Downstream Manufacturing Research Articles

A fine-scale atlas reveals the systematic imbalance between carbon emissions and economic benefits along value chain within China

In efforts to achieve the aspiring carbon mitigation goals, China is actively seeking to reconcile the economic development and carbon reduction with diverse regional conditions. Here, we firstly integrated a national-wide atlas on the labor division of production, and decomposed value added and carbon emission along China's domestic value chain during 2007–2017. We found that the value chain roles lead to a systematic imbalance between value added and carbon emissions across regions. Over 70 % of sufferers of the inequality were located at the north, most of which were in the upstream position to supply resource and energy intermediate products of higher on-site emissions and relatively less value added in comparison to the downstream manufacturing and service products production at the coastal regions. As a result, the northern inland suffered a great deal while part of coastal regions and southern inland were beneficiaries in the participation in domestic value chain. In particular, several regions inevitably undertake industries with higher emission intensity and less gains in a sound domestic industrial chain. These strongly call for a systematically policy- or price-based mechanism to explore fair strategy for emission reduction.

How data factor flow affects corporate pollution reduction: The environmental effects of digital empowerment

This study the theoretical hypotheses by building a relatively exogenous data factor flow indicator and a corporate pollution emission intensity indicator system using China's data flow restriction policy and corporate pollution emission data. Data factor is emerging as an essential new factor of production in today's digital economy, and data cannot function valuablely without an efficient flow. This study constructs a theoretical model of the influence of data factor flow on the pollution emissions of downstream manufacturing enterprises based on the vertical correlation of inputs and outputs. Additionally, we employ additional contaminants as a robustness test and sulfur dioxide, a common representation of air pollution, as the baseline. The empirical analysis's findings indicate that: (1) Data factor flow significantly reduces pollution in manufacturing enterprises. (2) The main way that data factor flow helps organizations minimize pollution is by increasing their productivity and ability to innovate in technology. (3) Domestic data flow is more important than cross-border data flow in helping industrial companies reduce pollution. (4) In general, foreign-owned enterprises have a greater need for data factor flow to reduce pollution than do state-owned and private businesses.

From Aimless Stray To Charting The Way: Financing Policy Reforms To Bolster Indonesia’s Downstreaming Strategy

Purpose: A major impediment to the entry of domestic firms into these sectors is limited access to financing. This study seeks to analyze the constraints to financing access in Indonesia and to formulate policy recommendations to address them by employing an integrative literature review and comparative analysis of East Asian countries. Methodology/approach: This paper employs an integrative literature review and comparative analysis to explore potential policy solutions for mobilizing capital for Indonesia’s downstream industry. Findings: Findings indicate that Indonesia’s financial system, following substantial liberalization, now tends to favor projects with short-term returns over long-term downstream manufacturing projects that are critical for economic transformation. Practical implications: Indonesia must direct its limited capital towards strategic downstream investments. The paper suggests three policy options: 1) providing direct preferential loans; 2) offering guarantees; and 3) injecting equity into targeted domestic firms. Originality/value: The recommendations come with several caveats, including robust governance, specific conditionalities, and stringent evaluation to ensure that financial support targets the most competitive enterprises that can meet the government’s long-term development goals. This research found that while the government's proactive financing presents inherent risk, the greater peril lies in inaction, which could further consign Indonesia to the middle-income trap.

Research on the Game Model of Green Technology Investment in a Two-Echelon Manufacturing Supply Chain Under Carbon Tax Regulation

Using a Stackelberg game model, this research examines the impact of government-imposed carbon taxes on the sustainability of a two-echelon supply chain. The analysis focuses on the interactions between upstream suppliers and downstream manufacturers, taking into account how manufacturers’ carbon emissions influence market demand, as well as how sustainability levels and price affect this demand. The results show that a centralized system has a lesser potential for total profit development in the supply chain than a decentralized system. To encourage investment in green technologies throughout the supply chain, this paper proposes two coordination mechanisms: a green subsidy and a two-part tariff contract. Numerical study reveals that a win–win scenario for the supply chain requires suppliers to share part of the costs. Furthermore, under a two-part tariff contract, successfully managing fixed costs can result in total profit levels comparable to those in a centralized system. The research also makes strategy recommendations, such as differentiating carbon levies, improving supply chain coordination, and assessing fixed costs. These aim to provide theoretical and practical implications for supply chain management in order to assist businesses and policymakers in effectively responding to the problems of climate change.

