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The High Technology industries are highly capital-intensive enterprises dealing with short life-cycle products, offering potential to simultaneously examine different perspectives of collaborative relationships. Although the extant literature on collaborative activities in business enterprises has progressed along the different stages in the industrial value chain, there is lack of cohesion in the current state of the art. Conceptual clarity and contextual description in particular are dispersed and disintegrated in the current state. In order to integrate the literature and highlight its contributions, it is essential to provide a more technical description and a discussion on supply chain collaboration from various perspectives of the High Technology industry. In this paper, the issues pertaining to responsiveness, collaborative development practices, strategic procurement and information technology (IT), and control-oriented approaches are presented. By effectively doing so, we provide a comprehensive literature review to determine the scope for the scope for the future research in the High Technology industries and other similar manufacturing environments.
Key words: High Technology industry supply chain, Responsive supply chain, Strategic procurement, Collaborative practices
The supply chain (SC) planning and coordination environment and the manufacturing processes of the high-tech industries are very complex. These industries require highly capital-intensive capacity of the contract manufacturers [Kamath and Roy (2007)]. The lead time for expansion of the capacity is very long. These industries have to sustain a time-based competition due to the fast moving technology [Hwang et al. (2008)]. The high-tech industry SC is characterized by the procurement of high-tech products and components with a smaller number of original equipment manufacturers and a large number of small- and medium-sized suppliers of equipments and materials. The major challenge in this SC is the accurate and real-time information sharing [Kaipia and Holmstrom (2007)]. The increased competition, customization and globalization in the high-tech industry dealing with short life cycle products have motivated the supply chain members to devise some schemes to collaborate with each other [Wang and Archer (2007)]. Keeping this in view, the purpose of this work has been to provide a brief background of the High Technology industry supply chain, and to examine the reasons behind the current transformations within this industry, focusing specifically on the reasons behind the emergence of collaborative initiatives to survive in the marketplace.
The High Technology manufacturing industries do not employ the same supply networks when supply and demands are subjected to unexpected change, which results in a permanent change in markets or strategies [Curry and Kenney (1999)]. Those structural changes usually occur due to the economic progress, political and social change, demographic trends, and technological advances [Ganesh (2004)]. These industries keep adapting their supply chains to adjust to changing needs. The best supply chains in the High Technology industries must identify the structural changes by capturing the latest data, and tracking key demand-supply patterns [Lummus and Vokkura (1999), Reddy and Rajendran (2005), Lapide (2006)]. This would help them to relocate facilities, change sources of supplies, and, if possible, outsource manufacturing.
The High Technology industries succeed in launching new products or entering into new markets by adapting supply chains with modified strategies [Lamothe et al. (2006)]. Speed to market and technical support may be crucial for ensuring the products' successful launch. So, it is required to set up facilities close to biggest target markets, which may be relatively expensive. As the speed may not be as critical as costs for medium-term survival of these products, these industries can shift the product's supply chain to other countries. The resulting cost savings will allow these industries to remain as leader in a highly competitive market.
The High Technology manufacturing industries can customize their supply chains to the nature of markets for products [Lau et al. (2006), Hwang et al. (2008)]. They may employ more than one supply chain (due to multiple customized product requirements), which can be expensive, but this will help them to get the best manufacturing and distribution capabilities for each product. These industries may set up manufacturing and sourcing in one country to ensure cost efficiency, in another country to guarantee speed and flexibility, and a supply network in a third country to maintain quality. As a result, this industry will incur higher overhead costs, lower scale economies in purchasing and manufacturing, and larger transportation costs in comparison to a single supply chain. However, since its brands cater to different customer segments, it can use different kinds of supply networks to maintain distinctive positions in the market.
Sometimes it is difficult for the High Technology industry to define the appropriate markets, especially when they are launching innovative new products with different levels of technology [Norris et al. (2000), Meixell and Wu (2001), Fisher (2006)]. Further, every product is at a certain stage of its life cycle [Cecil et al. (2006)]. By mapping either or both of these characteristics to supply chain partners, manufacturing network, and distribution system, the High Technology industries can develop optimal supply chains for every product or service they offer. So, developing an adaptable supply chain requires two key components: the ability to identify market trends and the capability to change supply networks. In order to identify future patterns, it is necessary to track economic changes in developing countries, and to identify the needs of ultimate customers.
