Evolving Logistic Roles of Steel Distributors

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Journal ISSN
Volume Title
School of Business | Doctoral thesis (monograph) | Defence date: 2003-10-31
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Date
2003
Department
Major/Subject
Logistiikka
Logistics
Mcode
Degree programme
Language
en
Pages
160 s.
Series
Acta Universitatis oeconomicae Helsingiensis. A, 224
Abstract
There are several intermediaries in an industrial supply channel from the mill to the product producer (original equipment manufacturer, OEM) that may hold title or process the material, or both. Traditionally, wholesalers and importers hold inventories of different items while OEMs, component suppliers or contract manufacturers do the processing. Steel service centers (SSCs) are relative newcomers that combine the stockholding and processing activities. The tremendous growth of the international SSC industry during the late nineteen hundreds has coincided with several structural changes in most steel-using industries. The research problem of this thesis is the transformation of the logistic roles of the operators excluding, however, some service providers such as transport companies, carriers, forwarders and consultants, as they do not own, stock or process the products. Empirical analysis is guided by the choice of a theoretical framework consisting of three models. The first is the Distribution Service model of Shapiro and Heskett that relates the extent of stockholding to the speed of delivery. The second model of Production Capabilities is by Hayes and Wheelwright, and it provides normative advice on the matching of the desired product-mix with the required automation in processing facilities. The third model considers the physical characteristics of products as potential determinants of the appropriate type of intermediation. In the case of bulky products such as steel and paper, one would expect the logistics capabilities of operators to affect the choice operational units and intermediary roles of companies despite the different forms of financing, customer relationships or vertical integration. To that end, a framework for classifying the intermediate products in terms of size, weight and design complexity was developed here to trace the footsteps of logistic operations. The objective is to analyze the logistic capabilities in terms of distribution services and manufacturing processes of the operators in any industry, and to determine the evolution of the logistic roles of the operators in steel distribution with special focus on the Finnish market. For comparison, some general trends are proposed from literature for finding the direction of evolution. These trends point towards higher levels of service, investment in automated processing, and more complicated designs of products. A historical review of the steel markets in several countries is then used to elaborate the logistics roles that the different operators have taken on during the transformation of markets and distribution channels. The evidence for these trends is sought in steel distribution in the US and Europe. The findings indicate that transformation from ordinary stockholding to value-added processing and specialization in local and international steel distribution has taken place. The differentiation of the logistics roles has created a competitive market of regional, multi-location SSCs with a full-line availability and versatile processing service and stockists each specialized on a narrow range of product lines. Finally, the evolution of Finnish steel distribution is described from a historical perspective with three periods determined by the business environment of imports, domestic production, and open markets. The steel industry in Finland has followed, by and large, the international trends with the exception of lesser role of independent steel service centers and considerable time lag. The key roles for coordination have changed from entrepreneurial importer or trading house to producers closely associated with the steel mills, balanced by consolidation of stockists and steel service centers. Eventually vertical integration and international trade have dominated the operations especially in Scandinavia. The applicability of the framework was explored also in the cases of paper and sawn goods industries resulting in satisfactory results concerning the identification and separation of the roles of operators in heavy logistics. To conclude, the framework used in the thesis proves applicable for the analysis of logistic operations and corporate roles in distribution. The diffusion of the roles of intermediary companies from the early days of industry seems to reflect the type of integrative strategy fashionable at that time rather than too low a resolution of the matrices. Especially the new model of Product Characteristics succeeds in separating the roles of most operators in any industry whereas the models of Distribution Services and Processing Capabilities run into difficulties in proper estimation of channels dealing with assembled goods and pure stocking operations, respectively. The recent development in steel industry does indicate that suppliers and service centers are differentiating and expanding their logistic roles further, thereby narrowing down the domain of mills and OEMs within the distribution channel. Hence, it remains an intriguing question for the managers and scholars alike whether the results that synthesize the history of heavy logistics also illustrate the basic principles of networking for modern supply chain management
Description
Supervising professor
Inkiläinen, Aimo, professor
Keywords
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Citation
Permanent link to this item
https://urn.fi/URN:ISBN:951-791-807-0