Chapter 3 Research Methodology
3.4 Final evaluation
In the final evaluation stage, we do another survey and present our proposed alternatives to another group of decision makers in June 2020. For each attribute, we ask them to provide their relative weights for each alternative. For each decision maker, we then conduct the same method of the consistency check, remove those whose CR are higher than the threshold value 0.1, and calculate her/his score for each alternative through weighted average. These scores are then averaged among all decision makers to result in the final scores for each alternative.
Chapter 4
Analysis and Results
4.1 Synthesis of priorities
In this chapter, we follow the research method of analytical hierarchy process (AHP) to construct a set of pairwise comparison matrices and conduct twenty surveys from the dominant experts to get the result of weighing the priorities within the attributes in each level. The survey is divided into three parts: basic information, first level of attributes, and second level of attributes.
4.1.1 Overall summary
presents on the demographics of the respondents. We conduct the survey to the industrial experts who have work experience in China and cross-countries management with at least three-year work experience. Among the total twenty responses, out of nineteen are from the consumer electronics manufacturing industry, and one is from the government department in Taiwan. Out of nine respondents have less than ten years work experience and up to eleven have more than ten years work experience. In addition, majority of the
work location of respondents are from Taiwan, and out of six are from China and two are from Southeast Asia who locate in Singapore and Malaysia.
Table 4.1: Demographics of the respondents
Category Items Numbers Percentage
Gender Male 11 55%
Female 9 45%
Age 25-29 6 30%
30-39 8 40%
40-49 6 30%
Education Undergraduate 8 40%
Postgraduate 12 60%
Position Program management 15 75%
Supply chain management 3 15%
Others 2 10%
Work Location Taiwan 12 60%
China 6 30%
Southeast Asia 2 10%
In the second stage, we analyze the pairwise priority comparison of the first-level attributes which include the “Government regulations”, “Society”, “Industry”, “Political stability”, and “Nature”. By calculating the normalized eigenvector and conducting the consistency check, the summary of relative weights for each attribute is shown in Table 4.2. The majority of the respondents consider “Government regulations” (37.6%) is the most important dimension for foreign company to evaluate whether a given area is suitable to run the supply chain or not.
Table 4.2: The pairwise comparison result of the first-level attributes
Attributes Weights Ranking
Government 0.376 1
Industry 0.221 2
Political Stability 0.199 3
Society 0.127 4
Nature 0.076 5
In the third stage, we analyze the pairwise priority comparison of the second-level attributes. First of all, the survey conducts the attributes within “Government regulations”.
Through the same process, the summary of relative weights for each attribute is shown in Table 4.3. The result shows the majority of the respondents consider “Business regulations and taxation” (31.4%) is the most important dimension within government regulations.
Table 4.3: The pairwise comparison results of “Government regulations”
Attributes Weights Ranking
Business regulations and taxation 0.314 1
Tariff 0.261 2
Industrial incentives and benefit 0.245 3
Environmental regulation 0.091 4
Intellectual property 0.089 5
Secondly, the survey conducts the attributes within “Society”. The summary of relative weights for each attribute is shown in Table 4.4. Among all the factors, the majority of the respondents consider “Labor market” (33.8%) is the most important dimension within society. Labor market not only refers to the size of labor market, but also contains the level of average wage, education, relative industrial skills, and language proficiency.
Table 4.4: The pairwise comparison results of “Society”
Attributes Weights Ranking
Labor market 0.338 1
Public infrastructure 0.203 2
Safety 0.201 3
Consumer market 0.168 4
Culture 0.090 5
Thirdly, the survey conducts the attributes within “Industry”. The summary of relative weights for each attribute is shown in Table 4.5. Between the two factors of completeness and thickness of supply chain, the large portions of the respondents consider
“Completeness of supply chain” (72.1%) is a strongly important dimension within industry from the integration of upstream and downstream.
Table 4.5: The pairwise comparison results of “Industry”
Attributes Weights Ranking
Completeness of supply chain 0.721 1
Thickness of supply chain 0.279 2
Next, the survey conducts the attributes within “Political stability”. The summary of relative weights for each attribute is shown in Table 4.6. Between the two factors, the large portions of the respondents consider “Completeness of legal system” (60.3%) is strongly important than the opposite political parties affiliation.