Vertical acquisition and carbon capture and storage choices under cap-and-trade regulation with sustainable finance

In this paper, we establish a contingent claim framework for environmental management. The paper focuses on the vertical acquisition of a supply chain in the context of sustainable insurance (i.e., sustainable finance), specifically considering carbon capture and storage (CCS) technology choices and cap-and-trade regulations. The main results are as follows. Firstly, a more stringent cap-and-trade scheme increases equity efficiency in sustainable insurance, particularly when the green upstream manufacturer with advanced CCS technology acquires the brown downstream manufacturer, which also uses advanced CCS technology. Secondly, it harms risk efficiency, especially when the green upstream manufacturer with backward CCS technology acquires the brown downstream manufacturer, which uses advanced CCS technology. Thirdly, it increases the default risk in the insurer's equity, especially when the green upstream manufacturer with backward CCS technology acquires the brown downstream manufacturer, which also uses backward CCS technology. Overall, cap-and-trade's effects on equity and risk efficiency in vertical acquisition and default risk in insurer's equity within sustainable insurance depend on adopting CCS technology. Policymakers should incentivize advanced CCS technologies in vertical acquisitions to enhance equity and reduce default risks, supporting long-term financial stability and environmental sustainability toward Sustainable Development Goals.

Enhancing robotic steel prefabrication with semantic digital twins driven by established industry standards

To increase automation in steel construction, new approaches are needed to strengthen the robustness of robotic steel prefabrication processes against manufacturing tolerances. While Digital Twins (DTs) can enable the detection of deviations and the adaptation of machine control accordingly, an adaptive information model interface that can integrate cross-process and cross-machine considerations is missing. Therefore, this paper focuses on the development of an ontology based on an existing steel prefabrication standard to link process data, tolerances and deviations, thereby enabling the realisation of a semantic DT. The approach’s feasibility is proven by a case study that demonstrates process and tolerance modelling, as well as linking robot control, feedback data, and measured tolerances for robotic plasma cutting. The results show that by means of the resulting data model, a semantic DT can be realised, which allows making deviations and process knowledge available for downstream manufacturing, assembly and construction processes.

Environmental regulation and intermediate imports: Firm-product-level evidence

This study examines the effects of domestic environmental regulations on import activity. Using a panel of firm-product-level data and variations in regulatory stringency across products established by China’s Eleventh Five-Year Plan for Environmental Protection (covering 2006–2010), it reveals that tougher regulations on emission-intensive industries at home led to increases in downstream manufacturers’ imports of emission-intensive intermediate inputs. Specifically, a 1% increase in sulfur dioxide emission intensity resulted in a 0.026% increase in intermediate imports after the implementation of the regulation. A back-of-the-envelope calculation suggests that, although the regulation increased emissions in source countries, it reduced global emissions of sulfur oxides and carbon dioxide. This is because the increases in imports caused by the regulation mainly came from countries with lower emission intensity than China. The regulation did not disproportionately increase imports from or emissions in developing countries.

Unravelling the carbon emissions compliance in sustainable supply chains: The impacts of carbon audit cooperation

As one of the 17 Sustainable Development Goals, reducing carbon emissions is crucial to combat climate change. It has also prompted companies to comply with emission regulations and evaluate the environmental impacts of their supply chains. Yet, news and reports occasionally highlight industrial instances of noncompliance. In particular, supplier’s noncompliance is often mistakenly attributed to its downstream manufacturers. Due to this misconception, manufacturers might conduct audits to protect their reputation and sales. Moreover, because a supplier may provide components to multiple competing manufacturers, they may collaborate to share audit findings regarding the common supplier’s compliance with carbon emissions regulations. However, studies do not reveal how this audit cooperation affects stakeholder interests. Here, we introduce a stylised model to examine the effects of carbon audit cooperation on the environment, competing manufacturers, and their supplier. We identify two main effects: the free-riding and amplifying effects. The former benefits the supplier but harms the environment and competing manufacturers, while the latter presents the opposite effect. The net impact depends on the balance between these two effects, which challenges conventional beliefs about carbon emissions compliance and highlights the importance of sustainability in the industry. Finally, we explore various extensions to validate the robustness of our findings.

