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Three
The three dimensions of dimensions of
responsiveness responsiveness
Matthias Holweg
Judge Institute of Management, University of Cambridge, Cambridge, UK 603
Abstract
Purpose – The concept of responsiveness has been widely discussed, yet so far most of this
discussion has remained qualitative in nature. The purpose of this paper is to develop a conceptual
model identifying the key factors that determine the responsiveness of a supply chain system, which –
once quantified – provide a unique profile of each supply chain setting towards the appropriate
supply chain strategy.
Design/methodology/approach – The paper reviews existing contributions and synthesises these
into a conceptual model of responsiveness. The model is applied using three case studies from the
automotive and electronics industry. The case research is based on value stream mapping,
semi-structured interviews, and site visits.
Findings – Three key findings could be established: first, the concept of responsiveness has a simple
logic that aligns itself to a wide range of manufacturing strategies. However, underlying this remit is a
complex interaction of an array of key variables, and it was found that previous contributions largely
have only addressed a subset of these. Second, these key variables can be grouped into three categories
or dimensions of responsiveness – product, process and volume – to provide a holistic understanding
of responsiveness and its key determinants. Third, due to the large involved, there cannot be one single
“holy grail” concept of how responsiveness can be achieved, neither does one single approach apply to
entire sectors.
Research limitations/implications – A great variety of variables needs to be considered in order
to provide a balanced view of all three dimensions of responsiveness, thus the case analyses remain at
a necessarily high level.
Practical implications – The paper provides guidelines for management on how to align their
supply chain strategy to volume, product and process contingency factors in order to balance
responsiveness to customer demand and supply chain efficiency.
Originality/value – The paper aims to elevate a discussion that previously has been held mostly at
a conceptual level beyond the qualitative description, and thus addresses a key shortcoming in the
current debate.
Keywords Quick response manufacturing, Supply chain management, Productive capacity,
Agile production
Paper type Research paper

1. Introduction
Attempting to give customers what they want within acceptable timeframes sounds
like a sensible business premise. While the grand scale of investment needed to design
and deliver a product at an economically competitive price creates certain constraints,
providing customers with products that meets their exact requirements as timely as
possible has an unmistakable logic. One would imagine that today, when most International Journal of Operations &
companies no longer enjoy the luxury of having customer demand in excess of their Production Management
Vol. 25 No. 7, 2005
ability to supply their products (as it has been in most markets for previous decades), pp. 603-622
responsiveness would be key to their success. Yet many industries, still excessively q Emerald Group Publishing Limited
0144-3577
focused on the easily measured performance of manufacturing plants, are failing to DOI 10.1108/01443570510605063
IJOPM respond to their customers and deliver customised products within a satisfactory
25,7 timeframe. Even today, only every second vehicle is custom-built in Europe, and
customers will have to wait an average seven weeks for these vehicles to be delivered
(Holweg and Pil, 2004).
The debate about the responsiveness of manufacturing operations however has
been going on for more than a decade, with its origins in the concept of “time
604 compression” or “time based competition”, which were initially promoted by Stalk
(1988), Bower and Hout (1988), and Stalk and Hout (1990), and were later adopted by a
range of companies and academic researchers (Harrison, 1996; Suri, 1999). At the same
time, several quick response initiatives have proven successful, namely the quick
response programme (QRM) in the textile sector, and the efficient consumer response
(ECR) Initiative in the fast-moving consumer goods (FMCG) sector (Hunter, 1990; Kurt
Salmon Associates, 1993; Lowson et al., 1999). Related generic contributions have also
come from such fields as systems dynamics, lean thinking, business process
re-engineering, agility, and mass customisation (Forrester, 1961; Hammer, 1990; Kidd,
1994; Womack and Jones, 1996a; Gilmore and Pine, 1997; Towill, 1999).
Previous debates have often attempted to show that one approach is superior to
another and that a new approach answers all previous unanswered questions, but have
we really moved forward? Over the last two decades, we have learnt a lot about
flexibility in a manufacturing context (Slack, 1983; Correa, 1992; Suarez et al., 1995), yet
apart from the conceptual work by Mather (1988) and Fisher et al. (1994) and initial
quantitative assessment on the plant and supplier level by Matson and McFarlane
(1999) and Harrison (1996), respectively, most discussion so far has remained in the
realms of qualitative description, as pointed out by Rohr and Correa (1998), or to quote
Sharifi et al. (2001):
More empirical evidence, alternative solutions for strategising, designing, and aligning the
supply networks . . . are some of the existing gaps in the body of research in the area.
Furthermore, it has been suggested that certain approaches are suitable for entire
industry sectors (Kidd, 1994; Naylor et al., 1999). The overall assumption however that
any one approach can be applied universally throughout one sector will be challenged
in this paper. Synthesising the existing debates on manufacturing flexibility, lean and
agile supply chain configurations and mass customisation strategies, a balanced
generic model based on product, process and volume factors is proposed, which will be
illustrated drawing upon empirical evidence from two European vehicle
manufacturers, and one electronics manufacturer’s supply chain.