2. The Supply Chain Environment
The fabless model of High Technology industry supply chain primarily focuses on research, design and development. There seems to be less emphasis on the investment in the industries and equipments, and more emphasis on design tools and resources [Stray et al. (2006), Marquez and Blanchar (2006)]. This design focus has made the fabless industries to create new High Technology products in the market and allows them to adapt to the new technology markets created by others [Fisher (2006)]. The fabless environment allows more time and resource allocation for circuit design procedures [Chung and Huang (2002)]. Set-up costs associated with wafer foundry are avoided and issues associated with wafer fabrication are minimized [Iwata and Wood (2002), Montoya-Torres (2006)]. Fabless industries are also able to transfer the responsibilities and risks associated with customer requirements to their foundry partners and other suppliers [Hwang et al. (2008)]. This results in rapid response to market and customer demands.
However, effective management of the fabless supply chain requires that these industries must accurately plan for capacity and material requirements [Christie and Wu (2002), Chauhan et al. (2004)]. With the volatile nature of this high-tech industry, the market demands change frequently. So, supply chain planning must be quick, and planning changes must be visible to all stakeholders [Miller (2002)]. The fabless industries must try to improve their business performance and exploit supply chain opportunities by integrating intelligent planning solutions and superior optimization technology [Kriepl and Pinedo (2004), Gupta et al. (2006)]. These industries may address the following two broad supply chain planning issues:
Unified strategic, tactical and operational supply chain optimization in a single planning environment with resource allocation [Schmidt and Wilhelm (2000), Yeh (2000), Fung and Chen (2005), Mistry (2005), Hwang et al. (2008)]
Internet collaboration with all business partners with problem solving approaches and system architecture [Peng et al. (2005), Cecil et al. (2006), Simatupang and Sridharan (2008), Chiang et al. (2007)]
The general relationships between the members of fabless supply chain (subcontractors, and customers) are depicted in Figure 1. As the customer demands are placed at finished goods level, manufacturing requirements are communicated to final test, assembly, wafer probe, and to the foundries. Efficient means of communication are necessary to ensure the success of the process, which can be achieved through the participation of the supply chain partners in the e-marketplaces. Due to the lengthy supply chain planning cycle, the fabless industries typically plan on a monthly basis, and react to changes in customer requirements on an hourly basis.
Figure 1: Relationship between members in a semiconductor SC (pull system)
Customer / Demand
OEM: Original Equipment Manufacturer
AT: Assembly/ Testing
Probe: Wafer Probe
2.1 Response to Changes in the High Technology Industry Supply Chain
Usually, the High Technology industry supply chain consists of materials and equipment suppliers, manufacturing and other service suppliers, High Technology device suppliers, distribution channels, original equipment manufacturers (OEMs), associated service and content providers, and equipment end users [Berry et al. (1994)]. The network of relationships in the High Technology industry supply chain is evolving as a result of pressures on both the demand and the supply side [Kim et al. (1999), Ritter et al. (2004)]. The goal of each activity in a supply chain is to add more value for the customer than the cost of carrying out the activity [Sahay (2003), Pohlen and Goldsby (2003)]. The ability to add value depends ultimately on a cost advantage, on differentiation, or on the ability to reconfigure the supply chain [Hwang et al. (2008)]. The structure of the supply chain changes periodically depending on the degree of vertical and horizontal integration that maximizes profits at a given point in time [Kapur et al. (2003)].
General industry trends will likely cause uncertainty in the supply and demand sides of the High Technology industry [Kim et al. (1999)]. The processes are being commoditized, and the value in High Technology devices is shifting away from manufacturing into design [Fisher (2006)]. At the same time, proper utilization of resources is becoming more challenging [Stray et al. (2006)]. Lifetime High Technology product volumes are decreasing relative to the growing scale of chip fabrications due to the proliferation of low-volume applications and chips with greater levels of application-specific functions [Banerjee (2007)]. So, the participants of the High Technology industry supply chain must consider the impacts of these changes in the supply chain, and must prepare to deal with an increasingly complex group of stakeholders. They have to adopt new business models, possibly through outsourcing or subcontracting some operations to enhance downstream competencies for the end-customers [Mason et al. (2002)]. The major changes affecting this industry can be explored by considering both downstream (demand) and upstream (supply) changes in the supply chain affecting the suppliers dealing with High Technology materials, components and devices.
