Research paper

Supply chain management integration and implementation: a literature review

Damien Power
Department of Management, The University of Melbourne, Melbourne, Australia
Abstract Purpose The purpose of this paper is to review a sample of the literature relating to the integration and implementation of supply chain management practices from a strategic viewpoint. Design/methodology/approach The literature is examined from three perspectives. First, supply chain integration covers issues relating to integration of core processes across organizational boundaries through improved communication, partnerships, alliances and cooperation. Second, strategy and planning examines supply chain management as a strategic matter for trading partners, along with factors relating to the amount of planning required. Third, implementation issues concern factors critical for successful implementation, as well as issues specic to inter and intraorganizational aspects of supply chain initiatives are contained in this sub-group Findings An important emergent theme from the literature is the importance of taking a holistic view, and the systemic nature of interactions between the participants. At the same time, it is also apparent that this requirement to take such an holistic and systemic view of the supply chain acts as an impediment to more extensive implementation. The strategic nature of adopting a supply chain wide perspective, on the one hand provides signicant potential benet, and on the other requires trading partners to think and act strategically. This is easier said than done within a stand-alone organization, let alone across a diverse and dispersed group of trading partners. Research limitations/implications The scope of this review is by design limited to a cross-section of the literature in this area. As such, it cannot, and does not, attempt to be an examination of the full range of the literature, but a sampling of important and inuential works. Practical implications This review of the literature serves to highlight the inter-dependence between integration (technologies, logistics, and partnerships), a strategic view of supply chain systems, and implementation approach. All three need to inform and underpin each other in order for management of supply chains to be able to deliver on the promise of benets for all trading partners. Originality/value This study reviews a sample of recent and classic literature in this eld, and in doing so provides some clear guidelines for the conduct of future research. Keywords Supply chain management, Integration, Management strategy Paper type Research paper

Introduction
The integration of supply chain management systems has been the subject of signicant debate and discussion. As organizations seek to develop partnerships and more effective information links with trading partners, internal processes become interlinked and span the traditional boundaries of rms. Physical logistics become more dependent on information technologies, and these technologies can also become enablers of further cooperative arrangements. Firms are then faced with the management of an extended enterprise as a network of processes, relationships and technologies
The Emerald Research Register for this journal is available at www.emeraldinsight.com/researchregister The current issue and full text archive of this journal is available at www.emeraldinsight.com/1359-8546.htm

Supply Chain Management: An International Journal 10/4 (2005) 252 263 q Emerald Group Publishing Limited [ISSN 1359-8546] [DOI 10.1108/13598540510612721]

creating an inter-dependence and shared destiny. The truly strategic nature of supply chain management thus becomes apparent for participating companies, with successful implementation becoming a source of competitive advantage. The intent of this literature review is to document and analyse literature relating to the integration and implementation of supply chain management practices. As such, it is organized into the following sub-sections: . Supply chain integration. This section covers issues relating to integration of core processes across organizational boundaries through improved communication, partnerships, alliances and cooperation. It also includes the application of new technologies to improve information ows and coordinate the ow of physical goods between trading partners. . Strategy and planning. Supply chain management as a strategic matter for trading partners, along with factors relating to the amount of planning required. . Implementation issues. Factors critical for successful implementation, as well as issues specic to inter and intra-organizational aspects of supply chain initiatives are contained in this sub-group. 252

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Framework for analysis

The integration of supply chain processes through investment in cooperative arrangement and technologies is difcult to separate from, or consider independently of, the strategic positioning of organizations. Effective supply chain integration requires effective implementation, and implementation uninformed by strategy will at best produce little in the way of tangible benets for the parties involved, and at worst be counter-productive and erode competitive advantage. As such the three elements that are the focus of this study are inter-linked and inter-related, and an examination of the literature in each of the three areas can throw some light on issues of importance for one or both of the other two.

Supply chain integration

General The purpose of supply chain management is described by Kaufman (1997, p. 14) as to being to . . . remove communication barriers and eliminate redundancies through coordinating, monitoring and controlling processes. The integration of supply chains has been described by Clancy as:
. . . attempting to elevate the linkages within each component of the chain, (to facilitate) better decision making [and] to get all the pieces of the chain to interact in a more efcient way [and thus] . . . create supply chain visibility [and] identify bottlenecks (Clancy, cited in Putzger, 1998, p. 55).

chain operates as a corporate entity, spans a virtual enterprise without reference to traditional company boundaries, and can be driven directly by customer demand via access to electronic storefronts. He states that this trend will create major changes in many companies, eventually leading to greater use of outsourced services. He also believes that the key to implementation lies in focusing initially on introducing changes within the company, and then extending the process to include suppliers and customers. The primary benets resulting could include cost and cycle time reductions. Wood (1997) focuses on the importance of aligning goals across functions through cooperation and collaboration, and cites the traditionally poor alignment of goals between manufacturing and sales/distribution functions as an example of opportunities for better alignment as a precondition for improvement in supply chain management practices. This cooperative theme is further supported by other writers (Fernie, 1995; Lawrence, 1997; Morton, 1997), and is in essence captured by Parnell (1998, p. 60) when he states that supply chain integration really occurs when:
. . . customers and suppliers establish tight partnerships with the objectives and probable outcomes of reduced inventory, shorter lead times and better service to the customer.