Table 4.6: The pairwise comparison results of “Political stability”
Attributes Weights Ranking
Completeness of legal system 0.603 1
Opposite political parties affiliation 0.397 2
Lastly, the survey conducts the attributes within “Nature”. The summary of relative weights for each attribute is shown in Table 4.7. Between the two factors, the large portions of the respondents consider “Distance of supply chain entities” (71.3%) is strongly important than the richness of natural resource.
Table 4.7: The pairwise comparison results of “Nature”
Attributes Weights Ranking
Distance of supply chain entities 0.713 1
Richness of natural resource 0.287 2
The overall priorities of the first level and second level attributes are shown in Table 4.8. “Completeness of supply chain” (16%) which hits the largest portion of total priority, is considered as the most important dimension among the sixteen factors, following by the “completeness of legal system” (12%) and “Business regulations and taxation” (11.8%).
Table 4.8: Synthesis of the pairwise comparison results (composite) Dimensions Weights
(Rank) Attributes Weights
(Rank)
Composite weights 2
(Rank)
Government 0.376 (1)
Business regulations and
taxation 0.314 (1) 0.118 (3)
Tariff 0.261 (2) 0.098 (4)
Industrial incentives and benefit 0.245 (3) 0.092 (5) Environmental regulation 0.091 (4) 0.034 (10) Intellectual property 0.089 (5) 0.033 (11)
Society 0.127 (4)
Labor market 0.338 (1) 0.043 (9)
Public infrastructure 0.203 (2) 0.026 (12)
Safety 0.201 (3) 0.025 (13)
Consumer market 0.168 (4) 0.021 (15)
Culture 0.09 (5) 0.011 (16)
Industry 0.221 (2)
Completeness of supply chain 0.721 (1) 0.16 (1) Thickness of supply chain 0.279 (2) 0.062 (7) Political
Stability 0.200 (3)
Completeness of legal system 0.603 (1) 0.12 (2) Opposite political parties
affiliation 0.397 (2) 0.079 (6)
Nature 0.076 (5)
Distance of supply chain entities 0.713 (1) 0.054 (8) Richness of natural resource 0.287 (2) 0.022 (14)
Composite weights: Results of multiplying each priority of its attributes and sub-attributes.
4.1.2 Synthesis of priorities (by work experience)
In this study, in order to analyze the difference results among various work experience, we divide the feedback into two major groups. Out of the twenty respondents, the nine having less than ten years of work experience are gathered into the junior group. On the contrary, the other eleven ones are put into the senior group. ranked as the second in the junior and senior groups, respectively.
Table 4.9 and Table 4.10 list the syntheses for these two groups. From these two tables, we may observe that “Completeness of supply chain” hits the largest portion of total priority in both two groups, followed by “Business regulations and taxation” and
“Completeness of legal system” ranked as the second in the junior and senior groups, respectively.
Table 4.9: Synthesis of pairwise comparison within ten years’ work experience
Dimensions Weights
(Rank) Attributes Weights
(Rank)
Composite weights (Rank)
Government 0.426 (1)
Business regulations and taxation 0.33 (6) 0.14 (2)
Tariff 0.253 (8) 0.108 (4)
Industrial incentives and benefit 0.231 (10) 0.098 (5) Environmental regulation 0.105 (14) 0.045 (9) Intellectual property 0.081 (16) 0.034 (10)
Society 0.097 (4)
Labor market 0.342 (5) 0.033 (11)
Public infrastructure 0.235 (9) 0.023 (12)
Consumer market 0.213 (11) 0.021 (13)
Culture 0.107 (13) 0.01 (15)
Safety 0.103 (15) 0.01 (15)
Industry 0.231 (2) Completeness of supply chain 0.716 (2) 0.165 (1) Thickness of supply chain 0.284 (7) 0.066 (7)
Political
Stability 0.188 (3)
Completeness of legal system 0.58 (3) 0.109 (3) Opposite political parties
affiliation 0.42 (4) 0.079 (6)
Nature 0.059 (5) Distance of supply chain entities 0.792 (1) 0.047 (8) Richness of natural resource 0.208 (12) 0.012 (14) Table 4.10: Synthesis of pairwise comparison with more than ten years’ work
experience
Dimensions Weights
(Rank) Attributes Weights
(Rank)
Composite weights (Rank)
Government 0.341 (1)
Business regulations and taxation 0.304 (7) 0.104 (3)
Tariff 0.267 (9) 0.091 (4)
Industrial incentives and benefit 0.254 (11) 0.086 (5) Intellectual property 0.094 (14) 0.032 (11) Environmental regulation 0.082 (15) 0.028 (13)
Society 0.148 (4)
Labor market 0.336 (6) 0.05 (9)
Safety 0.266 (10) 0.039 (10)
Public infrastructure 0.181 (12) 0.027 (14)
Consumer market 0.139 (13) 0.021 (15)
Culture 0.078 (16) 0.012 (16)
Industry 0.215 (2) Completeness of supply chain 0.726 (1) 0.156 (1) Thickness of supply chain 0.274 (8) 0.059 (7) Political
Stability 0.208 (3)
Completeness of legal system 0.623 (3) 0.129 (2) Opposite political parties