2. Definition and related concepts


2.1 Systems thinking – the origin of responsiveness
The concept of “a response” or “responsiveness” in manufacturing and supply systems
relates back to the initial proposition of a General Systems Theory. Ackoff (1971) for
example defines a “response” as:
. . . a system event for which another event that occurs to the same system or to its
environment is necessary but not sufficient; that is, a system event produced by another
system or environmental effect (the stimulus). Thus a response is an event of which the
system itself is the co-producer.
With regards to the management application of responsive order fulfilment, this input Three
is given by the customer order, and commonly an input-output analysis is used to dimensions of
analyse this process (Kramer and De Smit, 1977), by introducing a fully specified input
into the system and measuring the output over time. This approach was later responsiveness
translated into more “user-friendly” terms by Mather in his P/D ratio, where he
compares the production system’s response time (P) to the customers’ willingness to
wait (D) (Mather, 1988). Mather argues that the right order fulfilment strategy should 605
be decided by comparing to the ratio of customer willingness to wait, and the time it
takes to assemble a product. Thus, for the customers unwilling to wait at all this would
mean selling products from finished goods inventory, and making products to forecast
(MTF). In case of customers willing to wait until the products is assembled, but where
the manufacturing lead-time for the components exceeds this tolerance, the
assemble-to-order (ATO) approach is most suitable. In case the customers are
willing to wait also for the components to be made or delivered to order, the
build-to-order (BTO) strategy should be used, and where the process involves a
customised design, the engineer-to-order (ETO) strategy is appropriate. Although not
specifically mentioned by Mather, the P/D ratio also defines the de-coupling point in
the system at the point where the customer demand signal feeds into the supply chain.
In a MTF setting, this would be at finished goods level, in a ATO setting at component
level, and so on. The P/D ratio only denotes the basic order fulfilment strategies, and
hybrid strategies such as amend-to-order or locate-to-order have also been discussed
(Holweg and Pil, 2001).
While the systems approach undoubtedly provides a strong theoretical framework
for the responsiveness concept, within the management field a more specific definition
is required. Initial definitions have been proposed by Kritchanchai and MacCarthy
(1999), which however does not specifically mention the response to customer demand,
or changes in the marketplace. Thus, based on Kritchanchai and MacCarthy (1999), the
following definition is proposed:
Responsiveness is the ability to react purposefully and within an appropriate time-scale to
customer demand or changes in the marketplace, to bring about or maintain competitive
advantage.
Responsiveness in the wider supply chain context has been discussed by Fisher (1997),
who argues that the product characteristics (innovative or functional) and life cycles
need to be linked to the layout and functions (conversion and market mediation) of the
supply chain. Fisher proposes a simple matrix, plotting the product characteristics
against the supply chain characteristics. While this seminal contribution has been
widely quoted in relation to responsiveness (Naylor et al., 1999; Kehoe et al., 2001), a
concern with Fisher’s matrix is that complex products, such as motor vehicles, can be
either functional or innovative products (as Fisher himself acknowledges in the same
paper), yet at present are using the same processes, are being built in the same factories
and are using the same supply chain. Second, Fisher advocates the holding of stock in
the form of parts or components as the means to move from an efficient to a responsive
supply chain. Whilst this approach has had undoubted success in the electronics sector
(e.g. Dell’s “assemble-to-order” model, see Holweg and Pil, 2001), holding stock at either
location seems unfeasible in the auto sector due to the component variety and risks of
obsolescence, as will be shown below. Nevertheless, Fisher’s and Mather’s models are
IJOPM the most commonly cited quantitative contributions to the discussion, whereas most of
25,7 the related manufacturing and supply chain management concepts are still discussed
qualitatively, a point which will be expanded in the following discussion. First, the
concept of manufacturing flexibility will be reviewed, a discussion which in itself
reflects a great diversity of concepts and arguments, and subsequently, the concept of
responsiveness will be linked to the debate centred around the “lean” and “agile”
606 concepts.

2.2 Linking responsiveness to manufacturing flexibility


Flexibility, according to the Oxford Dictionary, means either the “ability to bend” or
the “ability to adapt”. It is the latter that has been at the focus of academic discussion in
relation to organisations in general, and manufacturing systems in particular.
Flexibility in management research is generally considered as an adaptive response to
environmental uncertainty (Gupta and Goyal, 1989; Gerwin, 1993). The ability of a
system to adapt to changing external and internal influences has been recognised as a
source of competitive advantage (Zelenovich and Dragutin, 1982; Hayes and
Wheelwright, 1984), and was widely promoted in the 1990s by Slack (1991) and Upton
(1994, 1995). Although flexible manufacturing systems (FMS) (Hill and Chambers,
1991) have been at the centre of debate, the need for flexibility should not be restricted
to the manufacturing function or the manufacturing sector, as Bateman (1998) points
out. In particular, as the importance of the ability to adapt to changing market
environments grew, the debate on flexibility at various levels provided the theoretical
origin for the concepts of responsiveness (Lowson et al., 1999) and agility (Kidd, 1994),
both of which will be discussed in the section below. For a detailed discussion of the
link between variability and uncertainty see also Correa (1994).
The motives for companies to seek flexibility and the benefits to be obtained have
been discussed in detail by Slack (1991) and Correa (1992). However, it can be
anticipated that the reasoning for seeking flexibility will vary according to industry or
company-specific circumstances. In fact, both Slack and Correa acknowledge the
diversity of motives that might incentivise companies to increase their operational
flexibility.
Examples of how flexibility can increase competitiveness are outlined by Hayes and
Wheelwright (1984) and Kim (1991). Kim identifies the ability to provide fast deliveries
as a source of competitiveness to be achieved through flexibility, whereas Hayes and
Wheelwright argue that flexibility can provide competitiveness through broad product
lines. Criticising such broad categorisation, Hill (1985) on the other hand rejects
flexibility as a “panacea”, and argues that specific types of flexibility need to be
explored in relation to the particular settings of each supply chain to fully exploit the
competitive potential.
2.2.1 Types of flexibility. Several types of flexibility have been discussed (Slack,
1983; Browne et al., 1984; Slack, 1991), yet for the purpose of the research, the
framework proposed by Slack (1991) will be used. Slack’s framework can be applied to
a wider context outside single manufacturing systems, and it also links the different
types of flexibility in a hierarchy, as shown in Figure 1.
This framework directly relates to the overall research problem, as
“responsiveness” can also be rephrased as “system flexibility”. The various
flexibility types proposed by Slack are shown in Table I.
Three
dimensions of
responsiveness