The main drivers of integration are listed by Handeld and Nichols (1999, p. 5) as: . the information revolution; . increased levels of global competition creating a more demanding customer and demand driven markets; and . the emergence of new types of inter-organizational relationships. They describe the three principal elements of an integrated supply chain model as being information systems (management of information and nancial ows), inventory management (management of product and material ows), and supply chain relationships (management of relationships between trading partners). The basis of integration can therefore be characterized by cooperation, collaboration, information sharing, trust, partnerships, shared technology, and a fundamental shift away from managing individual functional processes, to managing integrated chains of processes (Akkermans et al., 1999). The extent of integration can begin with product design, and incorporate all steps leading to the ultimate sale of the item (Transportation and Distribution, 1998; Modern Materials Handling, 1998; Ballou et al., 2000). Some authors also include all activities throughout the useful life of the product including service, reverse logistics and recycling (Carter and Ellram, 1998; Coleman and Austrian, 2000; Thomas and Grifn, 1996). The potential for integration of the supply chain to improve both prot potential and competitive position is highlighted by Wood (1997, p. 26) when he states that:
. . . since the supply chain represents 60% to 80% of a typical companys cost structure, just a 10% reduction can yield a 40% to 50% improvement in pretax prots (Wood, 1997, p. 26).

Information ows Effective application of information technology to the integration of supply chain activities has the effect of reducing levels of complexity. Senge (1990) denes two types of complexity, detail and dynamic. Detail complexity exists when there are many variables needing to be managed. Dynamic complexity exists where cause and effect are separated, and difcult to associate, in both time and space:
. . . situations where cause and effect are subtle, and effects over time of interventions are not obvious. Conventional forecasting, planning and analysis methods are not equipped to deal with dynamic complexity (Senge, 1990, p. 71).

The bullwhip effect is an example of a typical supply chain management outcome resulting from circumstances that are dynamically complex, and was rst highlighted by Forrester (1958, 1961). Chen et al. (2000, p. 269) have dened this effect thus:
This phenomenon states that the demand process seen by a given stage of a supply chain becomes more variable as we move up the supply chain (i.e. as one moves away from customer demand). In other words, the orders seen by the upstream stages of a supply chain are more variable than the orders seen by the downstream stages.

Symptomatic of this effect are excessive inventories, low customer service levels, inaccurate and untimely capacity planning, lost income, increased transportation costs and ineffective production scheduling (Lee et al., 1997). Lee et al. (1997, pp. 94-5) also state that access to, and management of, information is critical to minimizing this type of variation:
Innovative companies in different industries have found that they can control the bullwhip effect and improve their supply chain performance by coordinating information and planning along the supply chain.

Cottrill (1997) states that the evolution of the concept of integration has moved over time to one in which the supply 253

Attribution of causes for the bullwhip effect have varied since it was rst observed. Forrester would say that the behaviour in the system is a function of the interaction of structure (effective organization structure and information sources), delays (time between cause and effect/decision and implementation, etc.), and amplication (the inherent effects of policies) (Forrester, 1961, p. 348). Sterman (1989) sees the primary inuences as being irrational

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human behaviour driven by a misunderstanding of real demand. Lee et al. (1997) believe that the problem lies in the infrastructure of the supply chain itself, identifying practices such as demand forecast updating, order batching, price uctuation and rationing and shortage gaming as the key drivers. Where there is convergence is in the importance of reliable and timely information, although Forrester (1961, p. 427) makes the point that timely information is not necessarily the solution on its own:
Carried to its extreme, the result of more timely information can be harmful. The effect can be to cause the manager to put more and more stress on short-range decisions . . . the system improvements did not result so much from changing the type of information available or its quality nearly so much as from changing the sources of information used and the nature of the decision based on the information.

This view is supported by Churchman (cited in Malhotra, 2000, p. 6) when he states:

. . . knowledge resides in the user and not in the collection of information . . . it is how the user reacts to a collection of information that matters.

