Despite the importance of supply chains to firms, we know little about the intangible aspects of why some global supply chains excel while others struggle. The fit among strategy and knowledge elements is a key determinant of global supply chain performance. But which knowledge elements should be stressed by which firms depending on their strategy focus to achieve superior performance?

 

Why some firms outperform others has long been a central question in business. Substantial corporate resources and research inquiry have focused on knowledge (i.e., credible information and/or experience) as a means to achieve superior performance. Taking advantage of knowledge initiatives has been the focus in a variety of ways including in organizational learning, market orientation and the knowledge-creating company. Regardless of the labeling, the themes center on the fact that knowledge can serve as a strategic resource and, as such, is crucial to efforts to create value in a unique, inimitable and non transferable way.

Interestingly, little is known about how certain knowledge helps some firms’ supply chains excel whereas others do not. The lack of attention to appropriate knowledge in supply chains is unfortunate because firm and supply chain outcomes are increasingly intertwined. Indeed, an evolving feature of modern competition is that rivalry is becoming less “firm vs. firm” and more “supply chain vs. supply chain.” Firms such as Wal-Mart, Toyota and Dell have leveraged their supply chains into significant competitive advantages and strong performance, illustrating the importance of chain vs. chain competition. This begs the question: How are knowledge elements and strategies related to performance in global supply chains?

Studying the knowledge issue

Data on 913 firms over a three-year time period (2001-2003) were used to examine the effects of various knowledge initiatives on global supply chain performance. The sample consisted of supply chain managers drawn from the membership directories of the Council of Supply Chain Management Professionals and the Institute of Supply Management.

Global supply chain performance was measured via the four competitive priorities that are well-established outcomes in supply chain research: speed, quality, cost and flexibility. Measures for each dimension were used to develop an overall performance index consisting of equally weighted scores for the four dimensions.

The testing consisted of confirmatory factor analysis for the measures and hierarchical multiple regression involving the use of profile deviation analysis to examine the effect of knowledge on performance. Three forms of tests were conducted using qualitatively derived ideal knowledge profiles (using expert raters), quantitatively derived profiles (using the top performers in the data set) and theoretically derived profiles (whereas maximum scores on each knowledge element is preferred).

What kind of knowledge is needed?

The table summarizes the key knowledge elements that are important for each strategy type (i.e., the imperatives that seem to drive each configuration of knowledge and strategy).

High performing prospectors managed responsiveness, quality of knowledge, accessibility of knowledge, knowledge intensity and learning capacity. These results show that so-called prospector supply chains have to adopt a problem-solving orientation while also drawing extensively on knowledge embedded in the chain.

Successful analyzers were those that mastered learning capacity, responsiveness, knowledge intensity, quality of knowledge, memory and accessibility of knowledge. Managers of these supply chains must master more than twice as many knowledge elements as their counterparts in charge of differentiated defenders (and reactors), as well as more than low-cost defenders and prospectors.

Successful low-cost defenders relied on memory, knowledge intensity, knowledge use and accessibility of knowledge. Taken together, the four knowledge elements needed by low-cost defenders are consistent with the emphasis on efficiency. When facing strategic as well as operational issues, low-cost defender supply chains must strive to find knowledge efficiently. Tapping existing knowledge (memory) that is relatively easy to access (accessibility) is often the most efficient use of resources.

Differentiated defenders that prospered relied heavily on accessibility of knowledge, quality of knowledge and memory which also represent three of the six knowledge elements that analyzers preferred in their quest to achieve superior performance. Differentiated defenders walk a metaphorical tightrope in that they try to protect a niche through boldness and (often great) specialization that lead to (very) customized products or services rather than the more traditional cost containment exemplified by many supply chains.

Contrary to vast research, the reactor type may in fact be a viable strategy at least to achieve short-term performance in supply chains. They are likely to stress learning capacity, memory and quality of knowledge in their quest to be successful (at least in the short term).

Strategy Types

• Prospectors take on an aggressive new product-market position within defined markets and tend to be

industry pioneers in the development of new technologies.

• Analyzers represent an intermediate form of strategy; they maintain a secure market position within a core

market but also seek new market positions.

• Low-cost defenders are seldom at the head of chain development practices; their focus is instead on finding

ways to lower costs of existing (niche) chain practices to maintain a stable market domain.

• Differentiated defenders are rarely at the forefront of supply chain development; they focus on exploiting

elements that they do particularly well.

• Reactors act in response to competitive or other chain pressures in the short term.

		Tomas Hult, PhD, is associate dean for global initiatives and director of the Center for International Business Education and Research in the Eli Broad Graduate School of Management at Michigan State University. He is also executive director of the Academy of International Business and co-founder of Hult Ketchen International Group, LLC. Professor Hult can be contacted at This e-mail address is being protected from spambots. You need JavaScript enabled to view it .