affiliation 0.377 (4) 0.078 (6)
Nature 0.089 (5) Distance of supply chain entities 0.648 (2) 0.057 (8) Richness of natural resource 0.352 (5) 0.031 (12) The group with more than ten years of work experience considers the completeness of legal system as more important than the business regulation. The reason behind this may be explained in the following way. A legal system is a very comprehensive process that involves various complicated stages which may be executed and enforced only in a very long period. For those respondents who are from the senior group, they may have chance to participate in the changes of a legal system that impacts
a supply chain while the junior group may not be able to engage. Conversely, the junior group may have more chance to get involved and experience the changes of business regulation and taxation in their existing career.
4.1.3 Synthesis of priorities (by work location)
This survey has been distributed to different domain experts in various work locations.
Twenty respondents are from Taiwan, six from China, and two from Southeast Asia. In order to analyze the different perspectives held by people from two opposite government systems, we separate the results of pairwise priority from Taiwan and China into two group and conduct a comparison.
Table 4.11 demonstrates the ranking from the respondents who work in Taiwan. It indicates that “Completeness of supply chain” (18.8%) hits the largest portion of total priority, “Business regulations and taxation” (13.9%) ranks as the second, and “Tariff”
(8.8%) the third.ranked as the second in the junior and senior groups, respectively.
Table 4.9 Table 4.12 illustrates the ranking from those who work in China.
Interestingly, what these two groups of respondents consider as the most important are different. For those in China, “Completeness of legal system” (20.9%) is ranked as the first, which is different from the top for those in Taiwan. The attribute that is ranked as the first by the Taiwan group, “completeness of supply chain”, is ranked as the second by the China group (12.2%). The third highest in the China group is “Industrial incentives and benefit” (7.4%), which is only ranked as the fifth in the Taiwan group.
Table 4.11: Synthesis of pairwise comparison for those who work in Taiwan
Dimensions Weights
(Rank) Attributes Weights
(Rank)
Composite weights (Rank)
Government 0.368 (1)
Business regulations and taxation 0.378 (6) 0.139 (2)
Tariff 0.239 (9) 0.088 (3)
Industrial incentives and benefit 0.201 (11) 0.074 (5) Environmental regulation 0.091 (15) 0.033 (10) Intellectual property 0.091 (14) 0.033 (10)
Society 0.124 (4)
Labor market 0.406 (5) 0.05 (9)
Public infrastructure 0.224 (10) 0.028 (12)
Consumer market 0.16 (12) 0.02 (14)
Safety 0.127 (13) 0.016 (15)
Culture 0.083 (16) 0.01 (16)
Industry 0.272 (2) Completeness of supply chain 0.692 (2) 0.188 (1) Thickness of supply chain 0.308 (7) 0.084 (4) Political
Stability 0.145 (3)
Completeness of legal system 0.503 (3) 0.073 (6) Opposite political parties
affiliation 0.497 (4) 0.072 (7)
Nature 0.091 (5) Distance of supply chain entities 0.721 (1) 0.066 (8) Richness of natural resource 0.279 (8) 0.025 (13)
Table 4.12: Synthesis of pairwise comparison for those who work in China
Dimensions Weights
(Rank) Attributes Weights
(Rank)
Composite weights (Rank)
Government 0.363 (1)
Industrial incentives and benefit 0.304 (4) 0.111 (3)
Tariff 0.268 (8) 0.097 (4)
Business regulations and taxation 0.221 (10) 0.08 (5) Environmental regulation 0.11 (15) 0.04 (8) Intellectual property 0.096 (16) 0.035 (9)
Society 0.128 (4)
Labor market 0.27 (7) 0.035 (9)
Safety 0.253 (9) 0.032 (11)
Public infrastructure 0.186 (12) 0.024 (13)
Consumer market 0.181 (13) 0.023 (14)
Culture 0.11 (14) 0.014 (16)
Industry 0.154 (3) Completeness of supply chain 0.79 (1) 0.122 (2) Thickness of supply chain 0.21 (11) 0.032 (11)
Political
Stability 0.288 (2)
Completeness of legal system 0.725 (2) 0.209 (1) Opposite political parties
affiliation 0.275 (6) 0.079 (6)
Nature 0.067 (5) Distance of supply chain entities 0.708 (3) 0.047 (7) Richness of natural resource 0.292 (5) 0.02 (15)
The result of attribute ranking from China varies a lot compared to that from Taiwan. Owing to the strong legal system enforcement in China, most of the Chinese respondents consider it as one of the key factors which makes China a leading supply chain environment. Hence, they believe that the completeness of a legal system is much more important to the enterprises who need to consider moving supply chain into the area.
