Högskolan i Skövde

Distribution has become a key factor in today’s logistics system due to companies’ desires to achieve considerable economies of scale in production, achieved by focused factories, as well as customers’ demands for shorter lead-times and customer adapted products. The purpose of this research is to investigate if the in-transit distribution strategy may offer companies a competitive advantage and may be used as a complement to the centralised distribution strategy and/or the decentralised distribution strategy. This study shows that the in-transit distribution strategy can give major competitive advantages by offering rather short lead-times for customers without having to store products locally in warehouses. This, in turn, gives lower warehousing costs, lower tied-up capital, a less interrupted manufacturing, and steady and continuous production volumes. In order to be successful with this strategy, it takes good planning, working closely with customers, good market knowledge, and an enterprise resource planning (ERP) system that is able to support the strategy sufficiently. Among these factors, low variation in demand as well as manufacturing output is required, and furthermore distribution lead time needs to be predictable.

This research aims to enhance the current level of knowledge from supply chain planning (SCP) by analyzing the importance of collaboration, information exchange and a supporting information system in its successful execution. These are examined through a case study from international manufacturing company, which operates in automotive industry with its global manufacturing network. Research reveals that collaboration is a complex and important issue of SCP, and occurs simultaneously in vertical and horizontal dimensions. It is important to select strategic partners and to develop a structured work processes and routines. The main objective of collaboration is to determine common goals and objectives and to facilitate the exchange of information; these together drive the performance of a supply chain higher. A sufficient information system supporting the SCP is vital to facilitate collaboration, and information exchange between the different supply chain participants. However, currently in the case company quite many phases of SCP are completed without appropriate and integrated information systems and the process itself contains several manual phases.

In this research the in-transit distribution strategy is investigated by determining and analyzing key principles of the strategy. It is examined through a multiple case study and simulation. This research reveals that the in-transit distribution strategy is about considering goods that are being transported as a mobile inventory and actively dispatching goods to a destination, where there is a predicted demand before any customer orders are received. It can give major competitive advantages by offering rather short lead-times for customers without having to store products locally. This, in turn, gives lower warehousing costs, lower tied-up capital, a less interrupted manufacturing, and steady as well as continous production volumes. It is a workable solution for European manufactures competing in distant market. To be successful with this strategy, it takes good planning, working closely with customers, first-class market kowledge, and a supporting enterprise resource planning (ERP) system. Other highlighted requirements are low variation in demand and predictable distribution lead-time. Simulation study of one hypothetical product group verified case study findings, but we find it interesting that especially manufacturing output variance is very sensitive regarding the overall results. Also increasing average customer demand results in undesired outcomes.

Purpose – Research work describes in-transit distribution strategy by determining and analyzing key principles of it as well as by illustrating its application in practice. Emphasis on in-transit distribution strategy is to turn transportation pipeline as a mobile inventory holding place, and actively dispatching goods to a destination, where there is a predicted demand before any customer orders are actually received. The use of this strategy is supported by current trade flows: emerging market trade has increased considerably, but simultaneously Swedish export prices, for example, have significantly decreased. The paper aims to address this issue.

Design/methodology/approach – In-transit strategy is examined through a multiple case study from industrial companies having main factory operations in Sweden as well as using a system dynamics simulation model, and Monte Carlo analysis. These are supported by the second hand data of trade flows between Sweden, and India and China.

Findings – In order to be successful with in-transit strategy, the case studies show that excellent planning, working closely with customers, first-class market knowledge, and an enterprise resource planning (ERP) system that is able to support the process sufficiently are required. Other highlighted requirements of this strategy are low variation in demand, and predictable distribution lead-time. Simulation study of one hypothetical product group verified case study findings, but the authors find it interesting that manufacturing output variance especially is very sensitive regarding to the overall results. If variation increases, then in-transit strategy is not able to deliver for customers with the necessary accuracy. Also increasing average customer demand, and longer transportation delays lead to undesired outcomes (e.g. too much inventory or out of stock situations).

Research limitations/implications – The case study and second hand analysis is limited to one country, and further evidence is needed from other European, and possibly North American companies, to verify these findings.

Originality/value – There has been a rather limited amount of research works completed from the use of in-transit strategy, even if increased trade activity and lower price of exported items is that of the old west in their exports to emerging markets, and continues to be so in the future (was even strong to China during credit crunch year 2009). Our research is seminal in terms of a developed system dynamics simulation model.

This research aims to enhance current knowledge of supply chain planning (SCP) by analyzing the importance of collaboration, information exchange and a supporting information system in its successful execution. The issues are examined through a case study from international manufacturing company, Volvo Powertrain, which operates in automotive industry through its worldwide manufacturing network. This research reveals that collaboration is a complex and important issue of SCP, and occurs simultaneously in vertical and horizontal dimensions. It is important to select strategic partners and to develop structured work processes and routines. The main objective of collaboration is to determine common goals and objectives and to facilitate the exchange of information and these together drives the performance of a supply chain. A sufficient information system supporting the SCP is vital to facilitate collaboration, and information exchange between the different supply chain participants. However, currently in Volvo Powertrain quite many phases of SCP are completed without appropriate and integrated information systems and the process itself contains several manual phases. This study is explorative in nature and more empirical data, from similar and other research settings, is needed to further validate the findings. However, its empirical findings strengthen research discipline knowhow of SCP in global manufacturing companies. This research provides insight to managers and practitioners on how to coordinate operations planning and control (OPC) across organizations within the supply chain to enhance efficiency and effectiveness. The SCP procedures described in this research work also are valuable for Volvo Powertrain and other industrial actors to further develop processes to respond on competitive pressure. This research work empirically demonstrates, as very few before have done so, how OPC can be coordinated across the supply chain.