Newsvendor model for a dyadic supply chain with push-pull strategy under shareholding and risk aversion

This paper investigates the optimization and coordination problem in the framework of classic push and pull newsvendor models under shareholding and CVaR criterion. A decentralized supply chain consisting of upstream supplier and the downstream manufacturer is considered. Firstly, taking the risk aversion into account, the optimal decision-makings are investigated under shareholding in push, pull supply chain respectively. By comparison it is found that the optimal order or production quantity depends on the degree of member’s risk aversion and shareholding ratio. Furthermore, the combined contracts are designed to coordinate the supply chain and optimal coordination parameters are obtained. Besides, the impacts of risk-averse preference and the shareholding fraction on supply chain performance are also investigated. The results indicate that in push supply chain the optimal ordering increases in the risk-averse parameter of the downstream manufacturer and the percentage of shares held by the upstream supplier in the downstream manufacturer. However, the optimal wholesale price makes the opposite change. In pull supply chain, the optimal production quantity is independent of the shareholding fraction and decreases with regards to the supplier’s risk aversion. Lastly, some numerical examples are given to illustrate the theoretical results and some suggestions to supply chain management are also provided.

PH inactivation of SARS-CoV-2 and SARS-CoV in virus spiked protein A eluates from a mAb purification process

Biopharmaceutical manufacturing processes may include a low pH treatment step as a means of inactivating enveloped viruses. Small scale virus clearance studies are routinely performed using model enveloped viruses such as murine leukemia virus to assess inactivation at the pH range used in the downstream manufacturing process. Further, as a means of bioburden reduction, chromatography resins may be cleaned and stored using sodium hydroxide and this can also inactivate viruses. The susceptibility of SARS-CoV-2 and SARS-CoV to low pH conditions using protein A eluate derived material from a monoclonal antibody production process as well as high pH cleaning conditions was addressed. SARS-CoV-2 was effectively inactivated at pH 3.0, moderately inactivated at pH 3.4, but not inactivated at pH 3.8. Low pH was less effective at inactivating SARS-CoV. Both viruses were inactivated at a high pH of ca.13.4. These studies provide important information regarding the effectiveness of viral clearance and inactivation steps of novel coronaviruses when compared to other enveloped viruses.

A new coopetitive mode in a sustainable supply chain: Energy performance contracting and supplier encroachment

Energy performance contracting (EPC) is considered to promote the cooperation of low-carbon investment between supply chain members; however, few studies have examined the impact of supplier encroachment on EPC cooperation. This study investigated a new coopetitive mode in a sustainable supply chain with EPC and supplier encroachment. The supplier may provide an EPC service to curb carbon emissions for the downstream manufacturer and obtain a partial savings in carbon costs by bearing the entire cost of the EPC investment. However, the supplier is motivated to develop a new direct selling channel that engages in Cournot competition with the manufacturer in the final market. The consumer acceptance of a new encroaching channel and the unit incompatibility cost of EPC are two critical factors in supplier and manufacturer decisions. The results demonstrate that the lower the consumer acceptance of a new encroaching channel, the more radical the decision that will be made by the supplier to abate emissions after encroachment to reduce the manufacturer's emissions cost. Moreover, in contrast to the traditional result, encroachment might cause the supplier to charge a higher wholesale price when implementing EPC services. Furthermore, there exist win-win situation in the EPC scenario and lose-lose situation in which the two supply chain members are worse off whether the supplier provides either encroachment or EPC services.

Cloud-Based Machine Learning Methods for Parameter Prediction in Textile Manufacturing.

In traditional textile manufacturing, downstream manufacturers use raw materials, such as Nylon and cotton yarns, to produce textile products. The manufacturing process involves warping, sizing, beaming, weaving, and inspection. Staff members typically use a trial-and-error approach to adjust the appropriate production parameters in the manufacturing process, which can be time consuming and a waste of resources. To enhance the efficiency and effectiveness of textile manufacturing economically, this study proposes a query-based learning method in regression analytics using existing manufacturing data. Query-based learning allows the model training to evolve its decision-making process through dynamic interactions with its solution space. In this study, predefined target parameters of quality factors were first used to validate the training results and create new training patterns. These new patterns were then imported into the solution space of the training model. In predicting product quality, the results show that the proposed query-based regression algorithm has a mean squared error of 0.0153, which is better than those of the original regression-related methods (Avg. mean squared error = 0.020). The trained model was deployed as an application programing interface (API) for cloud-based analytics and an extensive auto-notification service.