(a) Demand side issues
The demand side issues in the High Technology industry supply chains may be characterized as follows:
The demand is driven by a large number of relatively low-volume applications, which makes it difficult for integrated device manufacturers (IDMs) to keep their fabrication facilities operating at optimal utilization efficiency, and support design and manufacturing costs [Stray et al. (2006)].
These industries are exposed to the requirements of multiple product categories [Berry et al. (1994)]. This greatly increases the potential number of suppliers, original equipment manufacturers (OEMs), and buyers that the High Technology industry supply chain members need to understand and deal with.
As many of the applications are becoming commodity products, and the customer requirements on the demand side of the supply chain are moving from hardware to service and content providers, the High Technology suppliers must interact with a new and heterogeneous group of buyers for design of innovative products and business [Kaipia and Holmstrom (2007)].
As the number of supply chain stakeholders increases, the profit margins are decreasing as the value associated with electronic applications has been distributed among a greater number of members or intermediaries. So, the ability to integrate High Technology features into content and services will play a key role in survival of this supply chain.
The High Technology suppliers must also consider the growing power of the end customers. As the product design to meet the customer requirements is typically influenced by marketing factors rather than pure technology considerations, the supply chain members must focus on the downstream activities [Chopra and Meindl (2007)].
The High Technology suppliers must recognize that time to market is a critical parameter for creating flexible product portfolios [Lamothe et al. (2006)].
(b) Supply side issues
The supply side issues in the High Technology industry supply chain may be characterized as follows:
As the capital and operating costs involved in High Technology manufacturing are very high, the High Technology suppliers focus on the relative profitability of various business models. This enhances the scope for collaboration among integrated device manufacturers (IDMs) into a few cross-enterprise "super-IDMs" and a few strong alliances [Lou et al. (2004)].
The High Technology suppliers compete among themselves to get priority status with foundries, and ensure that the foundries fabricate the chips they need when capacity is limited [Christie and Wu (2002)]. These suppliers would make high-risk decisions about the formation of collaborative network, and the information and resource sharing [Wu (2005)].
As the industry costs continue to increase, the most critical issue would be to identify the optimal processes and materials R&D for the supply chain members. If the technology of the major High Technology supplier fails to achieve large-scale adoption, the return on investment in process R&D may not be profitable. This would lead to technology commoditization and industry collaboration as the equipment, materials and component manufacturers would prefer strategic alliances [Skjoett-Larsen et al. (2003a)].
As the lead times for new product development are long and the payback is uncertain, product development decisions for specific customers is challenging.
(c) Supply chain issues
Supply chain uncertainty: The demand in the High Technology industry is very uncertain and thus difficult to forecast. In the manufacturing process, these enterprises face uncertainty caused by manufacturing lead times and capacities. The performance of suppliers is another main source of uncertainty in the High Technology industry [Montoya-Torres (2006), Chiang et al. (2007)]. Especially in phases of increasing demand, suppliers are often unable to deliver at the desired time in the required quantity [Sarkis and Talluri (2002)]. The purchase price is often very uncertain, and supply chain planning is often done with inaccurate data. So, the main supply chain uncertainty in the High Technology industry is caused by the demand, supply lead times, and purchase prices.
Supply chain risks: If the High Technology industry commits shorter delivery lead time to the buyers, the safety stock is higher, and the more resources and capital is employed in the supply chain [Silver et al. (1998)]. Due to short product lifecycles, the supply chain has a high amount of obsolete materials and resources that is to be scrapped and so, it negatively impacts the financial result [Weng (1999), Papadakis (2006)]. On the contrary, if the safety stock, and thus the resources and capital employed are lower, the delivery lead time is longer. So, there is a risk of lost opportunity when the buyers demand more components/products than the availability of supply. All management decisions about the High Technology industry supply chain have to take into account the trade-off between these risks [Juttner et al. (2003)]. So, it is imperative to quantify the effects of both the risks in monetary terms in order to evaluate the impact of supply chain decisions.