607

Figure 1.
Hierarchy of flexibility

Type Definition

Flexibility
Product The ability to introduce novel products or to modify
existing ones
Mix The ability to change the range of products made
within a given time period
Volume The ability to change the level of aggregated output
Delivery The ability to change planned or assumed delivery
dates
Dimension
Range The total envelope of capability which the
production system can achieve
Response The cost and time within which changes can be
made to the capability envelope Table I.
Types and dimensions of
Source: Adapted from Slack (1983, 1991) flexibility

Slack links the four main types of flexibility and the two dimensions – range and
response, and argues that both high levels of variety and uncertainty will most likely
require high levels of all types of flexibility. Mix flexibility has been at the heart of a
side-debate on flexibility, as it is seen as an alternative to focused manufacturing. The
“focused factory” would reduce cost by relying on the benefits of task specialisation
and was initially proposed by Skinner (1974), yet also discussed by Hayes and
Wheelwright (1984). Overall though, in his 1991 framework, Slack (1991) probably
provides what is the most comprehensive explanation of how flexibility and
responsiveness link: responsiveness, or “system flexibility” as he refers to it, is based
on a hierarchy of different types of flexibility, namely that of flexible operations (the
“process” dimension) derived from a matrix of flexible labour, flexible suppliers, and
flexibility derived from technology.
IJOPM 2.2.2 Factors determining flexibility. Reviewing the recent studies and classifications
25,7 of flexibility in manufacturing systems (c.f. Correa, 1992; Gerwin, 1993; de Grote, 1994;
Upton, 1995; Bateman et al., 1999; Lau, 1999) it soon becomes apparent how diverse the
argument has become. Whilst there generally is a common starting point, i.e. the need
to adapt to uncertainty of some kind, there is less agreement on the dimensions of
flexibility. Whilst Slack’s framework is commonly cited, Gerwin (1993) for example
608 uses “mix, changeover, modification, volume, re-routing, material and flexibility
responsiveness” dimensions. In their literature survey Vokurka and O’Leary-Kelly
(2000) identify no less than 15 different dimensions discussed in the literature.
Reviewing the contributions made to the flexibility debate, it was not possible to
establish a consistent set of factors determining or measuring flexibility. Vokurka and
O’Leary-Kelly (2000) also argue while that advances have been made in the debate,
further studies are needed to fully explain the complex nature of manufacturing
flexibility. Gerwin (1993) also concludes that little agreement exists on which
dimensions to include. Gerwin proposes that flexibility can be studied on various
hierarchical levels as a reason for this disagreement, and concludes that management
research has devoted too much time to the range aspects of flexibility as compared to
response flexibility.
Upton (1994, 1995) also argues that a great diversity of understanding exists about
what “flexibility” actually means, and of the different ways how this “ability to
change” can be achieved. Upton uses a framework similar to Slack’s, dividing
flexibility into product, process and volume dimensions. Upton further found no
relationship between the different dimensions of flexibility – its mobility (measured by
change-over times), and its range (the breadth of product range), to be more specific.
Overall, a considerable body of literature is at hand discussing the flexibility or
responsiveness of manufacturing systems, yet rarely is the link between these two
concepts clearly stated – a fact criticised in recent contributions (Kritchanchai and
MacCarthy, 1999; Matson and McFarlane, 1999). Essential questions such as whether a
flexible manufacturing system by default is also responsive, or what types of flexibility
are needed to be responsive are still without explicit answer. While the literature might
not offer a clear distinction between “manufacturing flexibility” and “responsiveness”,
or provide a concise definition of responsiveness, but there nevertheless seems to be a
consensus that different organisations will need different types of flexibility in order to
be responsive to market needs. For the purpose of this study, the following definitions
are therefore proposed, largely based on synthesising the above contributions (Slack,
1983, 1991; Holweg and Pil, 2001):
Flexibility is a generic ability to adapt to internal and/or external influences.
Responsiveness is the ability of the manufacturing system or organisation to respond to
customer requests in the marketplace. To achieve responsiveness, certain types of flexibility
are required of the manufacturing system itself, as well as of the supply and logistics
subsystems. The types of flexibility required to achieve such responsiveness in the supply
chain are contingent upon the system’s structure and environment.

