A qualitative exploration of the wood product supply chain – investigating the possibilities and desirability of an increased demand orientation
Introduction
In times of ever-increasing competition, an important question for the forest sector is how to produce wood in an efficient and cost-effective way, while at the same time satisfying customer needs fully (Pulkki, 2001). One suggestion is to improve the management of the wood supply chain and its planning and coordination strategies. Over the last years, this so-called supply chain management (SCM) has been attracting increased attention from researchers and practitioners (see e.g. Larsson et al., 2016). Businesses have become so closely connected that, in order to be able to compete in current markets, they increasingly have to rely on efficient supply chains. As Rezapour et al. (2014) stated, developing the appropriate supply chain “is no longer just an exiting opportunity; it has become a survival skill, a view that is shared by a growing number of companies”.
One of the underlying principles of supply chain management is that the overall performance of the chain should be the core, with the chain being more than the sum of the individual parts, i.e. the actors, in that chain (Kogler and Rauch, 2018). Supply chain management is considered to be crucial for any actor to be competitive on the market, as it tries to improve relationships between actors in a chain to eventually make every business better off, stay economically healthy and to take care of externalities (Mentzer et al., 2001; Haartveit et al., 2004; Chopra and Meindl, 2015). Accordingly, this paper focuses on the wood product supply chain connecting the actors (forest owners) who produce the raw materials (wood) and the actors (forest-based industries) who transform these into intermediate goods and final wood products, that are ultimately delivered to end customers (Lee and Billington, 1993; Kogler and Rauch, 2018).
One of the considerations in SCM is the degree to which materials are “pushed” (initiated by the delivering actor, also called a production-oriented supply chain strategy) or “pulled” (initiated by the receiving actor, also called a demand-oriented supply chain strategy) through the chain (Gaudreault et al., 2010). Essentially, with a push strategy raw materials and (intermediate) products are produced, based on anticipated demand (Soon and Udin, 2011); when and where possible, stock is organised and as soon as orders come in, materials and products are supplied. In contrast, with a pull strategy products are only produced based on actual orders with no inventories (Davis et al., 2014). Pure pull systems are thought to be more efficient than, and hence superior to, pure push mechanisms (Spearman and Zazanis, 1992; Yang et al., 2018) as pull systems reduce costs, improve quality and yield a smoother production flow (Hopp and Spearman, 2004). This in contrast to push systems, in which products might be different from what clients really want, leading to missed sales opportunities or unsold products if market demand does not match the produced good (Gaudreault et al. 2007; Cox, 2004). It is, however, often very difficult to switch over from a production-oriented behaviour to a demandoriented behaviour (Naskali, 2002); the strategy does not fit every product and production process, nor are all organisations able to implement such a strategy.
Some scholars have observed that traditionally the wood products industry seems to use a push-based strategy (Haartveit et al., 2004; Rametsteiner and Weiss, 2006; Frayret et al., 2007; Carlsson et al., 2009; Larsson et al., 2016; Makkonen and Sundqvist-Andberg, 2017). According to Troncoso et al. (2011), forest companies traditionally lack integration with downstream activities, due to, a.o., the long and complex supply chains, with diverging flows of materials, and production uncertainties (Haartveit et al., 2004). Troncoso et al. (2011) also observed that this has led to inefficiencies along the entire wood supply chain. Forest companies do not maximally profit, as their supply inefficiently matches market demand, and downstream actors, such as sawmills and wood processors, are unable to optimize production, as they do not receive the right materials at the right time (Troncoso et al., 2011). Carlsson and Rönnqvist (2005) also argued that a better integration of companies throughout the supply chain, in combination with an increase in customer orientation, might improve efficiency.
A body of literature already addresses the application of push–pull strategies in the wood supply chain in terms of efficiency. Especially Operational Research (OR) has been used extensively (D'Amours et al., 2008; Santa-Eulalia et al., 2011), mostly in the form of simulation studies. Several of these make use of multi-agent based models. Gaudreault et al. (2009), for example, used an Advanced Planning and Scheduling System (APS) in the FORAC experimental planning platform (FEPP) to evaluate three different push-pull combinations. Cid Yáñez et al. (2009), based on Gaudreault et al. (2009), studied the impact of the location of the so-called decoupling point in the wood supply chain. This decoupling point is the point in the chain that indicates how far upstream in the supply chain the customer demand (the pull) determines the production (Olhager, 2012). The decoupling point was also studied by Gautam et al. (2017), who analysed the additional value of a terminal to be used as a decoupling point, based on a mixed-integer programming model. Additionally, Haartveit and Fjeld (2003) developed “wood games” as a simulation tool to provide insights in the challenges of an increased demand orientation in supply chains in the forest sector.