Supply chain planning issues: Typical tasks of the High Technology industry supply chain planning on a tactical level are the determination of the level of stocks of semi-finished and finished products in the supply chain, the production plan, and the order quantities [Simchi-Levi et al. (2004)]. In order to support such decisions, a good understanding of various risks is necessary [Gaonkar and Viswanadham (2007)]. Therefore, these industries may develop appropriate supply chain planning frameworks to support systematically the processes of demand forecasting, production planning, and materials management [Hoque (2000)]. The idea of these planning frameworks is to minimize various risks in the supply chain for different supply and demand scenarios [Lim et al. (2006)].
Trade-off between the supply and demand uncertainty scenarios: The demand uncertainty scenarios are based on the demand forecast with a time horizon of the overall lead time of the end product, and the information about the stage of the end products' lifecycle [Zhang (2007)]. The supply uncertainty scenario is the prediction of the situation in the procurement market over a defined planning horizon, which is based on supply lead time and purchase price [Grover and Saeed (2007)]. So, the optimal ordering quantities can be estimated based on the cross-match between the different demand and supply scenarios [Lapide (2006)].
Selection of appropriate suppliers: An important task in the framework of supply chain management of the High Technology industry is the evaluation and selection of appropriate suppliers for each product [Sarkis and Talluri (2002)]. Therefore, this industry has to implement an effective and efficient supplier assessment and selection system [Yu and Tsai (2008)]. The components/products may be classified by the required characteristics of potential suppliers using the component group portfolio by considering the impact of the component on the business success of the end products and the characteristics of the buying market. Further, the potential suppliers may be classified by their skills using the supplier portfolio by considering the potential of the supplier and the characteristic of the buying market. The strategic suppliers must possess a high potential regarding its financial performance, manufacturing ability, and research and development competencies, as they are operating in a market with high competition [Grover and Saeed (2007)]. This may result in a much better transparency of the qualification of the suppliers so that the uncertainty and the risks originating from the supply side may be reduced [Garg et al. (2004)].
In summary, the component and device suppliers need to have a thorough understanding of upstream and downstream markets, and must make strategic business decisions involving outsourcing, partnerships, and target buyers and markets. They must also adapt to the changed dynamics (coevolution) of the supply chain, and explore the issues arising from these changes. In order to tackle these changes in the supply chain, the members must evolve methodologies for decomposing the revenue of a product by understanding the profit sources to shape business and competitive strategy. They may use real-time mathematical analysis to make better decisions about procurement for minimization of business risks.
3. Improving Supply Chain Performance with Collaborative Development Practices
In the highly competitive environment of the High Technology industry supply chain, effective collaboration is critical to both innovation and productivity [Wang and Archer (2007)]. Issues pertaining to product development and supply chain in such an environment can be identified as [Udin et al. (2006b)]: (a) inaccurate matching between products and technology (products falling behind the technology curve), (b) lack of proper communication with suppliers or customers, (c) project delays and budget overruns, (d) frequent and last-minute engineering changes, (e) shortage of skilled and updated manpower, and (f) incomplete customer solutions. But, collaborative development practices can minimize these problems, or eliminate them completely [Grover and Saeed (2007)].
The benefits of effective collaborative development practices might be [Whipple and Russel (2007)]: (a) better asset/resource utilization, (b) greater customer satisfaction, (c) increased productivity, (d) quick response time to market, (e) greater innovation, (f) decreased product risk, and (g) lower costs. But, the limitations of collaborative development practices may be: (a) costly recovery efforts, and (b) frayed relationships. Recent advances in information systems and management processes allow the High Technology industries to make collaborative development a strategic capability [Min et al. (2005), Lamothe et al. (2006)].
Successful collaborative development practices in supply chains consisting of the High Technology manufacturing industries may comprise of the following levels:
Product development chain design and partner selection management: Development chain design must aim at identifying the position in the chain at which the collaborative development efforts should be considered [Lamothe et al. (2006)]. In partner-selection management, the industry decides the approach to select most appropriate partners and bring them to the negotiation table, and the approach to manage the relationship and the portfolio of product development initiatives [Hacklin et al. (2006)].
Execution and processes: The High Technology industry must try to define the criteria for success, how decisions will be made, roles and responsibilities, and team structures and processes [Kim and King (2004)].
Information technology infrastructure: The High Technology industry must try to define how information and communication technology (ICT) will support collaborative development practices and the time and process of its deployment [Chae et al. (2005)], and how teams will leverage the ICT tools for maximum advantage [Bailey and Francis (2008)].