2.3 Linking responsiveness to the lean and agile debate


The notion of being responsive to customer demand, and providing customised
products within a minimal or acceptable timeframe is a very generic proposition,
and seems a logical concept. Not only can manufacturing operations align themselves Three
and their supply chain to customer demand, but also generally a reduction in costly
finished goods inventory is achieved (McCutcheon et al., 1994; Holweg and Pil, 2001). In
dimensions of
the case of General Motors for example, Blumenfeld et al. (1999) show that responsiveness
manufacturing response times have a direct impact on the inventory levels in the
system.
It is this generic nature of “being responsive” that has to be seen as the reason that 609
such a great variety of related approaches claim to achieve this goal, and to obtain the
flexibility in manufacturing required to provide “mass customised” products in a
responsive manner. Gilmore and Pine (1997) and Lampel and Mintzberg (1993) for
example refer to late configuration, modularity, postponement and standardisation as
possible strategies, yet also concepts such as the de-coupling points are being
discussed (Mason-Jones and Towill, 1999). As a result, most current manufacturing
concepts and strategies can be related to such notions, which lead to some interesting
discussion over the question who actually “owns” the concept?
In particular, the discussion as to whether “lean” or “agile” are the appropriate ways
to achieve responsiveness has received some attention over recent years (Naylor et al.,
1999; Christopher and Towill, 2001). In terms of a fit with responsiveness, just-in-time
(JIT) or lean production (Monden, 1983; Womack and Jones, 1996b) is well placed, since
its persistent focus on lead-time reduction and customer value seems apposite within
the debate about responsiveness, as Hines (1998) argues:
The Toyota Production System is, simply put, a method of shortening the time it takes to
convert customer orders into vehicle deliveries. In order to achieve this the entire sequence
from order to delivery is arranged in a single, continuous flow with continuous efforts made
in terms of shortening the sequence and making it flow more smoothly.
In fact, MacDuffie et al. (1996) showed that, for the automotive industry, lean plants are
capable of handling greater product complexity in far shorter change-over lead-times,
which potentially gives them the advantage of responding faster to changes in
customer demand than non-lean plants. Building on recent evidence from the Global
Assembly Plant Study, Holweg and Pil (2004) further show that lean work systems
also increase a plant’s ability to increase and decrease volume – at considerably lower
cost than traditional mass producers. Additionally, lean has the objective of reducing
any delays in the system, using just-in-time (JIT) systems, which reduce delivery and
production lead-times. The focus on quick changeovers and small lot production
enables the company to respond to demand without holding large inventories. Yet it is
the focus on levelled demand, or also referred to as “Heijunka” (Japanese for “smooth
wave”), that has been criticised as being too inflexible and not applicable in more
volatile markets (Katayama and Bennett, 1996; Harrison, 1999). Levy (1994) and
Frizelle and Efstathiou (2001) on the other hand argue that the lean approach of level
scheduling is superior in terms of managing complex systems. Lean simplifies and
reduces variance within complex and dynamic supply chain systems, creating a more
predictable and controllable behaviour, as well as reducing cost through a reduction of
complexity and uncertainty.
As a counter-reaction to the rigidity of the schedules in lean production, the agile
manufacturing approach emerged. The concept has its origins in the US, where the
term was introduced by the Iaccoca Institute (Goldman et al., 1995). Interestingly, the
terms “agility” and “agile manufacturing” were used by the Iaccoca Institute to
IJOPM describe the adapted version of the Toyota Production System in the US automotive
25,7 industry (as at the time the new concept could not be seen to be derived from a Japanese
approach for political reasons), yet the meaning of the term has migrated towards the
responsiveness of manufacturing operations. Agile manufacturing promotes three
major concepts to enable flexibility: introducing “response” buffers, postponing
decisions in manufacturing, and to late-configuring products (Kidd, 1994). The basic
610 technique of agility is to postpone the configuration of the product and to hold
component stock to respond to incoming orders by assembling the product to order –
as also proposed by Fisher (1997) to hedge against remaining residual uncertainty with
buffers of inventory or excess capacity.
Despite the controversy, a combination of the two concepts has also been suggested
in relation to particular market, product or process characteristics (Naylor et al., 1999;
