Bowon Kim

Coordinating an innovation in supply chain management

Abstract The importance of a long-term relationship between a manufacturing firm and its supplier(s) has been emphasized in the literature on supply chain management. Essential to such a relationship is the coordination among participants in a supply chain. In order to sustain the relationship, the coordination should enhance the profitability of not only the manufacturer, but also the supplier(s). In this paper, we consider a particular supply chain situation in which the manufacturer coordinates, e.g., supports, its suppliers innovation that can eventually lead to supply cost reduction. Developing a mathematical model, we show that although the coordination could improve the manufacturing firms own profitability, it might not be attractive to the supplier unless the supply cost reduction should ultimately increase the market demand to a certain extent. Under particular circumstances, if the market demand stays constant, the manufacturers profit increase due to the coordination equals the amount of profit loss to the supplier. The analysis presents exact mathematical criteria to determine whether the coordination strategy can be agreeable to both the manufacturer and the supplier. Numerical examples are employed to show the applicability of the criteria.

Dynamic outsourcing to contract manufacturers with different capabilities of reducing the supply cost

Abstract Contract manufacturing is a supply chain arrangement. In this paper, we investigate a situation in which a manufacturing company outsources its assembly operations to two contract manufacturers, taking into account time (as a dynamic factor) and processing level (in terms of assembling) simultaneously. Each contract manufacturer is assumed to have a different level of improvement capability of inducing supply cost reduction that, in turn, benefits the manufacturing company. Two types of contract manufacturer are considered: (i) one which offers a cheaper current price for its supply, but having little improvement capability and thus little potential for future supply cost reduction; (ii) the other, although offering a higher price, possesses a higher improvement capability. The decision problem faced by the manufacturing company is twofold: over time, (a) how much should be outsourced to each contract manufacturer (i.e., less capable or more capable); and (b) how processed (in terms of assembling) should the semi-finished units be when returned from the contract manufacturers. An optimal control model helps us develop a set of mathematical results, which can solve the decision problem. Numerical examples are also employed to demonstrate how the analysis can be utilized in a real-world setting.

Optimal pricing, EOL (end of life) warranty, and spare parts manufacturing strategy amid product transition

Abstract We study firm’s strategy to determine its product price and warranty period, and plan the spare parts manufacturing so as to maximize its profit and at the same time to fulfill its commitment to providing the customer with the key part continuously over the relevant decision time horizon, i.e., the product’s life cycle plus its EOL service (warranty) period . To examine the research question, we develop and solve a two-stage optimal control theory model. From the numerical analysis, we infer as follows. It is not always true that the longer the EOL warranty period, the better for the company’s profitability, implying there exists an optimal EOL warranty period that balances all the relevant forces like market demand and cost structures. The relationship between optimal EOL warranty period and failure rate (defect rate) is concave: when the defect rate is moderate, the company has to increase its EOL warranty period as the defect rate increases so as to compensate for the deteriorating quality; but, when the defect rate is beyond a threshold level, the company needs to curtail its EOL warranty commitment as the defect rate increases in order to avoid excessive cost to service the failed parts. By depicting key dynamics in this managerial problem, this paper sheds light on how to make decision for optimal pricing and warranty when the product life cycle is finite and the company is obliged to provide after-sales services to customers for an extended period of time after the current product is no longer produced.

Alternative Methods of Learning and Process Improvement in Manufacturing

This exploratory paper examines one class of decision related to learning and operations improvement: how and where to develop new manufacturing technologies as part of a program of continuous improvement. We examine the reasons for both the selection and the relative effectiveness of two methods for manufacturing improvement: learning by doing (in-process learning) on the shop floor and learning by development and experimentation away from the shop floor (off-line learning). We then explore how the development strategy selected affects the subsequent decision-making process, and how strongly initial choices about improvement methods affect later ones. Empirical data are presented from two Korean shipbuilding companies. While the structural characteristics of a plant, such as its layout and equipment, do appear to influence the improvement method it selects, we find that other factors, such as corporate philosophy and plant history also play an important role in the initial selection of improvement method. However, these determining factors fade in importance sharply over time, as the plant develops its ability to improve using that particular method. The fact the plant has practised improvement by one method (and, therefore, has often become relatively better at that mode of learning), begins to dominate the selection of future improvement techniques. Although this process is quite rational at each planning step, it can result in improvement processes in which small changes in initial circumstances and managerial choices cause large changes in the overall improvement path. The results also suggest that when managers choose any improvement methodology, they are not only learning about their manufacturing systems—they are choosing how their operation will learn, and indeed may lock themselves into that mode of learning for a longer duration than that of the current set of improvement projects.

