1. Can Merge-in-Transit be Sustainable? A Micro-Enterprise Perspective
OR59 Annual Conference
Loughborough University
12-14 September 2017
Can Merge-in-Transit be Sustainable? A Micro-Enterprise Perspective
Eliseo Vilalta-Perdomo 1 , Oliverio Cruz-Mejia 2 and Martin Hingley 1
1 Lincoln International Business School Universidad Autónoma del Estado de Mexico

2. Abstract
The theme of sustainable supply chains is explored from a particular configuration, Merge-In-Transit (MiT). Three different operational strategies: Postponement, Mass Customization and Rapid Fulfilment are revisited in the light of MiT. Limitations to current understandings of ‘sustainability’ are recognised and an extension to this concept is explored in the context of Micro-Businesses (MBs). In order to build operational approaches to this extension, different retailing structures are presented and discussed: direct marketing, supply chain, supply network and supply community. Finally, two languages: of needs and for interactions are presented and exemplified to show alternative approaches to build sustainability in supply chains where MBs participate actively.
The OR Society OR59 Annual Conference Loughborough University,12-14 September 2017

3. Merge-in-transit Postponement, Mass Customization and Rapid Fulfilment
The OR Society OR59 Annual Conference Loughborough University,12-14 September 2017

4. Merge-in-transit Direct deliveries
The OR Society OR59 Annual Conference Loughborough University,12-14 September 2017

5. Merge-in-transit Deliveries through warehouse
The OR Society OR59 Annual Conference Loughborough University,12-14 September 2017

6. Merge-in-transit Merge-in-transit deliveries
The OR Society OR59 Annual Conference Loughborough University,12-14 September 2017

7. Merge-in-transit Is not just cross-docking
Customers
Nature of the product
Main goals
Crossdocking
To distribute products from manufacturers to retailers.
High-consumption products for retailers’ continuous replenishment.
Products with stable demand
To minimize holding and handling costs by removing intermediate distribution warehouses.
Merge-in-Transit
To satisfy end-customers; no retailers are involved.
Multi-product orders consolidated in one-delivery independent shipments for end-customers.
Products are normally made-to-order and with high obsolescence costs.
To deliver made-to-order product orders with very high customer satisfaction in the delivery
The OR Society OR59 Annual Conference Loughborough University,12-14 September 2017

8. Merge-in-transit Online vs Physical Retailing
Online retailing
Physical retailing
Inventory selection + -
Order tracking for products assemble-to-order
Market area size
Touch and feel
Purchase price comparison
24 hrs. shopping
Personal service
Multi-item consolidated delivery
Immediacy
Customer equipment requirements
Receipt of product
Adapted from Otto & Chung (2000)
The OR Society OR59 Annual Conference Loughborough University,12-14 September 2017

9. Merge-in-transit Postponement
A strategy that delays product differentiation to as late as possible, with the aim to improve marketing systems’ efficiency (Anderson, 1950)
A strategy to speculate with the delay of operations activities (i.e. inventory holding, assembly, and manufacturing) in the distribution channel, to reduce cost and deal with competitive forces (Bucklin, 1965)
The OR Society OR59 Annual Conference Loughborough University,12-14 September 2017

10. Merge-in-transit Postponement
Pagh & Cooper (1998) suggest three categories of postponement:
Postponement in logistics involves a degree of speculation, as finished products are held in inventory until orders are placed.
Manufacturing postponement considers pre-planning products assembly, in terms of which partner will process and distribute final goods.
Full postponement combines previous two. It is more focus on opportunities available in specific time windows.
The OR Society OR59 Annual Conference Loughborough University,12-14 September 2017

11. Merge-in-transit Mass customisation
Gilmore & Pine II (1997) suggest mass customization as a “flexible work process”.
It refers to a customer co-design process of products and services that matches product features to the needs of each individual customer (Piller, 2005).
It allows high-volume customization of goods and services to individuals’ specifications, within a fixed solution space, characterized by stable but still flexible and responsive processes.
Accordingly, mass customization provides increase in variety and customization without a corresponding rise in costs, providing strategic advantage and economic value (Pine II, 1999).
The OR Society OR59 Annual Conference Loughborough University,12-14 September 2017