Christopher and Towill, 2001). Naylor et al. state that the adoption of either depends on
the market knowledge and positioning of the de-coupling point. Agile is to be seen as
appropriate “in fluctuating demand (in terms of volume and variety)”, whereas lean is
seen as suitable for low-variety, low variability environments. A similar distinction is
also discussed by Christopher (1999), whereas Mason-Jones and Towill (2000) argue
that whilst lean and agile may seem to represent two contrasting approaches, most
organisations will need to adopt certain elements of both concepts to create hybrid
strategies, generally depending on the volume per product and the position of the
de-coupling point in the system.
Interestingly, the de-coupling point strategy (Hoekstra and Romme, 1992) is used in
both the lean and agile contexts. In the lean approach, the objective is to extend the
“customer pull” as far back into the supply chain as possible, whereby all tiers would
operate only on the demand signal submitted from the preceding tier. Within the
“leagility” model, it has been suggested to create an agile system downstream, and a
lean supply chain only upstream from the de-coupling point (Naylor et al., 1999), yet
this was not the original intention of lean thinking.
In this context, it should be noted however that both Naylor et al. (1999) and
Christopher and Towill (2001) are basing their argument on a very narrow,
production-oriented definition of lean, as opposed to the “lean enterprise” definition
suggested by Womack and Jones (1994) soon after their seminal work in 1990. In fact,
many contributors, eager to point out the shortcomings of the lean concepts, still base
their arguments on the early and limited understanding of lean thinking prevalent in
the western world in the early 1990s (Hines et al., 2004).
In the agile manufacturing system, the de-coupling point would be set by
introducing a buffer of components to allow for assembling products to customer order
without being delayed by the response lead-time of the upstream supply chain. In the
same way as in the lean approach, agile would strive towards pushing the de-coupling
point further up the supply chain. However, there is an inherent danger of triggering
further demand distortion placing de-coupling points downstream, i.e. at finished
product or component level, as pointed out by Mason-Jones and Towill (1999). They
argue that “the further the information de-coupling point is moved upstream the better
the improvement in the dynamic behaviour of the supply chain”, which is congruent
with previous contributions on supply chain dynamics. Basing production schedules
on actual orders reduces the distortion caused by multiple layers of forecasting, or
“double-guessing”, and provides a maximum of demand visibility that is otherwise Three
hard to achieve. dimensions of
The initial concept of the de-coupling point dates back to the “P/D Ratio”, which has
been popularised by Mather (1988), yet has also been traced back by Slack (1991) to the responsiveness
early Japanese literature (Shingo, 1981). The P/D ratio concept is probably the closest
to actually quantifying the key variables that determine which order fulfilment
strategy should be implemented by the company. However, there are certain problems 611
arising with the concept, as it does neither consider short-term demand variability nor
long-term trends or patterns, such as seasonality. Also, product variety and the
distribution of demand in relation to the specifications offered are neglected (Pil and
Holweg, 2004). This is a major shortcoming of the concept, as many companies today
operate differentiated stocking policies, whereby high volume “runners” would be
stocked and low volume specification or “strangers” would be made to order only. In
this sense, Mather’s model is too simplistic. Peugeot, for example, only builds a very
limited number of vehicle specifications to forecast (which are available through its
distribution centres within 24 hours), and the remainder are built to order only. This
hybrid strategy enables Peugeot to bridge the gap between impatient customers, a long
order-to-delivery lead-time for custom-built cars, and high product variety (Holweg
and Pil, 2001).
Merging the concept of de-coupling and the customisation of the product, the
concept of postponement has also been discussed (Pagh and Cooper, 1998). With
regards to the order fulfilment process, postponement implies delaying the
configuration of the product as far as possible, enabling more efficient supply
chains and responsiveness to the customer – a concept closely related to mass
customisation (Pine, 1993). The basic notion is to gain competitive advantage through
delaying the final product configuration, in terms of increased responsiveness and
reduced inventory holding cost for finished (customised) products. The topic has been
widely discussed and applied since its original proposition by Starr (1965) in 1965
(Bowersox and Closs, 1996; Feitzinger and Lee, 1997).