Identifying the appropriate e-market mode of operation: The High Technology industry supply chain must try to define and select the most appropriate e-market intermediary to coordinate the whole supply chain including the buyer, and determine optimal actions that maximize the total expected system profit [Mahadevan (2000), Ke et al. (2009)].
In order to achieve efficient supply chain capability, and the corresponding operating and financial benefits, the High Technology manufacturing industries must be proficient in the partner selection and management, which is the key determinant for the success of collaborative development [Chang et al. (2006), Blankley (2008)]. Partner selection and management may pass through three stages:
(a) Partner evaluation and selection
The following indicative criteria might be considered for the assessment and selection of most ideal partners for collaboration in High Technology industry supply chain [Jain et al. (2007), Huang and Keskar (2007), Kannan and Haq (2007), Yigin et al. (2007)]:
Objective and strategy based criteria
Financial viability and terms
Willingness to allocate resources in the desired time-frame
Demonstrated track record of innovation
Guidelines for intellectual property management and technology access
Compatibility of development processes and systems
Converting these criteria to a scoring model may be a useful technique for decision-making. Another key success factor would be to identify the people who decide on the partnership and negotiate with the partner. Before approaching any partner, the High Technology industry should have a vision of the technology and market, along with a joint value proposition that articulates the short-term relationships as well as the long-term relationships [Naesens et al. (2007)].
(b) Relationship initiation
The stage of relationship initiation may consider the following aspects:
Detailed governance structure for the relationship that defines the exclusivity of the relationship, such as who pays, who owns, how decisions will be made, and how performance will be measured [Cai et al. (2009)]
Segregate the formal and legally binding documents, such as intellectual property ownership
Building trust and eliminating the pitfalls of trying to create the most appropriate contract, while outlining the organizational, process, and IT requirements needed for a successful relationship between the buyer and the supplier [Ke et al. (2009)]
(c) Relationship management
The third critical portfolio of relationship management may consider the following aspects:
Setting up a process of regular reviews to evaluate relationship performance, make adjustments, share strategies and roadmaps, and to identify other potential areas of collaboration [Fisher (2006), Kampstra et al. (2006)]
Evaluating and managing the portfolio of collaborative development partners at the strategic level. The return, balance, mix, and strategic fit of the portfolio of partners should be regularly reviewed. This review would be the basis for deciding which partnerships should be extended and which ones should be terminated once the co-development program is complete [Li et al. (2007), Naesens et al. (2007)].
With the most appropriate partners, processes, supporting ICT systems and tools, and strategic investment, the High Technology manufacturing company can realize the full potential of its product development and supply chain [Li et al. (2007), Adamides and Pomonis (2007)].
In order to achieve collaborative supply chain excellence, the supply chain for product development and supply may be configured to fully utilize core competencies and maximize R&D throughput by leveraging the capabilities of development partners [Kaipia and Holmstrom (2007)]. These processes must be in place to enable effective partner management and efficient interactions. The collaborative development practices in terms of performance means extending the implemented practices within the existing enterprise to partners and suppliers [Chiang et al. (2007)]. This quick-win approach may keep the High Technology manufacturing organizations moving forward in its supply chain improvement program [Li et al. (2007), Vachon et al. (2009)].
In the context of the present work, three types of collaborative relationships have been considered for supply chain planning. Vertical collaboration can be defined as a relationship between supply chain members performing complimentary activities or services, i.e., when two or more enterprises, such as supplier, manufacturer, distributor, carrier, and retailer share the responsibilities and resources to serve similar end customers [Bagchi et al. (2005)]. Further, horizontal collaboration can be defined as a business agreement between two or more enterprises at the same level in the supply chain in order to allow greater ease of work and cooperation towards achieving a common objective, through proper manipulation, utilization and sharing of appropriate resources, such as machinery, technology and manpower [Cruijssen et al. (2007)]. Finally, a form of combined relationship, which links the benefits of both vertical and horizontal collaboration, has been defined as lateral collaboration in the present work wherein the buyer and suppliers work together toward a common objective, sharing information and resources to solve problems, and streamline procurement processes [Mason et al. (2007)].