How does technological complexity affect manufacturers' innovation? Based on the perspective of vertical separation structure

PurposeComplex technology not only provides potential economic benefits but also increases the difficulty of application. Whether and how upstream technological complexity affects downstream manufacturers' innovation through vertical separation structure is worth discussing, but it has not been effectively discussed.Design/methodology/approachThrough theoretical analysis and empirical testing, this article discusses the cost effect and market competition effect caused by upstream technological complexity on downstream manufacturers and further elucidates the impact of upstream technological complexity on downstream manufacturers' innovation.FindingsResearch has found that the impact of upstream technological complexity on the downstream manufacturers' innovation depends on the cost effect and market competition effect. The cost effect caused by the complexity of upstream technology inhibits the innovation of downstream manufacturers. In contrast, the market competition effect promotes the innovation of downstream manufacturers. There are differences in the cost effect and market competition effect of upstream technological complexity on different types of downstream manufacturers, so there is also significant heterogeneity in the impact of upstream technological complexity on innovation of different types of downstream manufacturers.Originality/valueThe conclusions of this article improve the understanding of the relationship between upstream technological complexity and downstream innovation and provide helpful implications for industrial chain innovation.

Does the opening of producer services promote the wage growth of the downstream manufacturing industry?-Empirical evidence from Chinese manufacturing listed companies.

Based on the vertical connection between upstream and downstream industries, a unique theoretical model is constructed to analyse the impact mechanism of the opening of producer services on downstream manufacturing wage growth. The empirical tests are carried out using the data of China's manufacturing listed companies from 1999 to 2020. Our findings indicate that the opening of producer services has an inverted-U-shaped impact on downstream manufacturing wage growth, and the average level of the opening of producer services in the sample period is lower than the corresponding threshold. Overall, it is in the stage of promoting the wage growth of the downstream manufacturing industry. The opening of producer services mainly affects the wage growth of the downstream manufacturing industry through two channels: labour productivity and labour income share. The results of heterogeneity analysis show that the wages of capital and technology-intensive and low-competitive manufacturing industries are relatively strongly promoted by the opening of producer services. Therefore, promoting the orderly opening of producer services and strengthening the technological links between industries will help promote the wage growth of downstream manufacturing industries.

Destabilization of Indomethacin-Paracetamol Co-Amorphous Systems by Mechanical Stress.

Using co-amorphous systems (CAMS) has shown promise in addressing the challenges associated with poorly water-soluble drugs. Quench-cooling is a commonly used CAMS preparation method, often followed by grinding or milling to achieve a fine powder that is suitable for subsequent characterization or further down-stream manufacturing. However, the impact of mechanical stress applied to CAMS has received little attention. In this study, the influence of mechanical stress on indomethacin-paracetamol CAMS was investigated. The investigation involved thermal analysis and solid-state characterization across various CAMS mixing ratios and levels of mechanical stress. The study revealed a negative effect of mechanical stress on stability, particularly on the excess components in CAMS. Higher levels of mechanical stress were observed to induce phase separation or recrystallization. Notably, samples at the optimal mixing ratio demonstrated greater resistance to the destabilization caused by mechanical stress. These results showed the significance of careful consideration of processing methods during formulation and the significance of optimizing mixing ratios in CAMS.

When and how to introduce upstream competition in an innovation supply chain

Considering an innovation supply chain with a primary supplier involvement in the new product development of a downstream manufacturer who sells to consumers, we address when and how to introduce a secondary supplier by applying order commitment besides innovation quality-dependent contract and revenue-sharing contract. Our results show that the secondary supplier should be invited after the new product development is achieved. The innovation quality-dependent order commitment contract can improve the innovation quality of the supply chain. The innovation quality-dependent wholesale price contract warrants the supplier's innovation quality to keep the same level as the single-supplier supply chain and improves the primary supplier's profit. The incentive effect of a revenue-sharing contract on the supplier's innovation quality is more substantial when introducing a secondary supplier after new product development than before. Furthermore, the negative effect of the supplier's competition on innovation quality and profit of the manufacturer can be alleviated by wholesale price decision-making power consignment. We also provide rich managerial insights into supplier involvement in new product development practices by analyzing the equilibrium behaviors and numerically simulating significant decision variables concerning the demand sensitivity to innovation quality.

