNFI/TLI
3.76
Willingness to share
information
0.774
Legal and
contractual terms
Supplier potential
development
Physical proximity
0.671
Information sharing
on forecasts and
production plans
Agreements on
delivery frequency
VMI or consignment
stock
Kanban systems
Supply base redesign
Co-location of plants
2.93
0.677
3.58
0.607
2.28
0.542
0.585
0.352
0.592
0.733
0.505
0.613
0.452
0.333
98.684
59
0.001
0.994
0.987
0.991
Finally, the impact of supply strategy on manufacturing performance was evaluated, using ANOVA to
measure the signicance of the differences in the values
of each performance variable between the clusters. Post
hoc tests with the Scheffe` method was also used, in the
same way as we did for the congurations.
5. Results
5.1. Supply strategy configurations
The constructs measuring supply strategy identied
through the factor analysis were used to detect supply
strategy congurations, using a cluster analysis that
resulted in the nal classication of the companies into
four groups. Table 5 shows, for each cluster, the number
of rms, the cluster centre (average value of each factor)
and the ANOVA signicance (which can be used only
for descriptive purposes because the clusters have been
chosen to maximise the differences among cases in
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Table 5
Supply strategy congurations (number in brackets indicate clusters that are different at po0:05)
Area
Factor
Sample
1. Leanness
2. Agility
3. Price and
visibility
4. Leverage
ANOVA
sig.
Selection
criteria
Operational performance
3.94
4.23 (3,4)
4.09 (3,4)
3.77 (1,2,4)
3.47 (1,2,3)
0.000
Lower price
Collaboration and
potential performance
Information sharing
3.76
2.93
4.44 (2,4)
3.32 (3,4)
2.78 (1,3)
3.21 (3,4)
4.36 (2,4)
2.63 (1,2)
2.56 (1,3)
2.39 (1,2)
0.000
0.000
3.55
4.35 (2,3,4)
4.01 (1,3,4)
3.09 (1,2,4)
2.41 (1,2,3)
0.000
2.26
2.71 (3,4)
2.48 (3,4)
1.95 (1,2)
1.86 (1,2)
0.000
284
100%
82
28.9%
67
23.6%
96
33.8%
39
13.7%
Operational
integration
base and the adoption of system coupling mechanisms, although not as much as with information
integration. In summary, this cluster is characterised
by an equally high attention to supplier performance,
price and collaboration potential, and a systematic
and diffused adoption of supply integration practices,
both forward and backward, in line with the wellknown model of Lean supply proposed by Lamming
(1993), which prescribes the selection of suppliers
according to all relevant criteria and the adoption of
advanced integration mechanisms in order to establish close collaboration. This cluster accounts for
28.9% of the sample.
2. Agility: the second cluster highlighted by the analysis
is characterised by the selection of suppliers mainly
on operational performance, but with also a relevant
attention to collaboration and potential performance,
while price is less important compared to clusters 1
and 3. There is also a large adoption of information
sharing mechanisms while supply base redesign and
system coupling is only partially in place. We can
conclude that these companies are characterised by
an approach to supply management focused on
exploiting information integration mechanisms to
obtain high performance from suppliers, also through
collaboration and advanced relationships. This strategy is very close to the Agile supply model proposed
by Christopher (2000), which prescribes the selection
of suppliers mainly on the basis of quality, speed and
exibility, the creation of long-term collaboration
and the integration through information technology.
This cluster represents 23.6% of the sample.
3. Price and visibility: companies belonging to this group
select suppliers rst of all on the basis of price, while
operational performance, although not negligible, is
less important, probably as an order qualier, not an
order winner. Collaboration and potential performance are unimportant criteria. This denotes a shortterm market approach to supply, but interestingly the
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Table 6
Supply strategy congurations across industries (ISIC codes)
381
382
383
384
385
Chi-square sig.
1. Leanness (%)
2. Agility (%)
4. Leverage (%)
Sample (%)
22.0
30.5
30.5
11.0
6.1
34.3
26.9
16.4
9.0
13.4
28.1
30.2
24.0
9.4
8.3
30.8
38.5
20.5
2.6
7.7
28.2
30.6
23.6
8.8
8.8
0.489
Table 7
Supply strategy congurations and rm size
Small (o249)
Medium (250499)
Large (500+)
Chi-square sig.
1. Leanness (%)
2. Agility (%)
4. Leverage (%)
Sample (%)
39.0
19.5
41.5
49.3
14.9
35.8
58.3
24.0
17.7
71.8
12.8
15.4
52.5
19.0
28.5
0.001
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Table 8
Supply strategy congurations and incidence of purchasing on total production costs
1. Leanness
2. Agility
4. Leverage
Sample
Average
60.0%
57.8%
56.4%
55.8%
57.7%
ANOVA sig.
0.491
Table 9
Supply strategy congurations and internationalisation of purchasing
Domestic
Europe
Global
1. Leanness (%)
2. Agility (%)
4. Leverage (%)
Sample (%)
ANOVA sig.
47.9
33.0
19.1
52.3
28.4
19.3
58.8
29.5
11.6
57.9
31.1
11.0
54.0
30.5
15.5
0.096
0.715
0.033
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Table 10
Supply strategy congurations and manufacturing performance (number in brackets indicate clusters that are different at po0:05)
Volume exibility
Manufacturing conformance
Delivery speed
Delivery reliability
Manufacturing lead time
Mix exibility
Procurement lead time
Procurement cost
1. Leanness
2. Agility
4. Leverage
Sample
ANOVA sig.
4.01
3.82
3.71
3.77
3.79
3.89
3.44
3.48
3.75
3.74
3.64
3.57
3.65
3.64
3.46 (4)
3.42
3.72
3.47 (1)
3.55
3.56
3.47 (1)
3.47 (1)
3.25
3.16
3.37
3.47
3.68
3.47
3.53
3.29
3.08
3.03
3.76
3.63
3.63
3.61
3.61
3.60
3.33
3.30
0.000
0.000
0.586
0.275
0.012
0.000
0.025
0.005
(4)
(3,4)
(3)
(3,4)
(4)
6. Conclusions
This study identied on an empirical basis different
congurations of supply strategy, i.e. alternative sets of
decisions and practices that are adopted by European
companies in the engineering sector to manage their
supply relationships.
(1)
(1)
(1)
(2)
(1)
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