1. Stanford GSB Sloan Program Strategic Management
13 Managing the Supply Chain
JCI Automotive Systems Group
February 14, 2003
John Roberts

2. The Question Not “make or buy?”
But, instead, “How should we organize and manage the value chain?”
what parts inside the firm?
what parts outside?
how to structure relations across stages, whether these involve boundaries or not?
Value capture v. value creation
February 14, 2003
John Roberts

3. Managing Internal Supply
Integrated command and control
incentives?
Responsibility centers
cost, profit, investment?
allocation of decision authority
trade outside?
transfer prices
February 14, 2003
John Roberts

4. Managing External Supply
Arm’s-length v. Alliances
Cost of managing v. benefits
Information sharing important?
Specific investments?
physical, intellectual
Balance of ST temptations and LT rewards
share benefits
limit numbers
February 14, 2003
John Roberts

5. Two solutions in a system of complements
Each of the traditional US and Japanese systems is an internally aligned, coherent choice in a system of complements
Each made sense in terms of the competitive conditions and strategies
block entry
speed of product development
February 14, 2003
John Roberts

6. Cultural embeddedness?
The Japanese system was argued to be dependent on particular features of the Japanese culture, society and economy.
This is apparently incorrect:
a similar system was common in the US auto industry before its consolidation
the Japanese auto companies have adapted it in their transplants
non-Japanese firms in many industries have adopted it as competitive conditions changed
February 14, 2003
John Roberts

7. A mistaken conclusion
Some observers now argue that the Japanese model of close, long-term relations is inherently superior (in all contexts?)
February 14, 2003
John Roberts

8. The correct lesson to learn
Organizational design needs to be adapted to the technology, the strategy and the external environment
A design that works well in one context may not in another
Sorting out the sources of performance differences is thus complex
February 14, 2003
John Roberts

9. Still …
A large number of firms should think hard about boundaries and whether they are too much in a command and control mode
Loosening coupling may be very valuable
February 14, 2003
John Roberts