12. Merge-in-transit Mass customisation strategies
Task
Manufacturing to Order MTO
Manufacturing to Stock MTS
Assembly to Order
ATO
Information
Product specifications
Provide forecast
Configuration management
Planning
Provide engineering capacity
Project Inventory levels
Determine delivery dates
Control
Adjust capacity to customer needs
Assure customer service levels
Meet delivery dates
Sales and Operations Planning
Demand forecasts, engineering detail
Demand forecast
Demand forecasts, product family mix
Master Production Scheduling
Final configuration
Actual demands
Mix forecast, actual demands
Customers
Design status, delivery date.
Next inventory replenishment
Configuration issues, delivery date.
Source: Vollmann, Berry, Whybark and Jacobs (2004)
The OR Society OR59 Annual Conference Loughborough University,12-14 September 2017

13. Merge-in-transit Mass customisation
The OR Society OR59 Annual Conference Loughborough University,12-14 September 2017

14. Merge-in-transit Quick response
This strategy is also known as ‘Time-Based Competition’ (TBC).
Quick response supply chains rely on the use of speed to gain competitive advantage (Suri, 1998). Therefore, lead-time analysis is a key performance indicator in quick response supply chains.
Having the ability to respond to customers’ requirements on a time basis is fundamental to the marketing concept (Christopher, Lowson & Peck, 2004)
Companies like Dell Computers, Cisco Systems and Amazon (prime) are examples of organizations running quick response operations.
The OR Society OR59 Annual Conference Loughborough University,12-14 September 2017

15. Merge-in-transit Who were first?
Company
Year of introduction
Business sector
Cisco Systems
1997
Telecommunications
Sun Microsystems
Computers
Lucent Technologies
Dell Computers
1998
Micron Computers
Ericsson
1999
Source: O’Leary (2000a and 2000b) and Hoffman (1998)
The OR Society OR59 Annual Conference Loughborough University,12-14 September 2017

16. Merge-in-transit Summary
Task
Advantages
Limitations
Postponement
Reductions on cost due to final product inventory
Slow response times
Mass customisation
High-volumes without an increase in cost for quality or delivery
Need of internet-based technical solutions
Need to build and maintain an extensive suppliers’ network
Quick response
Fast-paced response to global customers
Usually limited to high- value products
The OR Society OR59 Annual Conference Loughborough University,12-14 September 2017

17. Merge-in-transit Micro-businesses´ context
Postponement +
Mass customisation = +
Quick response
The OR Society OR59 Annual Conference Loughborough University,12-14 September 2017

18. Sustainability and resilience
The OR Society OR59 Annual Conference Loughborough University,12-14 September 2017

19. Sustainability and resilience
PEOPLE
PLANET
PROFIT
Bearable
Viable
Equitable
Sustainable
“The Triple Bottom Line is an expanded baseline for measuring performance, adding social and environmental dimensions to the traditional monetary yardstick”
(SCBD / IUCN, 2007)
(Elkington, 1997/1999)
The OR Society OR59 Annual Conference Loughborough University,12-14 September 2017

20. Language of policy-making
consensus
ADVANTAGES?
LIMITATIONS?
Quality of life
(bearable)
Globalisation
(equitable)
Knowledge
Internal vs. external
Acquisition, codification, recovery & use
Education
SOCIETY
(people)
Capital:
Local vs. global
Standardisation
CSR
Science
Shared value
Language of policy-making
Impact
(viable)
ENVIRONMENT
(Planet)
ECONOMY
(Profit)
Language of …
Language of
decision-making
Trade-offs
Environmentalists?
Scientists?
Politicians?
Efficiency & effectiveness
Lean vs. agile
Real cost of non-renewable resources
(Vilalta-Perdomo & Corliss, 2012)
The OR Society OR59 Annual Conference Loughborough University,12-14 September 2017