2.4 Synthesis – the key factors


In conclusion, several relevant debates could be identified that – either directly or
indirectly – contribute to the discussion of responsiveness in the supply chain. On the
other hand, the lack of definition, previously also criticised by Matson and McFarlane
(1999) and Kritchanchai and MacCarthy (1999), as well as the lack of empirical
evidence undermining the claims of time-based competitiveness clearly demonstrate
the need for a comprehensive and unifying conceptual model of responsiveness (Rohr
and Correa, 1998; Sharifi et al., 2001).
However, it is neither the purpose of this paper to resolve the controversies
underlying some of these debates, nor to accredit a single manufacturing system with
the “ownership” of the responsiveness concept. The objective is to identify the key
factors influencing a supply chain’s capability to respond to customer demand. Hardly
surprisingly, the great variety of concepts and debates also translates into a diversity
of factors considered relevant, as shown in Table II.
As illustrated, there is considerable ambiguity as to which factors are regarded as
essential, which clearly shows that overall a more holistic approach to responsiveness
is needed. Whilst most of the approaches discussed above place very specific emphasis
25,7

612

Table II.
IJOPM

Main contributors and


critical factors considered
Demand
Nature of Product Order-to-delivery Point of product De-coupling Product Supply chain Customer pareto
demand variety lead-times configuration point life cycle response time expectations analysis
p p p p p
Christopher (1999) p p p
Christopher and
Towill (2001) p p p
Fisher et al. (1994) p p p p
Fisher (1997) p p p p
Kritchanchai and
MacCarthy (1999) p p p p p
Lowson et al. (1999) p p p
Mason-Jones and
Towill (1999) p p p
Mather (1988) p p
MacDuffie et al.
(1996) p p p p
Naylor et al. (1999) p p p p
Slack (1991) p p p
Spring and
Dalrymple (2000) p p p p
Womack and Jones
(1996a, b)
on their underlying concept – such as flexibility in manufacturing, the ability to Three
respond to demand variability, or the configuration point of the product – there are in dimensions of
fact underlying common themes in most of these concepts. These commonalities can be
grouped into three “dimensions” of responsiveness. These dimensions follow the responsiveness
systems approach of considering a manufacturing system’s inputs (in terms of
customer demand), transformation processes (in terms of manufacturing and logistics,
as well product customisation), its outputs (in terms of order fulfilment), and its 613
environment (in terms of generic industry variables such as the typical product life
cycle, seasonality of demand, etc.).
(1) The product dimension relates to key factors such as the point of product
customisation, which is intertwined with the product’s architecture – whether it
is modular or integral, as defined by Ulrich (1995). Also, both internal and
external product variety are key determinants for the supply chain, as well as
the overall life cycle of the product. Key contributors include: Mather (1988),
Slack (1991), and Fisher (1997).
(2) The process dimension covers the production lead-time, not only of the actual
manufacturing process, but also the response capabilities of the supplier and
logistics operations are important (Fisher et al., 1994; Gustin et al., 1995).
Furthermore, the supply chain settings in terms of the de-coupling and product
customisation points are crucial. Key contributors include: Mather (1988),
Christopher (1999), Kritchanchai and MacCarthy (1999), and Mason-Jones and
Towill (1999).
(3) The volume dimension includes factors such as the nature and variability of
demand (i.e. the volume requirements), the customer expectations in terms of
order-to-delivery (OTD) lead-time and product variety, as well as factors such
as the distribution of demand over the range of specifications offered
(effectively a Pareto analysis). Key contributors include: Mather (1988), Fisher
et al. (1994), Womack and Jones (1996b), and Christopher and Towill (2001).
To illustrate these three dimensions and their relevance to responsiveness, three case
studies will be presented in the following, quantifying the factors identified above and
discussing their impact on the overall responsiveness of the particular supply chain
system in question. The aim is to elevate the general debate from the realms of
qualitative description, thus addressing one of the main criticisms so far (Rohr and
Correa, 1998; Sharifi et al., 2001).

3. An empirical view of responsiveness


One needs to consider a great variety of variables in order to provide a balanced view
of all three dimensions of responsiveness. Customer expectations vary from market to
market, as do product offerings and order fulfilment lead-times. Developing and
discussing empirical evidence related to three supply chains however faces obvious
constraints within a single paper thus needs to remain at a necessarily high-level. The
data presented in the following was collected using a multi-method approach of
semi-structured interviews with key sales, production and logistics management staff
at the three organisations, which was complemented by a two-day process mapping
workshop on site, as well as visits to the manufacturing operations in question. The
“Learning to See” value stream mapping methodology (Rother and Shook, 1998) was
IJOPM chosen, as it has the unique advantage to show the entire order fulfilment process on
25,7 one map, rather than separate the information and material flow charts (Gardner and
Cooper, 2004). This way, the interactions between these two key flows can be captured,
which is instrumental in identifying the product customisation and de-coupling points
in the system, for example. Also, in the automotive case, the market and
customer-related data could be triangulated with secondary performance of vehicles
614 distribution systems, which were collected as part the pan-European benchmarking
conducted by the International Car Distribution Programme over the last decade
(Williams, 1999, 2000).
Deliberately, two examples from “the industry of industries”, as Peter Drucker
called the motor industry half a century ago, were chosen (Drucker, 1946). The main
reason is that for the last century the automotive industry has been a key source of
strategic thinking in manufacturing – yet in terms of responsiveness the industry
struggles to adopt the concepts successfully applied in other sectors (Holweg and Pil,
2001, 2004). The car industry is inherently bad at responding to customer demand – in
the UK only 33 per cent of new vehicles were built to order in 1999, the rest was
supplied from stock. Stock levels of vehicles in airfields tend to range from 43 to 72
days supply across Europe. Heavy discounting is used to convince customers to buy
specifications they did not ask for, and only 75 per cent of customers claim they bought
the exact vehicle they originally wanted. At the same time, the average
order-to-delivery waiting time is 48 days in Europe for volume cars (ICDP, 2000).
Whilst there is increasing recognition at vehicle manufacturer level of this failure, the
industry so far has failed to adopt new strategies towards more responsive vehicle
supply, despite frequent calls to build “cars like Dell builds computers” (Andrews,
2000). Therefore, the two automotive cases are set into comparison to a European
electronics manufacturer, who assembles a wide range of notebooks, desktops and
servers to customer order, and achieves OTD times of 5-7 days within Europe for c.90
per cent of its customers. Table III shows the key variables, grouped into demand,
product and process-related factors.
Several obvious conclusions can be reached from the comparison: first, the low
internal and high external product variety in the electronics case show why the
“assemble-to-order” approach adopted by the electronics manufacturer is so powerful.
Considerable choice (external variety) can be offered by combining a limited set of
standard components (Pil and Holweg, 2004). Also, following Mather’s P/D ratio, the
discrepancy between the supply chain response time and the impatience of the
customers clearly shows that a true “build-to-order” strategy would currently not be
feasible within a timeframe acceptable to the customers. Without reducing the
response time from the supplier (by co-locating key suppliers next to the assembly
plants, for example), the current approach is as far as the de-coupling point can be
moved upstream within the supply system.
Second, despite the fact that both vehicle manufacturers are volume producers of
similar mid-range vehicles, and the fact that their manufacturing operations in
question here are based in the UK, they show very different characteristics in terms of
their product and processes, which in turn puts the “global applicability” claimed by
certain responsive manufacturing strategies very much into question. Let us examine
the differences and the underlying reasons in more detail.
Key variable Vehicle manufacturer A Vehicle manufacturer B Electronics manufacturer

