- October 23, 2007 - 16:00
- ZLC, Lecture Room A1
Vanderbilt University · Nashville, TN (USA)
“Valuing Time in the Supply Chain: Using a Product’s Marginal Cost of Time to Drive Supply Chain Design”
Supply chain design strategy has been framed as a tradeoff between cost efficiency and responsiveness, and several authors have explored how product characteristics affect this design choice. Within this framework, our research shows that time is the most critical design metric. Specifically, the tradeoff between efficiency and responsiveness is precisely captured by the cost of a unit time delay for a product at each stage in the chain– that is, by the product’s marginal cost of time.
We first demonstrate how the marginal cost of time can be a strategic driver by examining a common decision: whether to move domestic production of a product offshore. We develop a model to calculate the product’s marginal cost of time and use it to determine the real cost of lengthening the chain by moving offshore. Rules-of-thumb and insights into offshoring strategy for different product categories are obtained.
The marginal value of time also provides key insights for reverse supply chain strategy. For products with short shelf lives and high marginal time values (such as fashion goods), the return stream should be designed for early product differentiation and rapid response.
We also show that there are products for which the appropriate supply chain strategy should be a hybrid: responsive in one segment of the chain and cost efficient in others. As an example, we analyze the agricultural supply chain for a highly-perishable product such as fresh produce, and show that, because the marginal value of time changes dramatically as the product moves through the chain, the early stages should be very responsive and the later stages cost efficient.
Joseph D. Blackburn is James A. Speyer Professor of Management in the Owen Graduate School of Management, Vanderbilt University. He has served as Associate Dean and Senior Associate Dean of the Owen School and was Acting Dean from February, 1999 through July, 2000.
Professor Blackburn’s teaching and research is focused on time-based competition: how organizations develop competitive advantage through faster, more productive processes. His book Time-Based Competition was published in 1991 by BusinessOne-Irwin. He has published over fifty papers in the areas of time-based competition, operations strategy, and new product development. His current research deals with methods of valuing response time in supply chains and design strategies for reverse supply chains.
Professor Blackburn received his Ph.D. in Operations Research from Stanford University, an M.S. from the University of Wisconsin and a B.S. from Vanderbilt University. He has previously served on the faculties of the Graduate School of Business at the University of Chicago and Boston University and has been a visiting professor at the Graduate School of Business, Stanford University, Catholic University Leuven, Australian Graduate School of Management, and INSEAD in Fontainebleau, France.