4. Value-based Strategic Procurement and IT Systems
Lately web-based e-marketplaces are considered by High Technology industries as a fast-track mechanism to a tightly synchronized supply base. The web-based e-marketplaces and the solution providers (for inventory management and financial services) are not separate entities, rather they are integrated to develop the optimal strategies that the supply chain members must use, and to justify whether these strategies are revealing the actual need. So, the true value of e-marketplace can now be considered as a mechanism to ensure greater collaboration and synchronization between various members of supply chain networks [Li et al. (2005), Chen et al. (2007), Wang and Archer (2007)].
Figure 2: The commodity matrix [Handfield and Straight (2003)]
The objective of strategic procurement operating in an e-market is to choose the optimal supplier/contract manufacturer for a product/component, more specifically the one who can provide the most valuable product to the buyer [Gunasekaran and Nagi (2008)]. Most ideal supplier does not necessarily mean lowest cost supplier or the supplier that manufacture products/components of highest quality; depending on the item other areas may be more important [Bhutta and Huq (2002), Sardinha et al. (2009)].
The commodity matrix depicted in Figure 2 takes into account the importance and value of an item in the context of a High Technology manufacturing industry and how the buyer will benefit from different sourcing processes. It is obvious that the value depends on some key areas, such as integration, information sharing and flexibility apart from price, quality, level of priority, and the available supplier base [Barlow and Li (2005)]. If high quality of a product is the requirement, a reliable supplier is the necessity. If the availability of capable and competing suppliers for an item is limited, internal standards or external agreements should be created to ensure a positive results, such as cost reduction for the buyers and gain of valuable market knowledge [Handfield and Straight (2003)].
There are other areas of value necessary beyond the options displayed in this model, such as ability to communicate effectively and to provide the necessary speed of delivery [Coia (2004)]. This would allow the High Technology manufacturing industries to have experts manage their products/components in a particular commodity family creating superior processes. Strategic assets, sensitive information, and requirements that are integral to procurement operation may be achieved through proper initial agreements [Foster (2003), Handfield and Straight (2003)]. By interacting buyers and suppliers together in a real-time reverse auction, the lead-time associated with the procurement of an item may be reduced [Amelinckx et al. (2008)]. Interaction and coevolution becomes imperative such a transactional context.
The High Technology industry has invested in developing internet based e-market or private exchanges to support high value, high risk commodity procurement [Kumaran et al (2002)]. This procurement initiative requires a great deal of flexibility to handle specifications and evaluate beyond the routine procurement activities of an enterprise, which are primarily process driven supported by e-market [Barlow and Li (2005)]. Further, it has been assumed that the e-market intermediaries, who are the procurement solution providers, have explored the potential for specialized tools and strategies to meet the needs of procurement activities. This latest procurement technology may focus on the areas of information sharing, partnerships, decision support and evaluation to support procurement professionals for informed decision, reduced workloads by automating processes, while maintaining sufficient flexibility to accommodate the organizational processes in the High Technology industry supply chain [Christopher et al. (2006), Koh et al. (2008)].
The ultimate goal in collaborative procurement in a coevolutionary context is to explore the best possible solution from the list of bidders while reducing the level of risk involved in pursuing an enterprise's strategy through a given supplier [Wu and Olson (2008)]. A survey of literature [Svensson (2002), Chiang et al. (2007) and Grover and Saeed (2007)] has indicated various aspects of procurement on collaborative initiatives to manage complex requirements and to remain accountable for decisions made through an on-going basis. These aspects may be summarized as process efficiency, supplier relationship development, managing complex requirements, return on investment, accountability, controlling risks, and securing stake-holder collaboration. The collaborative initiatives may fail if the needed collaboration from the stake-holders is not secured within the scope of the supply chain, poor strategy and planning, and a lack of well defined specifications [Angerhofer and Angelides (2006)]. Within the stake-holder collaboration issue, the ability to manage and work effectively with other supply chain members throughout the procurement process is both essential and difficult given a lack of direct managerial authority and an organizational culture. So, securing stake-holder collaboration for procurement function may be given maximum priority in the High Technology industry supply chain. Further, the process of negotiation is often based on a cyclical dialogue between the buyer and the supplier in which capabilities and responses are validated through a more thorough investigation. This process reduces potential risks and adds to the robustness of the evaluation for procurement in e-market mode of operation and business collaboration [Li et al. (2007), Tapiero (2007), Vachon et al. (2009)].