Volume
Customer order-to-delivery 17 per cent of customers are willing to wait up to 7 days, 83 per cent are “Instant gratification”, not more than
lead-time expectations willing to wait up to 30 days 1 week
Demand stability Real demand largely unknown, yet sales registrations are hugely distorted “Hockey-stick” syndrome, with
with peaks in March and September (15 per cent annual volume each), and peaks towards the end of the month,
troughs in July, August, December and February further peak in December
Demand – specification Pareto c.1 per cent of specs account for 50 c.10 per cent of specs account for 75 c.10-20 per cent account for 80 per
analysis per cent of sales per cent of sales volume cent of sales
Product
Variety post configuration 5,843,600 (major volume model) 820 (major volume model) 100,000 þ (average across product
(External) range)
Variety pre configuration Average 2,000 – 4,000 components, relating to 15,000 individual parts 15 key components, 200 parts
(internal)
Point of customisation Body shop, paint shop and vehicle assembly. Limited late configuration at Assembly (hardware), and software
distribution centre and dealership uploading. Customised software for
corporate clients
Product life cycle c.4.5 years c.3 years 4-6 months
Process
Total order-to-delivery lead-time 26 days in UK for custom-built 98 days in UK for custom-built 5-7 days
vehicles (best case) vehicles (best case)
Distribution lead-time to/within the 5 days 7 days 3-5 days
UK
Supply chain response lead-time 1 day for local sourcing, 8 weeks worst case for distant sourcing (Japan) 2 months from key suppliers (Asia &
US)
Decoupling Point(s)in the Supply At dealer level, i.e. at finished At distribution centre level for At component level, through local
Chain product level in the market runner models, in assembly for the component warehouse
remainder
responsiveness

variables
Quantifying the key
Three

Table III.
615
dimensions of
IJOPM As can be seen from Table III, both vehicle manufacturers show similar characteristics
25,7 for most demand-related variables, yet key differences show in terms of product
variety offered and order-to-delivery lead-times. The reason is that vehicle
manufacturer B pursues a strategy of supplying vehicles from distribution centres,
hence has strongly rationalised the product range to less than 1,000 specifications. The
actual order-to-delivery lead-time hence seems less of an issue. In 1999, this vehicle
616 manufacturer sourced 75 per cent of all orders from existing stock, 31 per cent of which
were from dealer inventory, 6 per cent were allocated to customers while in the factory
pipeline, yet still 18 per cent were built to customer order. The latter seems surprisingly
high, as the system is geared to providing low variety products from central stocking
locations, which would be replenished against a long-range forecast.
In comparison, vehicle manufacturer A seems to have a system comprising of the
“worst of the two worlds”, on the one hand high variety products are offered, yet only
15 per cent are built to customer order, and 74 per cent are sourced from stock in the
marketplace. The results are high discounts required to sell these vehicles, and
frequent stock clearing promotions to cope with the consequences of the inevitable
forecast errors. Compared to vehicle manufacturer B, the order-to-delivery lead-time is
far shorter, which could open the opportunity of building more vehicles to order, as the
OTD lead-time largely falls within the customer waiting tolerance.
For both manufacturers the decoupling point rests within the distribution channel,
and hence costly inventory of finished vehicles is inevitable. For vehicle manufacturer
A, the current supply chain settings do not permit moving the de-coupling point any
further in the system. Due to the low external variety however, vehicle manufacturer B
was able to aggregate the “runners”, i.e. the high-volume specifications, from central
distribution centres, to which all regional dealers have access within a 24-hour call-off
lead-time. This enabled both a reduction in overall inventory, as well as a far better
control of this stock. It might be argued that reduction in external variety is
detrimental to overall sales (Lancaster, 1990), yet the operational improvements by
moving the de-coupling point might well outweigh these.
In comparison to the electronics manufacturer however, it can be clearly seen that
the internal product variety inherent in the automotive product does not permit an
emulation of the assemble-to-order approach, as the stock holding costs for the entire
component range (for all specifications!) would be prohibitive. Also, the current
order-to-delivery capability in the auto industry in general, as in these cases, logs an
order of magnitude behind the responsive processes that are in place within the
electronics, grocery and textile supply chains.