The impact of decision‐making sharing between supplier and manufacturer on their collaboration performance

Purpose – IThe purpose of this paper is to focus on manufacturers and suppliers who engage in strategic relationships for quality improvement and new product development. Depending on the balance of bargaining power in the relationship, each partners resource commitment to the activities such as quality improvement and new product development may vary. This has implications for both manufacturer and supplier profitability. Therefore the paper aims to investigate how variations in the structure of the decision‐making process (i.e. manufacturer dominated, supplier dominated, or balanced) affect the performance of each partner in strategic collaborative relationship.Design/methodology/approach – In order to answer the research question, the paper uses real data from a telecommunications company to develop a simulation model and conduct a what‐if analysis.Findings – The analysis shows that sharing the decision‐making process has indeed a significant impact on the collaboration performance: an optimal outcome...

Managing the transition of technology life cycle

For a technology platform or paradigm, there are multiple generations of technology. In turn, multitude of products and/or services could be derived from each technology generation, which follows a life cycle and will be eventually replaced by the next generation. Here both old and new technologies are based on the same technology platform. In this research, we explore how to manage the transition of technology generations, from a macro level perspective. We develop analytical models and test them using a simulation technique. The results show how the key determining factors interact with each other, in particular, how the optimal switching time between technology generations is determined by such factors as technological uncertainty embedded in the technology, the cost to switch from one generation to another, and the utility which the economy enjoys by utilizing the technology platform.

The perception gap among buyer and suppliers in the semiconductor industry

Strong and productive partnerships between buyers and suppliers are important for effective outsourcing. Such partnerships should be based on mutual understanding, which can be hampered by a perception gap between the supply chain partners with respect to what are the critical factors for a successful buyer‐supplier relationship. The nature of such a perception gap is explored by looking into the partnership between a Korean semiconductor manufacturer and its suppliers. Results indicate that there exist statistically significant differences in some of the perceptions both between the manufacturer and its suppliers and among the suppliers according to their production capability and product requirement.

Competitive priorities and supply chain strategy in the fashion industry

Purpose – The purpose of this paper is to explore how high‐performing companies in the fashion industry align their supply chain strategy with their competitive priorities.Design/methodology/approach – In order to answer the research question, case study research on four fashion companies most competitive in the global market. The primary sources of information for the case studies were interview data.Findings – Based on in‐depth interviews with top managers at the companies, propositions are reached: the competitive priorities are closely linked with the firms choice of target market, which in turn determines its supply chain strategy, including both sourcing and channel strategy.Research limitations/implications – This paper shows how in‐depth case studies based on interview data about best practices in the fashion industry can contribute to the literature by linking firms competitive priorities with its supply chain strategy.Practical implications – The research outcome enables managers to design the...

Pollution accumulation and abatement policy in a supply chain

This paper seeks to determine how the double marginalization phenomenon affects the tradeoff between polluting emissions and abatement activities related to pollution accumulation in a supply chain composed of one manufacturer and one retailer. The environmental consequence of this inefficiency, which emerges in a non-cooperative vertical setting governed by a single-parameter contract, is overlooked in the literature on pollution control. In the setup of a two-stage game, we investigate the impact of double marginalization for non-cooperative equilibrium. To check whether there are differences between dynamic and strategic effects of double marginalization on pollution accumulation, both the open-loop and feedback Nash equilibria are derived over a finite time horizon, with the cooperative solution as a benchmark.

Modes of foreign market entry by Korean SI firms

As an exploratory study, our research aims to investigate what factors would influence choices of foreign market entry mode by system integration (SI) companies. There are two distinct points. First, we specifically focus on a service industry, i.e., SI (System Integration) industry, which has unique features compared with other industries, yet not been studied extensively. Second, we indirectly examine whether forces influencing firms in an advancing country like Korea are different from those in more advanced countries: in this paper we investigate the Korean cases only, since most of the previous studies viewed this issue from the perspective of advanced countries.