The importance of value based strategic procurement, or the process of finding the best supplier and securing an optimal contract, is increasing across the High Technology industries as enterprises becomes more capital intensive and project-based [Liston et al. (2007), Frascatore and Mahmoodi (2008), Blankley (2008)]. There is an industry trend for consolidation of the supply base and for the grouping of purchases into more strategic deals [Storey et al. (2006), Vachon et al. (2009)]. They have shifted to on-line transactions in order to increase the efficiency with the growth of the internet [Hackney et al. (2004), Gimenez and Lourenco (2008)]. After increasing supply efficiency through on-line procurement transactions, these enterprises have sought more direct cost savings without affecting the relationship with suppliers and the long term business development of the enterprises [Pyke and Johnson (2003), Smart (2008), Fawcett et al. (2009)].
In summary, value-based strategic procurement must present a more holistic and coevoluiotnary procurement analysis, and the evaluation of cost would be a part of the entire evaluation. Also, the capacity to maintain all internal communications and linking those communications with the related procurement documents would ensure that all important information is shared and considered for an ultimate decision [Bailey and Francis (2008)]. The key features of such electronic systems which support this procurement must entail decision making support and collaboration support [Hausen et al (2006), Yao et al. (2007)]. Typically, their solutions must have features, such as electronic RFx (Request for Information, Request for Proposal, Request for Quotation), support for structured and collaborative evaluation process, a decision model (e.g. rule base and weighted), and dynamic reporting. Another important perspective of this procurement solution must be its ability to reduce the error in the complex procurement process and facilitate a more thorough analysis of the most important factors across a cyclical process, which involves constant updating as new information is gathered to verify capabilities [Li and Lin (2006), Kaipia and Hartiala (2006), Bartlet et al. (2007)]. In order to choose an IT system for value-based strategic procurement, the supply chain managers must look for a solution, suitably designed to integrate with an already complex organization process involving a wider range of stakeholders [Marquez et al. (2004), van der Vaart and van Donk (2008), Smart (2008)].
5. Control-oriented Approaches for High Technology Industry Supply Chain
The High Technology industry supply chain management is an interactive process with a network of enterprises up and down the supply chain focusing on the objective of improved response to the prevailing market conditions. Although these members may need to develop a variety of products to cater market segments, such products should be augmented by solutions that address broad and high-volume markets in communications, consumer electronics and personal computers from a procurement perspective [Fisher (2006)]. The supply chain management within this industry demands a high level of buyer-supplier, supplier-supplier and buyer-buyer collaboration (for example: between fabless enterprises and their foundries). While there are many opportunities to collaborate along the supply chain, certain areas offer significant leverage from a member's perspective, such as creation and investment of mutual fund, optimum utilization of available resources and capacity, collaborative technology and product development, and collaborative procurement strategy for materials and components.
By collaborating at the early stage of product development and manufacturing, the suppliers and buyers together can present a basis for financial institutions to provide necessary capital and generate funds for optimal investment in development of resources [Ojala and Hallikas (2006), Marquez and Blanchar (2006), Dulluri and Raghavan (2008)]. This would help in meeting time-to-market deadlines by using each others' capacity and resources for competitive advantage [Chauhan et al. (2004), Blankley (2008)]. In order to make this strategy a success, the supply chain members should consider collaborating not only with the members in a vertical manner (in a different echelon) but also with other members in a horizontal manner (in the same echelon) to share capacity and other resources. In such a setting, the supply chain members may collaborate in establishing design tool centers, manufacturing centers, and transportation and logistics service centers, and product/component design and manufacturing/inventory management may be done through a third party, such as e-market intermediary [Wang et al. (2007)]. For example, the foundry may provide resources for prototype verification with a multi-project wafer (MPW) using its fabrication facilities. The foundry may also invest in developing a fabless venture by providing services in a coevoluiontary exchange for equity.
6. General Observations and Insights from the High Technology Industry Supply Chain Literature
The preliminary review of the collaborative initiatives and coordination models from the perspective of High Technology industry supply chain has set out to provide numerous insights and research gaps to future researchers in supply management.
