Abraham Zhang

Impacts of business environment changes on global manufacturing outsourcing in China

Purpose – Rising production costs in coastal China have caused the popularity of the “China plus one” strategy, and the hike in oil prices favors near‐shore outsourcing to reduce transportation costs. Taking into consideration supply chain strategy, this paper aims to investigate the impacts of these major business environment changes on manufacturing outsourcing in China.Design/methodology/approach – Considering costs and lead times, a bi‐objective integer programming model is developed to determine optimal supply chain configuration decisions under various business environment scenarios. A case study with a family of footwear products is used to illustrate model application and present detailed analyses.Findings – Impacts of factors could be non‐intuitive. Partial relocation may be better than relocating all manufacturing steps to lower‐cost regions. Coastal China is still attractive for products with short order lead times, because of its formation of industrial clusters and efficient logistics service...

Daily Maersk’s impacts on shipper’s supply chain inventories and implications for the liner shipping industry

The liner shipping industry has long been characterized by a weekly sailing frequency and schedule unreliability. This research is motivated by the launch of the revolutionary “Daily Maersk” service in late 2011, which introduced daily departures and “absolute reliability” in the Asia–North Europe trade lane. This article analyzes Daily Maersk’s impacts on a shipper’s supply chain inventories and profound implications for the liner shipping industry as a game changer. The quantitative analyses show that the impact of more frequent sailings is most significant on a shipper’s cycle stock, while improving schedule reliability substantially reduces safety stock and pipeline stock. Daily Maersk is most valuable for products that have high value density, high inventory holding cost ratio, low demand variability, and high service level (SL) requirement. These findings imply that the trend of liner alliance/merger/acquisition is likely to continue or even accelerate as shipping lines consolidate fleet capacity to offer more frequent sailings. Rival carriers may step up their involvement in terminal operations to improve schedule reliability. They also need to rethink about their SL targets and clearly define their preferred customer segments.

Port strategy in the era of supply chain management: the case of Hong Kong

This article studies port strategy from a supply chain perspective considering the case of Hong Kong. Hong Kong port used to be the world’s busiest container port, but it is now in danger of losing its hub status due to rising competition from neighboring lower-cost rivals. The analysis shows that Hong Kong’s free port status and world-class customs clearance offer the port a sustainable and considerable advantage to shorten transit time. The port is thus a strategic fit for the shipping of high-value and time-sensitive cargoes, and should pursue an agile strategy for a responsive supply chain. It is imperative for the port to strengthen its core competencies in agility by retaining a favorable position in port rotation with shipping lines and raising the efficiency of barging. Further reducing cost substantially would be beneficial, but might not be feasible and should not be the primary nor sole focus of policy makers and port operators.

Active scheduling for hybrid flowshop with family setup time and inconsistent family formation

This research is motivated by a real-life hybrid flowshop scheduling problem where jobs are organized in families according to their machine settings and tools. This type of problem is common in the production process of standard metal components. The problem is complicated by the requirement of family setup time when a machine changes from processing one job family to another and the formation of job families varies in different stages. This problem has been previously solved with a non-delay scheduling heuristic in which no machine is kept idle. This research illustrates that inserting intentional idle time into a non-delay schedule can further reduce the total setup time as well as makespan. With the inserted idle time, the non-delay schedules are extended to active schedules. This paper presents a mechanism to determine the locations and lengths of intentional idle times in the efficient active schedules. Four active scheduling approaches are developed by integrating two types of waiting factor operators into two non-delay approaches. Computational experiments have been conducted to compare the proposed active scheduling approaches in terms of effectiveness and efficiency. The results have shown that the proposed active scheduling approaches are superior to non-delay scheduling. The analysis of variance has been applied on the factors related to scheduling environment, problem size and scheduling approach. The analysis has identified factors that are most influential on the scheduling result.

Third-party purchase: an empirical study of Chinese third-party logistics users

Purpose – Third-party purchase (3PP) is a new value-added service offered by third-party logistics (3PL) providers. The purpose of this paper is to examine the perception of 3PP service from the perspective of 3PL users. Design/methodology/approach – The authors conducted a survey of Chinese 3PL users and received 242 usable responses. The authors then employed structural equation modeling to test the conceptual model. Findings – The authors found that the likelihood of 3PL users using a 3PP service is significantly associated with uncertainty, but not with asset specificity or frequency or transaction size. 3PP usage is significantly associated with value-to-client. Originality/value – This research is the first survey study of 3PP as a value-added service offered by 3PL providers, from the perspective of 3PL users. The findings suggest that 3PL users are very positive about the value of 3PP service. The 3PP market is still in its infancy but it has great potential, especially for commodity items that ha...