“Industrial incentives and benefits” is ranked as the third highest within the China group. To explain this, note that the China government has continuously outspread the industrial incentives by all kinds of public medias. The respondents who work in China therefore usually get the information directly and timely. For example, the China government regularly releases the investment incentives to labor-intensive enterprises or enterprises with extensive facilities for them to relocate their factories from coastal areas to the inland area. These incentives typically include taxes, lands, and funding. It has gradually increased the respondents’ awareness of the government industrial policy to the enterprises.
The third highest ranked attribute within the Taiwan group is “Tariff”. We can tell from the macroeconomy that Taiwan has a relatively stable economic growth and is a well-developed capitalist environment. Its legal structure and business incentives are pretty mature without frequent changes. As it is rare for the Taiwan government to offer huge industrial incentives, for enterprise focusing on cost reduction, tariff is one of the
most critical factors that affects the business finance. This explains why tariff is ranked high.
4.2 Synthesis of alternatives
From the previous in-depth interviews with experience consumer electronic manufacturing industry experts and managers, a few countries have been suggested to replace the supply chain in China. In order to evaluate whether any of these suggested alternatives is indeed better than China, which means shifting supply chain should be executed, we conduct a new survey. We ask three decision makers from Singapore, Taiwan and China (in which are abbreviated as DM1, DM2, and DM3, respectively) to provide their opinions for three alternatives, Taiwan, China, and Vietnam. These alternatives are shown in Figure 4.1. The scores from the three decision makers are listed is Table 4.13. The structural model we obtained in Table 4.8 and scores in Table 4.13 are then combined to finalize the alternative selection process. The final results are provided in Table 4.14.
Figure 4.1: Shifting supply chain model with alternatives
Table 4.13: The pairwise comparison results of alternative Attributes
Taiwan China Vietnam
DM1 DM2 DM3 DM1 DM2 DM3 DM1 DM2 DM3
Business regulation and taxation
0.620 0.639 0.286 0.224 0.274 0.143 0.156 0.087 0.571 Industrial
incentives and benefits
0.167 0.726 0.200 0.667 0.205 0.400 0.167 0.069 0.400 Environmental
regulation 0.333 0.767 0.194 0.333 0.175 0.700 0.333 0.058 0.107
Tariff 0.690 0.750 0.201 0.065 0.125 0.118 0.245 0.125 0.681
Intellectual
property 0.782 0.714 0.286 0.056 0.143 0.571 0.163 0.143 0.143
Public
infrastructure 0.252 0.221 0.124 0.704 0.712 0.800 0.044 0.068 0.075 Labor market 0.105 0.071 0.089 0.798 0.217 0.587 0.097 0.712 0.324
Culture 0.455 0.738 0.400 0.455 0.198 0.400 0.091 0.064 0.200
Consumer
market 0.200 0.266 0.286 0.745 0.632 0.571 0.055 0.102 0.143
Safety 0.556 0.701 0.194 0.354 0.213 0.700 0.090 0.085 0.107
Completeness
of supply chain 0.190 0.205 0.297 0.750 0.741 0.539 0.060 0.055 0.164 Thickness of
supply chain 0.190 0.254 0.194 0.750 0.662 0.700 0.060 0.084 0.107 Opposite
political parties affiliation
0.412 0.600 0.286 0.261 0.200 0.571 0.328 0.200 0.143 Completeness
of legal system 0.620 0.714 0.148 0.224 0.143 0.767 0.156 0.143 0.085 Distance of
supply chain entities
0.134 0.038 0.194 0.746 0.619 0.700 0.120 0.343 0.107 Richness of
natural resource 0.111 0.080 0.118 0.778 0.265 0.613 0.111 0.656 0.269
From Table 4.13, we observe that China is ranked as the top alternative in five attributes, including “Public infrastructure”, “Consumer market”, “Completeness of supply chain”, “Thickness of supply chain”, and “Distance of supply chain entities”, by all three decision makers. On the contrary, Vietnam is consistently listed as the last alternative in eight attributes, including “Environmental regulations”, “Public infrastructure”, “Culture”, “Consumer market”, “Safety”, “Completeness of supply chain”, “Thickness of supply chain”, and “Completeness of legal system” by all three decision makers. For Taiwan, there is no attribute for which the three decision makers all rank it as the top or last alternative.