4. Discussion
The case evidence reveals several novel insights, which have been alluded to in the
literature review, but so far lack the empirical backing. The most important insight is
the interdependence of the dimensions of responsiveness. A manufacturer might have
a fast order-to-delivery process, well capable of serving an impatient customer base,
yet if the internal product variety is high, the manufacturing operation might struggle
to deliver the products in time. For example, consider the above case of the electronic
manufacturer. If the products were not based on only 15 key components, but instead
showed variety levels comparable to the motor industry, the assemble-to-order
strategy practiced would no longer be economically viable. Holding component
inventory of all of these parts would quickly be cost-prohibitive, and the manufacturer Three
could not capitalise on the flexibility in the manufacturing operation. dimensions of
Equally, consider vehicle manufacturer A, which offers significantly more variety
to its customers than vehicle manufacturer B. However, since most vehicles are sold responsiveness
from existing stock at the dealership, the manufacturer cannot capitalise on its
advantage of high product variety. Choice is offered to the customer, the OTD
lead-time is much shorter than in case of vehicle manufacturer B, yet still that choice 617
does not reach the customer. The misalignment between product variables (i.e. external
variety) and the process variable (i.e. sales sourcing) prohibits this manufacturer from
exploiting his response capability.
Vehicle manufacturer B on the other hand has a well-aligned system, whereby
external variety is aligned to the strategy of matching customer needs with existing
stock in a central distribution centre. The long OTD lead-time is hardly relevant, as the
deliberate decision is not to build products to order, but instead decouple the system at
the distribution centre level. The obvious caveat of this strategy is the reduced levels of
external variety, which cannot be increased without compromising the levels of finding
exact customer-product matches in the distribution centre stock.
The cases clearly illustrate that excelling in either dimension of responsiveness is
likely to be futile, if this capability is not aligned to the other two. Product and process
need to be aligned to customer demand in order to provide the desired competitive
advantage. A misalignment between the “product”, “process” and “volume”
dimensions will inevitably lead to a strategic conflict in the supply chain, and result
in an overall sub-optimal supply chain performance. The automotive industry, with its
enormous product variety and fairly patient customer base, is a classic example of such
misalignment. With billions of theoretical specifications offered to the customer,
effective choice is limited to what is available in the dealer stock (Holweg and Pil, 2004).
One could argue that Henry Ford’s famous quote “Any colour as long as it is black”
should be amended to “Any colour as long as it is on the dealer’s lot” today.

5. Conclusion
A range of seminal contributions have been made to the field of responsiveness, yet as
pointed out above, the current debate so far has been focussed on a limited number of
dimensions only, or remained in the realms of qualitative description – a gap this
paper aims to address. Based on the literature review and the empirical evidence from
the three cases discussed above, the following conclusions could be reached.
First, the concept of responsiveness has a simple logic, which easily aligns itself to a
wide range of manufacturing strategies. Most current manufacturing and supply chain
strategists would agree that the need to capture customers’ need, to provide the right
product within an acceptable timeframe is an essential cornerstone of sustained
competitiveness. However, underlying this remit is a complex interaction of a range of
key variables, yet previous contributions commonly only have addressed a subset of
these.
Second, these key variables can be grouped into three categories or dimensions of
responsiveness, to provide a holistic understanding of responsiveness and its key
determinants (Figure 2). These dimensions are volume, i.e. customer expectations and
the nature of demand, the product dimension, i.e. the impact of product variety and
customisation, and the process dimension, i.e. the production and supply chain
IJOPM
25,7

618

Figure 2.
Conceptual model of a
responsive supply chain
system

lead-times, as well as the positioning of the de-coupling point(s) in the system. Thus,
the proposed model draws upon, yet also significantly extends Mather’s P/D ratio,
which essentially only addressed the process and volume (“demand”) dimensions.
Third, given the multiple contingency factors involved, there cannot be one single
“holy grail” concept of how responsive order fulfilment can be achieved, neither does
one single approach apply to all companies of one sector, as the example of the two
vehicle manufacturers discussed above shows. Most likely, companies of one sector
will show very similar profiles, yet it depends on the key factors – the key
characteristics of the manufacturing and supply system, its products and the market
environment – which approach suits under the particular circumstances. The model
proposed provides an initial step towards a more diversified view of responsive supply
chain strategies, yet is bound by the limitations of this study. Evidence from three case
studies provides the analytical validity for the model, yet it obviously lacks statistical
validity across large populations. Further scholars are encouraged to complement the
proposed model based on further empirical studies with wider scope. Preferably these
studies would be cross-sector comparative analyses, thus providing not only a
balanced view of the factors considered, yet also help to provide a better understanding
as to which of these factors are of particular relevance in the various industries.
In terms of theoretical contributions, a considerable body of knowledge has been
developed explaining the concept of flexible manufacturing over the last two decades.
When it comes to extending this notion to the wider supply chain however, the picture
is bleak. Several key contributors (Bower and Hout, 1988; Stalk, 1988; Fisher et al.,
1994; Fisher, 1997), have discussed the issue, yet as Rohr and Correa (1998) point out,
the literature shows an imbalance between conceptual and empirical work in the area
of time-based competitiveness which could clarify how actual companies are adapting
to this challenge. This paper addresses this gap, and aims to contribute towards a
generic model of responsiveness – capable of considering the multiple contingencies
that arise from the realms of different processes, product structure and configuration
concepts, and volume/demand configurations. One solution clearly does not fit all, but Three
equally, several key factors could be identified in this study that determine which dimensions of
strategy is appropriate, and why.
responsiveness
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(Matthias Holweg is university lecturer at the Judge Institute of Management, University of


Cambridge, UK. Prior to joining the faculty at Cambridge, he was a Sloan Research Fellow at
MIT’s Center for Technology, Policy and Industrial Development, and a Senior Research Fellow
at the Lean Enterprise Research Centre at Cardiff Business School. His research focuses
primarily on the implementation of build-to-order strategies in the automotive sector, and he
currently leads the research efforts of MIT’s International Motor Vehicle Program in this area. He
holds an Industrial Engineering degree from the University of Applied Sciences in Wedel,
Germany, an MSc in Operations Management from the University of Buckingham, and a PhD
from Cardiff Business School.)

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