A supply chain configuration model for reassessing global manufacturing in China

Purpose – Global manufacturers have faced unprecedented cost pressures in China because of Chinese currency appreciation, rising labour costs, higher oil prices and reduced value‐added tax rebates. This paper aims to reassess the decision of operating global manufacturing facilities in China.Design/methodology/approach – A mixed integer programming model is developed for a typical global manufacturing supply chain that includes production in the Pearl River Delta region and trade in Hong Kong. A case study with a footwear product is used to illustrate model application and present detailed analyses.Findings – The modelling results affirm the need of relocating labour‐intensive production that mainly competes on low costs. Nevertheless, coastal China offers considerable benefits from industrial clustering and a logistics advantage in comparison with inland China and Asian countries where labour costs are still relatively low. Hong Kong remains a robust location choice for trade operations because of its fa...

Allocation flexibility for agribusiness supply chains under market demand disruption

Abstract This paper develops a multi-commodity multi-period optimisation model to analyse market demand disruption risk in agribusiness supply chains. It investigates the role of allocation flexibility and the effectiveness of multiple risk management strategies for achieving allocation flexibility. A robust optimisation formulation is used to obtain risk-averse solutions for an objective combining expected profit and risk. Numerical results are presented for a real-life case study of Zespri’s kiwifruit supply chain. The results show that allocation flexibility is effective for mitigating market demand disruption risk. Three proposed risk management strategies, namely diversified demand market, backup demand market and flexible rerouting, improve both expected profit and risk measures. While diversified demand market and backup demand market strategies are equally important for all decision-makers, flexible rerouting is especially significant for less risk-averse decision-makers.

Lean and Six Sigma in logistics: a pilot survey study in Singapore

Purpose Lean and Six Sigma are the two most powerful methodologies for process improvement. They have been widely employed in manufacturing and healthcare industries to achieve substantial cost savings and quality improvement. The purpose of this paper is to investigate the implementation of Lean and Six Sigma for improving logistics operations. Design/methodology/approach A survey was conducted among 410 companies registered under the Singapore Logistics Association and returned 32 usable responses. χ2-tests were used to identify factors affecting the implementation of Lean and Six Sigma. Findings It was found that 37.5 per cent of respondents had implemented Lean and the majority of them had implemented Six Sigma together. All implementing companies reported varying degrees of cost savings and productivity improvements. Large logistics companies are more likely to implement Lean and Six Sigma. Companies with a higher service standard are more likely to implement Six Sigma. Research limitations/implications The survey was limited to Singapore. Future studies should explore a broader geographical coverage and improve the response rate. Practical implications Lean and Six Sigma are applicable for improving logistics operations. Senior management must be committed to support an implementation. Effective training and communications are required for overcoming resistance to change and helping employees to understand improvement methodologies and initiatives. Originality/value This research is the very first survey study of Lean and Six Sigma in the logistics industry. It reveals similarities and differences in comparison with the implementation of these methodologies in the manufacturing industry. The findings offer valuable insights for improving logistics operations.

Impacts of business environment changes on global manufacturing in the Chinese Greater Pearl River Delta: a supply chain perspective

Business operating conditions have changed substantially in the Chinese Greater Pearl River Delta (GPRD) due to the Chinese currency appreciation, rising labour costs, highly volatile oil prices and new processing trade policies. Such changes have triggered manufacturers to rethink their global operations. This article studies potential global manufacturing trends from a supply chain perspective. A mixed integer programming model suggests that these changes have negatively affected the regions competitive advantages as its labour-intensive production mainly targets at the mass market and competes on low costs. Three production relocation trends are affirmed, i.e. the relocation to lower-cost areas within China, lower-cost Asian countries and areas near end markets. However, it is also discovered that the GPRD region still attracts businesses with its formation of industrial clusters, the enhanced comparative advantage against competing regions in inland China or Asian lower-cost countries under high oil prices, and Hong Kongs being a robust location choice to host trade operations.

A multi-period mixed integer programming model for the problem of relocating a global manufacturing facility

In the recent years, changing business conditions have triggered labor-intensive global manufacturers to consider relocating out of the Pearl River Delta of China, known as “The Worlds Factory.” This article presents a multi-period mixed integer programming model for the problem of relocating a global manufacturing facility. The objective function of the model is to maximize total after-tax profit. The model addresses dynamic aspects of timing, including potential developments in business factors and the need for a gradual capacity transfer in order not to disrupt supply chain activities. The model application generates an optimal capacity transfer schedule and forecasts after-tax profits. In general, a stable exchange rate for the Chinese currency, renminbi (RMB), would make lower-cost areas of China more competitive. Also, a dramatic RMB appreciation would enhance the comparative advantage of Asian lower-cost countries. A rapid increase in oil prices would make locations near major markets more favorable in order to avoid high transportation costs.