In the High Technology industry supply chain, it has become a common practice for the suppliers to supply several buyers or markets at dispersed locations with global manufacturing facilities. While the suppliers benefit from the lower manufacturing costs and can offer their products at lower prices, the buyers observe longer lead times. Hence, they face higher uncertainty of demand and higher risk. One approach of dealing with high demand uncertainty is the pooling of inventory, also called inventory centralization, which reduces the risk of mismatching demand and supply, and thus increases profit [Cherikh (2000)]. The relevance of coevolution comes to the fore. In such a setting, the buyers might improve the total profit of the chain if they cooperate to benefit from inventory pooling. These benefits might be increased by the coordination of ordering quantity [de Vries (2007)].
In the High Technology industry supply chain, the buyers determine their order quantities independent of the other members. If they decide to collaborate through resource sharing, their previous order quantities would not be optimal for the new situation. So, they can create more value by coordinating their order quantities. Another improvement in the collaboration output can be achieved through information sharing by joint forecasting activities [Byrne and Heavey (2006), Forslund and Jonsson (2007)]. So, the buyers can allocate their previous orders more effectively.
Although the collaboration activities lead to higher supply chain profit, the buyers are primarily interested in what they would gain individually out of the collaborative initiatives. A division of the total profit, which satisfies the expectations of the buyers, is required to sustain their contribution to the cooperation as well as for the stability of the cooperation.
In order to continue the collaborative business practices, the supply chain members must have the ability to adapt to the changes in the business environment. The market conditions and the requirements of the buyers might change over time or new buyers might get involved in the cooperation. As the conditions are changing, the outcomes of the collaboration would also change. So, the crucial issue lies in aligning the incentives that does not discriminate the buyers and suppliers and help coordinating the procurement activities [Cachon and Larriviere (2005)].
Usually, formal and economic conditions of the buyer-supplier relationships are determined by contracts or mechanisms that the suppliers offer to the buyers [Cachon (2003)]. The collaborative initiative fails, if the buyers and suppliers act independent of each other. Any cooperation between the buyers would have an effect on the suppliers, and the suppliers might react to this change if they are not satisfied with their new conditions. In some instances, the buyers' or suppliers' profit might diminish and accordingly they adopt their own strategy to reach the previous profit level. In such cases, the buyers and/or suppliers would not be able to achieve the expected benefits from their collaboration. Therefore, it is important for the buyers and the suppliers to investigate how each might be affected by their collaborative initiatives and how to reach a consensus before they start collaborating (collaboration schemes or mechanisms).
As an effect of globalization, the High Technology industries have tended to expand their supply chains through mergers, joint ventures, and strategic partnerships into several markets. As a result supply chains have become large groups of semi-independent enterprises, which have special capabilities, and work together for the success of the chain and eventually for their own. Despite the good future that was expected for inter-enterprise supply chain collaboration, there is some empirical evidence that actual collaboration between different enterprises has not really taken off, and coevolutionary exchange of true and valuable information between the members in the supply chain is very limited [Wisner and Tan (2000)]. Some of the business literature indicates problems with this collaboration due to lack of trust, unbalanced power situations, insufficient knowledge about fair allocation of benefits, and so on.
In view of the above, support tools may be developed to enhance decision making at the operational and tactical level for successful collaborative initiatives among the buyers or suppliers or both to benefit from inventory pooling and coordinated ordering. It is also imperative to investigate the impact of cooperation on buyers, suppliers and buyer-supplier interactions, and stable division of benefits or profits, which is important for the existence and stability of the cooperation in such a collaborative initiative.
1.9 Concluding Remarks
The paper attempts to identify some general issues pertaining to collaboration initiatives in the High Technology industry supply chains. It proposes a collaborative model for the business exchange between the two parties in the industrial value chain. The High Technology industry has been selected as a case industry due to its significance on the global economy. Many enterprises in the supply chain network of the High Technology industry may be unaware of the fundamental dynamics in inter-enterprise collaborative procurement approaches. With the emergence of e-market and due to supplier competition for components of short life cycle product, developing the supplier is not the issue for the buyer. Instead the priority is to sustain time-based competition and volatile product demand for responsive and flexible supply chain. These coevoluiontary interactions provide a context of dynamic issues related to the exchange in the coevolution. These collaborative models between the two sides of the coevolutionary exchange can be related to both developing and developed contexts. The magnitude and complexity of the supply chain management in the High Technology industry in different context is no different to the international context, as these industries are global corporations. As such, the High Technology industries in India are very much limited and they are all part of the global corporations.