Table 4.14: Synthesis of alternatives
Alternatives DM1 DM2 DM3 Geometric mean
Taiwan 0.387 0.493 0.224 0.349
China 0.461 0.355 0.507 0.436
Vietnam 0.151 0.153 0.269 0.184
As shown in Table 4.14, decision makers 1 and 3 prefer the supply chain to remain in China while decision maker 2 prefers the supply chain to be shifted to Taiwan.
However, decision maker 2’s preference difference between Taiwan and China is not significant enough to outweigh the other two decision makers’ preference over China. By calculating the geometric mean, we achieve a sufficient agreement that China remains the best alternative, at least for this moment, for a foreign company to operate a consumer electronic manufacturing supply chain. China, with the existing advantages of integrating supply chain clusters and well-established public infrastructure, remains the best alternative when considering shifting supply chain.
Chapter 5
Conclusion and Future Works
5.1 Conclusion
Facing the US-China trade war starting from 2018 and a recent pandemic in early 2020, lots of discussions within the consumer electronics manufacturing industry have been brought out on whether the supply chain should be moved out of China. To address such a shifting supply chain decision, in this study we build a hierarchical model for listing and ranking key attributes for firms to evaluate.
We apply the analytical hierarchy process (AHP) framework to decompose key factors, extract associated attributes to prioritize the multiple criteria, and structure a hierarchical model to evaluate the process. In order to structure the critical hierarchy of attributes, we conduct seven in-depth interviews with industry experts and managers. We then invite twenty domain experts to conduct the pairwise comparison among attributes.
Their ratings allow us to calculate the relative weights with the use of the eigenvalue method to do the consistency check of each paired comparison matrix. In the final
evaluation stage, we conduct another survey and present our proposed alternatives to three decision makers. By following the same analysis process, we reach the conclusion that China remains the best alternative, at least for this moment, for a foreign company to operate a consumer electronic manufacturing supply chain. Among all attributes, China is consistently considered as the top alternative in “Public infrastructure”, “Consumer market”, “Completeness of supply chain”, “Thickness of supply chain”, and “Distance of supply chain entities”. In short, China has the existing advantages of integrating supply chain clusters and thus remains the best alternatives when considering shifting supply chain.
It is worthwhile to mention that the current winning position held by China may still be changed in the future. For those foreign firms who rely heavily on China, they should pay more attention to the increasing downsides, such as the continuously rising labor wage, non-flexible government regulations, increasing requirement environmental protection, etc. The intense relationship between the US and China is also putting the supply chain in China in a vulnerable position. Firms are strongly suggested to restructure the distribution of supply chain to avoid the reliance on one country. Given that shifting supply chain requires long-term planning, it is essential for foreign firms to start the planning and take actions to diversify the supply chain to reduce the risk. This can begin with a move to widen the component sourcing or nearby geo-economy manufacturing assembly location options.
5.2 Future works
There are certainly limitations for this study. Firstly, we have a relatively small number of respondents because we set a strict criterion on interviewees in order to get in-depth feedback for analysis. To obtain a more solid research finding, we may look for more qualified respondents in the future.
In addition, in the final stage of the alternative selection, India is not listed as one of the alternatives. This is because most of the respondents we may reach do not have supply chain involvement in India. Given India is one of the widely discussed countries regarding shifting supply chain, future researchers are suggested to include India in their analysis by finding respondents with India experience.
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