21. Retailing structures
Direct marketing, supply chain, supply network & supply community
The OR Society OR59 Annual Conference Loughborough University,12-14 September 2017

22. Retailing structures Direct marketing
There is no active participation of intermediaries.
Producers might be open to collaboration but usually none shows any interest on leading collective initiatives.
Direct marketing characterisation
Arrangement
Challenge
Driver
Organisational principle
Transactional direction
Power structure
Supply chain
Survival
Dependent on producers’ expectations
Adaptation
Towards the customer
Based on direct customers´ relationships

23. Retailing structures Supply chain
The strongest actor (i.e. supermarket) structures coordination protocols between different actors
Customers (may) receive benefits from operational savings
Supply chain characterisation
Arrangement
Challenge
Driver
Organisational principle
Transactional direction
Power structure
Supply chain
Lean/agile
Economic only
Organised by main actor
Towards the customer
Centralised around main actor

24. Retailing structures Supply network
Several strong actors (i.e. supermarkets, distributors) build redundant chains that provide additional resilience to the supply ‘system’
Customers (may) receive benefits from operational savings
Supply network characterisation
Arrangement
Challenge
Driver
Organisational principle
Transactional direction
Power structure
Supply network
Resilience
Economic mainly
Externally self- organised
Towards the customer
Centralised around several hubs

25. Retailing structures Sustainability and resilience
Capability through time to deal with noise
Sustainability
Resilience
Adaptability
Learning
Capability to preserve a system in the long-term
The OR Society OR59 Annual Conference Loughborough University,12-14 September 2017

26. Retailing structures Supply community
Supply community characterisation
Arrangement
Challenge
Driver
Organisational principle
Transactional direction
Power structure
Supply community
Collaboration
Different drivers
Internally self- organised
Towards the producer
Decentralised
“[Community] operations research [COR] is the securing of improvement in social systems [collectives to become stronger actors] by means of scientific method”
(adapted from Churchman, 1970)

27. To implement supply communities
Language of needs and language for interactions
The OR Society OR59 Annual Conference Loughborough University,12-14 September 2017

28. Implications on TC and micro-businesses
Decision-making under uncertainty (Kahneman).
System 1. Experienced-based decisions
System 2. Reflective decisions
Approach
Kahneman´s system
Direct marketing
System 1
Supply chain
System 2 - profit
Supply network
System 2 - resilience
Supply community
Systems 1 & 2
The OR Society OR59 Annual Conference Loughborough University,12-14 September 2017

29. Sustainability and resilience
Capability through time to deal with noise
Individual
perspective
Sostenibility
Resilience
Collective
perspective
Language of
needs
Language for
interactions
Capability to preserve a system in the long-term
The OR Society OR59 Annual Conference Loughborough University,12-14 September 2017

30. Implications on TC and micro-businesses Kahneman´s system 1
The OR Society OR59 Annual Conference Loughborough University,12-14 September 2017

31. Implications on TC and micro-businesses Kahneman´s system 2

32. Recommendations and conclusions
The OR Society OR59 Annual Conference Loughborough University,12-14 September 2017

33. Recommendations and conclusions
A possible way to develop sustainable MiT strategies in MBs is by means of collaboration. Groupings of MBs associated in organizations that share common resources to deal with their own challenges is one possible solution for MiT implementations. For instance, communities of MBs may share common resources that would not be possible to develop alone.
The OR Society OR59 Annual Conference Loughborough University,12-14 September 2017

34. Recommendations and conclusions
The procedure consists of collecting a set of people (the potential community) and build what links them (a project) in order to create a second set of observations (additional collective resources).
Putting people together by means of propensity exercises;
create initial links, by means of people engagement;
increase the variety through new internally-defined attractive activities, and
strengthen and improve interactions, based on safeguard protocols.
The OR Society OR59 Annual Conference Loughborough University,12-14 September 2017

35. THANKS FOR YOUR ATTENTION
The OR Society OR59 Annual Conference Loughborough University,12-14 September 2017