Mature Cluster: Industry &
Supply Chain Dynamics
ONRIS Seminar Nov 4, 2005
Peter Warrian
University of Toronto
ONRIS: Mature Clusters
• Role of Lead/Anchor Firm
• Shift from Analytic to Synthetic Knowledge
• Supply Chain Dynamics
• External Linkages and Internal Dynamics
of Clusters
• Conclusions
Cluster Typology: Mature
Industries
Knowledge
Dimensions
Industrial Structure and Cluster Linkages
Lead/Anchor Firm
Global Supply Chain
Local Value Chain
Synthetic
Ontario Steel
Montreal Aerospace
Southern Ontario
Autoparts
Sudbury Mining S&S
Windsor Automotive
TDM
Toronto Multimedia
Analytic
New Brunswick IT
Ottawa Photonics and
Telecom
Waterloo ICT
Mtl, Tor, Van, Hal
Biotech
Cape Breton IT
Vancouver New Media
Montreal New Media
Quebec Photonics
Ottawa Biotech
Saskatoon Biotech
Ontario/BC Wine
BC Wood
Ontario Food
Hybrid
Cluster Typology: Mature
Industries
Knowledge
Dimensions
Industrial Structure and Cluster Linkages
Lead/Anchor Firm
Global Supply Chain
Local Value Chain
Synthetic
Ontario Steel
Montreal Aerospace
Southern Ontario
Autoparts
Sudbury Mining S&S
Windsor Automotive
TDM
Toronto Multimedia
Analytic
New Brunswick IT
Ottawa Photonics and
Telecom
Waterloo ICT
Mtl, Tor, Van, Hal
Biotech
Cape Breton IT
Vancouver New Media
Montreal New Media
Quebec Photonics
Ottawa Biotech
Saskatoon Biotech
Ontario/BC Wine
BC Wood
Ontario Food
Hybrid
Cluster Typology: Mature
Industries ON Steel
Knowledge
Dimensions
Industrial Structure and Cluster Linkages
Lead/Anchor Firm
Global Supply Chain
Local Value Chain
Synthetic
Ontario Steel
Montreal Aerospace
Southern Ontario
Autoparts
Sudbury Mining S&S
Windsor Automotive
TDM
Toronto Multimedia
Analytic
New Brunswick IT
Ottawa Photonics and
Telecom
Waterloo ICT
Mtl, Tor, Van, Hal
Biotech
Cape Breton IT
Vancouver New Media
Montreal New Media
Quebec Photonics
Ottawa Biotech
Saskatoon Biotech
Ontario/BC Wine
BC Wood
Ontario Food
Hybrid
Role of Lead Firm
• Exit: Windsor TDM (International Tool)
• Labour Shedding: Mining (Inco)
• Implosion: Steel (Stelco)
International Tool: Exit of Leader
Inco/Falconbridge: Shedding
Labour
Stelco: Implosion of a Leader
• Withdrawal from Analytic Knowledge
– Decline and elimination of Stelco Engineering
• Applied Product Development
– Dofasco as franchiser/value added reseller of
Arcelor & NKK technology
– Solutions in Steel: Application Development Know How
Shift from Analytic to Synthetic
Knowledge
• Patent Data
– Dates of Application
– Dates of Publication
• Steel Industry Patents 1970-2005
– Decline of Stelco Engineering/Steltech 90s
Steel Patent Data by Application
Date
60
8
7
50
6
40
5
30
4
3
20
2
10
1
0
1965
1970
1975
1980
1985
1990
1995
2000
2005
0
2010
USA
Canada
ON Steel Knowledge Networks
• Withdrawal from Analytic Knowledge
– Decline and elimination of Stelco Engineering
• Applied Product Development
– Dofasco as franchiser/value added reseller of
Arcelor & NKK technology
– Solutions in Steel: Application Development Know How
Supply Chains
• Asymmetric Knowledge Flows in Supply
Chains: Aerospace
• Dynamics and Dysfunction in Auto-Steel
Supply Chain
Advanced Technology Cluster:
Aerospace
• Niosi: Dynamics within Supply Chain
– OEM aerospace assemblers
– Tier 1 & Tier 2 suppliers
• Knowledge flows: International circuits of
design, procurement
• Asymmetry between knowledge flows
between firms and local labour pool
Aerospace: Asymmetry of
Knowledge Flows
Changing Supply Chain Models
Drive Innovation
• Toyota Model
– Lean Production & JIT
– Reduced inventory, cycle times, SPC
• Dell Model
– Mass Customization
– Build-to-Order
Typical Order-to-Delivery Process
Purchasing
Plan
Programming
Marketing
National
Sales Co.
Order Bank
Plan
Scheduling
Schedule
Schedule
Sequencing
Tier 2
Supplier
Tier 1
Supplier
Inbound
Logistics
Body, paint,
assemble
Outbound
Logistics
Dealer
Inv.
Customer
Auto Industry Build to Order
• On average, it takes 40 days to get a car
• 30 days for an customer order to actually
be inserted in the assembly plant
schedule.
• 60 days total inventory in the supply chain
• Same number as Henry Ford in 1926.
• Closer integration of supply chain has
increase volatility
Auto Supply Chain Volatility
2500
2000
OEM Assembly
1500
Supplier Assemby
1000
500
0
Component
(internal)
Component
(external)
Dofasco
• Benchmarking against Dell: Vanilla Boxes
• Mass customization strategy: Platforms
– Information content of the steel
• Diversity creates key bottleneck in Mills:
Slab Specifications & Production
– Slabs ‘Designs’: Dimensionality, Physical &
Chemical Properties
– From 10,000 Designs -> 300 Vanilla Boxes
External Linkages and Internal
Dynamics of Clusters
• Dynamics of Disaggregation in Cluster
– Mining Services
– ON Steel
Disaggregation in Mining Services
Algoma
• OEM, Tier 1and
•
•
Specialized Tier 2
Suppliers
Interface with Design
Capacities: Safety
Metallurgy: AHSS
microstructures
Disaggregation of Auto Steel
Cluster
• Circuit 1: Global Supply Chain
– Auto OEM, Tiers 0.5-1.0, highly specialized
Tier 2 firms
– Integrated Mill Metallurgy: DFS, STE, AGA
• Circuit 2: Local Value Chain
– Generalized Tier 2, Tier 3, Stampers
– Processing Technology: Service Centres,
Processors, Minimills
Conclusions
• Cluster Life Cycles
• Multiple Policy Objects
– Disaggregation
• Policy targets are moving and changing
Knowledge Dimensions and
Flows in Mature Clusters
• Synthetic Knowledge & Innovation
– Application of existing sources & combination
of knowledge
– Interaction between clients & suppliers
– Reliance on applied product development
• Infrastructure
– Problem solving
– Sources of talent & recruitment