1. Mature Cluster: Industry & Supply Chain Dynamics ONRIS Seminar Nov 4, 2005 Peter Warrian University of Toronto

2. ONRIS: Mature Clusters Role of Lead/Anchor Firm Role of Lead/Anchor Firm Shift from Analytic to Synthetic Knowledge Shift from Analytic to Synthetic Knowledge Supply Chain Dynamics Supply Chain Dynamics External Linkages and Internal Dynamics of Clusters External Linkages and Internal Dynamics of Clusters Conclusions Conclusions

3. Cluster Typology: Mature Industries KnowledgeDimensions Industrial Structure and Cluster Linkages Lead/Anchor Firm Global Supply Chain Local Value Chain Synthetic Ontario Steel Montreal Aerospace Southern Ontario Autoparts Sudbury Mining S&S Windsor Automotive TDM Toronto Multimedia Analytic New Brunswick IT Ottawa Photonics and Telecom Waterloo ICT Mtl, Tor, Van, Hal Biotech Cape Breton IT Vancouver New Media Montreal New Media Quebec Photonics Ottawa Biotech Hybrid Saskatoon Biotech Ontario/BC Wine BC Wood Ontario Food

4. Cluster Typology: Mature Industries KnowledgeDimensions Industrial Structure and Cluster Linkages Lead/Anchor Firm Global Supply Chain Local Value Chain Synthetic Ontario Steel Montreal Aerospace Southern Ontario Autoparts Sudbury Mining S&S Windsor Automotive TDM Toronto Multimedia Analytic New Brunswick IT Ottawa Photonics and Telecom Waterloo ICT Mtl, Tor, Van, Hal Biotech Cape Breton IT Vancouver New Media Montreal New Media Quebec Photonics Ottawa Biotech Hybrid Saskatoon Biotech Ontario/BC Wine BC Wood Ontario Food

5. Cluster Typology: Mature Industries ON Steel Knowledge Dimensions Industrial Structure and Cluster Linkages Lead/Anchor FirmGlobal Supply ChainLocal Value Chain SyntheticOntario SteelMontreal Aerospace Southern Ontario Autoparts Sudbury Mining S&S Windsor Automotive TDM Toronto Multimedia AnalyticNew Brunswick IT Ottawa Photonics and Telecom Waterloo ICT Mtl, Tor, Van, Hal Biotech Cape Breton IT Vancouver New Media Montreal New Media Quebec Photonics Ottawa Biotech HybridSaskatoon BiotechOntario/BC Wine BC Wood Ontario Food

6. Role of Lead Firm Exit: Windsor TDM (International Tool) Exit: Windsor TDM (International Tool) Labour Shedding: Mining (Inco) Labour Shedding: Mining (Inco) Implosion: Steel (Stelco) Implosion: Steel (Stelco)

7. International Tool: Exit of Leader

8. Inco/Falconbridge: Shedding Labour Inco/Falconbridge: Shedding Labour

9. Stelco: Implosion of a Leader Withdrawal from Analytic Knowledge Withdrawal from Analytic Knowledge –Decline and elimination of Stelco Engineering Applied Product Development Applied Product Development –Dofasco as franchiser/value added reseller of Arcelor & NKK technology –Solutions in Steel: Application Development - Know How

10. Shift from Analytic to Synthetic Knowledge Patent Data Patent Data –Dates of Application –Dates of Publication Steel Industry Patents 1970-2005 Steel Industry Patents 1970-2005 –Decline of Stelco Engineering/Steltech 90s

11. Steel Patent Data by Application Date

12. ON Steel Knowledge Networks Withdrawal from Analytic Knowledge Withdrawal from Analytic Knowledge –Decline and elimination of Stelco Engineering Applied Product Development Applied Product Development –Dofasco as franchiser/value added reseller of Arcelor & NKK technology –Solutions in Steel: Application Development - Know How

13. Supply Chains Asymmetric Knowledge Flows in Supply Chains: Aerospace Asymmetric Knowledge Flows in Supply Chains: Aerospace Dynamics and Dysfunction in Auto-Steel Supply Chain Dynamics and Dysfunction in Auto-Steel Supply Chain

14. Advanced Technology Cluster: Aerospace Niosi: Dynamics within Supply Chain Niosi: Dynamics within Supply Chain –OEM aerospace assemblers –Tier 1 & Tier 2 suppliers Knowledge flows: International circuits of design, procurement Knowledge flows: International circuits of design, procurement Asymmetry between knowledge flows between firms and local labour pool Asymmetry between knowledge flows between firms and local labour pool

15. Aerospace: Asymmetry of Knowledge Flows

16. Changing Supply Chain Models Drive Innovation Toyota Model Toyota Model –Lean Production & JIT –Reduced inventory, cycle times, SPC Dell Model Dell Model –Mass Customization –Build-to-Order

17. PurchasingProgrammingMarketing Order Bank Scheduling Sequencing National Sales Co. Plan Schedule Tier 2 Supplier Tier 1 Supplier Inbound Logistics Body, paint, assemble Outbound Logistics Dealer Inv. Customer Typical Order-to-Delivery Process

18. Auto Industry Build to Order On average, it takes 40 days to get a car On average, it takes 40 days to get a car 30 days for an customer order to actually be inserted in the assembly plant schedule. 30 days for an customer order to actually be inserted in the assembly plant schedule. 60 days total inventory in the supply chain 60 days total inventory in the supply chain Same number as Henry Ford in 1926. Same number as Henry Ford in 1926. Closer integration of supply chain has increase volatility Closer integration of supply chain has increase volatility

19. Auto Supply Chain Volatility

20. Dofasco Benchmarking against Dell: Vanilla Boxes Benchmarking against Dell: Vanilla Boxes Mass customization strategy: Platforms Mass customization strategy: Platforms –Information content of the steel Diversity creates key bottleneck in Mills: Slab Specifications & Production Diversity creates key bottleneck in Mills: Slab Specifications & Production –Slabs ‘Designs’: Dimensionality, Physical & Chemical Properties –From 10,000 Designs -> 300 Vanilla Boxes

21. External Linkages and Internal Dynamics of Clusters Dynamics of Disaggregation in Cluster Dynamics of Disaggregation in Cluster –Mining Services –ON Steel

22. Disaggregation in Mining Services

23. Algoma OEM, Tier 1and Specialized Tier 2 Suppliers OEM, Tier 1and Specialized Tier 2 Suppliers Interface with Design Capacities: Safety Interface with Design Capacities: Safety Metallurgy: AHSS microstructures Metallurgy: AHSS microstructures

24. Disaggregation of Auto Steel Cluster Circuit 1: Global Supply Chain Circuit 1: Global Supply Chain –Auto OEM, Tiers 0.5-1.0, highly specialized Tier 2 firms –Integrated Mill Metallurgy: DFS, STE, AGA Circuit 2: Local Value Chain Circuit 2: Local Value Chain –Generalized Tier 2, Tier 3, Stampers –Processing Technology: Service Centres, Processors, Minimills

25. Conclusions Cluster Life Cycles Cluster Life Cycles Multiple Policy Objects Multiple Policy Objects –Disaggregation Policy targets are moving and changing Policy targets are moving and changing

26. Knowledge Dimensions and Flows in Mature Clusters Synthetic Knowledge & Innovation Synthetic Knowledge & Innovation –Application of existing sources & combination of knowledge –Interaction between clients & suppliers –Reliance on applied product development Infrastructure Infrastructure –Problem solving –Sources of talent & recruitment