Effects of Revenue-Sharing Contracts and Overconfidence on Innovation for Key Components

Revenue-sharing (RS) contracts are a common approach in incentivizing innovation of upstream suppliers by addressing the uneven profit distribution between upstream and downstream firms. Considering the possible overconfidence characterizing decision makers in the supply chain, we investigate the effect of the RS contract and the tendency of overconfidence of supply chain members on the investment in R&D of key components of products in the context of an upstream supplier that is a leader in the R&D and production of key components. We find that regardless of the bargaining power of either party, an RS contract can increase the R&D investment in key components. Regarding the effects of overconfidence of either the downstream manufacturer or upstream supplier, an RS contract can increase the R&D investment in key components. Supplier (manufacturer) overconfidence can harm their own profits but increase the profits of the manufacturer (supplier), and when the level of overconfidence is below a certain threshold, the damage to their own profits is less than the increase in each other’s profits, thus benefiting the whole supply chain. In addition, we also find a joint effect of RS contracts and overconfidence: when the bargaining power of the supplier is low, the RS contract has a certain compensatory effect on the loss of their own profits caused by overconfidence.

Enterprises cooperation and government supervision strategies under the impact of COVID-19

The outbreak of COVID-19 posed great risks to enterprise operations and government regulation. However, few studies focused on the impact of government supervision policies on supply–demand matching of upstream and downstream enterprises. Therefore, this paper establishes an evolutionary game model that considers interactions between upstream suppliers, downstream manufacturers and government departments, analyses the key factors that affect the evolutionary stable strategies (ESSs) of each participant, and explores the impact of government supervision policies on participants’ decision-making. Eight strategies are considered, and is found that the evolutionary stability results are affected by various factors. First, higher epidemic losses promote cooperation between the supply and demand sides, such as technology upgrades and information sharing, but excessive epidemic losses is counterproductive. Furthermore, the government’s supervision policies can promote enterprises’ cooperation, thereby improving social benefits, and reducing supervision costs is the key to achieve this. Results also indicate that although manufacturers can obtain a wholesale price discount from cooperative suppliers, suppliers increase the original wholesale price when the proportion of cooperative manufacturers increases.

Technology licensing contract design considering royalty transparency and demand information asymmetry with downstream co-opetition

This paper studies how technology suppliers can optimally design licensing contracts when there is incomplete information on the licensee’s demand potential for the product in a high-technology supply chain. A licensing contract typically contains an up-front payment and royalties on product sales. The licensor decides to license one technology to a licensee, which designs products based on the supplier’s technology and outsources the product manufacturing to a competitive downstream manufacturer. We apply principal-agent models to formulate the licensor’s contracting problem while considering the transparency of the licensing royalty and find that under demand information asymmetry, the optimal contract structure changes with the demand potential. More specifically, both the separating and pooling strategies can be the optimal strategies for the licensor under the observable contract case. Conversely, under the unobservable case, only the separating strategy is the optimal licensing strategy. And the licensor can always charge zero royalty to a high-type design firm regardless of the menu strategy or the single contract. Furthermore, we examine the effect of licensing royalty transparency on licensing decisions and firms’ profits and highlight the effect of downstream competition on the licensor’s profit. Our results show that the licensor can be better off in the observable contract case. By contrast, the design firm may be better off in the unobservable contract case. We provide a rationale for the licensing contract design under demand information asymmetry and further shed light on the choice between public and secret licensing terms.

Optimal multichannel distribution strategies with limited capacity and uncertain demand

In reality, either the supplier or the manufacturer may launch new high-tech final products, in which case the demand is highly uncertain and the supplier’s capacity for the critical component may be limited. This paper establishes a game-theoretic model consisting of a manufacturer and a supplier with constrained capacity who not only supplies the critical component to the downstream manufacturer but also produces its final products. In this case, both the manufacturer and supplier face the newsvendor problem. We investigate the supplier’s optimal distribution strategies, the manufacturer’s ordering decisions, and the impact of the supplier’s limited capacity on supply chain operations when both the manufacturer and supplier confront demand uncertainty in the end market. Our results show that the supplier can choose among different distribution strategies, that is, the dual channel, the supplier-only, and the sole seller in the market, depending on the capacity and the relative profitability of the supplier’s and the manufacturer’s final products. Overall, the limited capacity will result in a significant loss to the supply chain. Further, double marginalization can be alleviated by the limited capacity and its variation with capacity depends on the relative profitability of the supplier’s and manufacturer’s final products. To coordinate the supply chain, we examine different contracts and demonstrate that our proposed two-sided revenue-sharing contract and the two-sided buyback contract could achieve effective coordination.