These studies developed a wide variety of network design models, making it possible to model the supply chain, evaluate different supply chain configurations, carry out what-if analyses and/or provide optimal solutions (Kogler and Rauch, 2018). Based on the studies, it is currently well understood that improved coordination and design of the supply chain may lead to clear gains (e.g. in reduced cost and hence higher profits, responsiveness, resilience). In contrast to these studies, which have been mathematical in nature, this study takes a different approach as a way to further examine the push-pull dilemma in the wood supply chain. It investigates the perceptions of key actors in the wood supply chain on the possibilities and desirability to develop a more demand-oriented strategy in the wood product supply chain, based on a web-survey and interviews. As Chéné et al. (2014) observed, despite the many mathematical models that have been proposed, most of the time the decision makers' perceptions, intuition and preferences are ignored. Considering that humans generally beat computers when it concerns strategic thinking, that they can support and improve strategies in which they participate, and that they are able to cope with the real world without using complex mathematical modeling (Chéné et al., 2014), it is essential to include these decision-makers when exploring supply chain management. The research questions to be answered in this paper are:
- 1.
Which strategies (push/pull) do the key actors in the wood supply chain employ and what are the main factors driving the decision for a certain strategy?
- 2.
To what extent do the key actors in the wood supply chain consider a more pull- oriented strategy feasible and why (not)?
- 3.
What alternative improvements do the key actors in the wood supply chain consider to be as or even more important?
The paper draws on two different qualitative research projects, exploring the perceptions of key actors in the wood supply chain. The first project focused on push and pull strategies among forest holdings in different countries, whereas the second carried out a case study of (part of) the wood supply chain in the Netherlands. In the first project, the objective was to explore push and pull strategies among forest owners, being the provider of the raw material and therefore central in the wood supply chain. The aim of the second project was to explore (part of) a wood supply chain, from forest owner to end-user, to illustrate the situation and specific problems within this chain. Taken together, these projects enable us to provide a more detailed insight into the viability of demand-oriented (pull) strategies than the two studies could have done separately.
The remainder of this paper is organised as follows. Section two provides a brief theoretical background on supply chain management in general, and on push and pull strategies in particular. Section three presents the methodologies applied in the two projects, while the fourth section proceeds with the results of the two studies. Finally, the paper ends with a discussion and conclusion on the insights gained.
Section snippets
Conceptual framework
Since the early 1990s, Supply Chain Management (SCM) has gained a prominent place in the management literature. Essentially, the concept of SCM extends the view of operations from one single organisation to the whole supply chain (Heikkilä, 2002). Despite this prominence, considerable confusion exists about its meaning (New 1997; Lummus et al., 2001; Mentzer et al., 2001; Kauffman, 2002). Kathawala and Abdou (2003), for example, concluded that SCM has not been defined in a unified manner, with
Project 1: push and pull strategies among forest holdings
The first study was designed to explore the push and pull strategies among forest holdings in different countries. Forest holdings play a vital role in the wood supply chain as the provider of the raw material, which is both the starting point and the building block of any final product. Ensuring the adequate supply of these raw materials is, therefore, critical in every supply chain.
The forest holdings targeted were selected based on a combination of purposive and convenience sampling.
Supply chain strategies and decoupling point
Fig. 2 portrays the supply chain for the interviewed companies from project 2. The figure summarizes the results of the strategies used by these companies. It is important to realize that this chart only portrays part of the supply chain; only the connections between the companies interviewed are reflected and many more connections with other companies exist which are not in the figure.
What the figure shows is that, even with only a small part of the supply chain portrayed, it is impossible to
Which strategies (push/pull) do the key actors in the wood supply chain employ and what are the main factors driving the decision for a certain strategy?
The underlying assumption of this paper was that the wood supply chain has a relatively low customer orientation due to the traditionally production oriented focus of the sector. Despite the small sample sizes in the two projects, the results clearly show that, although push strategies are dispersed along the supply chain, pull principles were also found to be present, from the forest owners in stage one to the industry in stage five. It is, however, difficult to classify the wood supply chain
Declaration of Competing Interest
The authors declare that they have no known competing financial interests or personal relationships that could have appeared to influence the work reported in this paper.
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