Hill (2000) states that one of the practices exacerbating this uncertainty of demand is the practice of forward buying, or purchasing larger than needed quantities to take advantage of lower unit prices. He estimates that this practice can account for as much as 50 per cent of distribution inventories. Levary (2000) puts the ultimate result of the bullwhip effect simply as being either an increase in cost to the end user, or a decrease in prot for the various members of the chain. Upin et al. (2000) express this in terms of increased uncertainty of cash ow and earnings for both buyers and suppliers. Handeld and Nichols (1999, p. 6) summarize the potential for information technology applications for supply chain integration thus:
With the emergence of the personal computer, optical bre networks, the explosion of the Internet and the World Wide Web, the cost and availability of information resources allows easy linkages and eliminates informationrelated time delays in any supply chain network.

partners in an international context (Carter, 2000). The Delphi Group highlight the asynchronous nature of e-mail type messaging, providing . . . the ability to communicate serially, without interaction and interruption, thereby bridging the constraints of time and distance (Australian Industry Group, 1999, p. 19). Many authors point to the fact that e-mail provides cheap and easy to use means of staying in contact with trading partners 24 hours-a-day and seven days a week (Marshak, 1999; Lancioni et al., 2000; Kaufman, 1997). Advances in internet technologies and software are also affecting the application of longer established technologies. The development of Extensible Markup Language (XML) and EDI/XML (an open standard for sending EDI transmissions over the internet) are making connections between organizations different information systems more cost effective and easier to implement. XML was developed in the mid-1990s out of an awareness of the limitations of Hyper Text Markup Language (HTML), the basic language for internet communications (Cunningham, 1999). XML is described as:
. . . an industry standard designed to provide a structured mechanism for sharing and understanding business content [allowing] . . . an application to recognize a document type, individual data elds, and specic data located within a document. XML-enabled applications can parse data from a suppliers web site, interpret the data, and initiate the appropriate response or business transaction (A.T. Kearney, 2000, p. 13).

Bowersox and Calantone (1998) state that the notion of an integrated supply chain is not a new one, but that it has only recently become feasible as companies have access to information that is accurate, timely and affordable. They also make the point that information is the only element within the supply chain that has become less expensive over time. An example of this trend is the increasing use of e-mail for communication both within companies and between trading partners. Some recent Australian gures indicate that e-mail is being used by over 40 per cent of small businesses and over 80 per cent of medium sized companies to do business with customers and suppliers (Yellow Pages Survey, 1999, cited in Lawrence, 1997). At a minimal cost email is being used to transfer word processor les, design documentation and CAD les, spreadsheets and trading documents such as orders and invoices between trading partners (Braue, 1999). The breadth of applications and uses that e-mail is being put to in the streamlining of supply chain communications is often under-estimated. Baum cites the example of Premenos Technologies, an electronic commerce vendor in the USA, developing a program (aimed at small businesses) for transmission of electronic data interchange (EDI) type documents via e-mail using the Secure Sockets Layer (SSL) protocol (Baum, 1997). Carter points out that the use of e-mail is an important facilitator of better communications and relationships between trading 254

The advantage that XML offers is a exible standard for the exchange of information between trading partners via the internet (New South Wales Department of State and Regional Development and Microsoft Australia, 2001). It therefore establishes the ability to exchange rich information (previously only available through the use of EDI) at a comparatively low cost. XML adds meaning and semantics to text, taking it beyond mere formatting (a limitation of HTML) and in so doing allows the content (rather than just the code) to be understood by the computer (Westhead et al., 2000). It is also scalable (able to be built upon without major modication), and requires signicantly less specialist knowledge to manipulate than previous programs (Huson and Owens, 2000). There have been a large number of software applications developed to allow better ow of information throughout the supply chain including: ERP systems (developed from MRPII systems); order management systems to automate the order fullment process; demand planning systems for managing and monitoring forecasts; warehouse management systems for inventory management, picking and placement; transport management systems for the planning and dispatching of shipments; advanced planning and scheduling systems for developing and managing production plans; customer relationship management systems for providing customer service, support and intelligence on customer demographics; data warehousing applications able to store, analyse and report corporate data stored in many different systems in customized format (Huson and Owens, 2000; Harrington, 1997; Moller, 2000). These systems have usually suffered from the fact that they have been bottled up within parts of an organization, or even the supply chain, and have not easily been linked to one another (Huson and Owens, 2000). A powerful emerging application for XML, enabling supply chain integration, is as a middleware provider between many corporate legacy systems:

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With the introduction of XML translation software . . . businesses and marketplaces now have access to software that acts as an interpreter to reconcile multiple communications standards allowing, for example, an EDI purchase order to be converted into an XML equivalent document that is readable by a suppliers inventory system (Upin et al., 2000, p. 54).
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Complications in costs. Unpredictable variations in duties and taxes between countries can make sourcing decisions akin to playing roulette (Kilgore, 2000, p. 6).

There is a view, however, that this is a short-term solution, having many of its own limitations such as lack of scalability, a reliance on proprietary code, and limited access to useful business intelligence (Huson and Owens, 2000). The real ability of information technology to enable true integration is best captured by Christopher (2000, p. 38) when he says:
The use of information technology to share data between buyers and suppliers is, in effect, creating a virtual supply chain. Virtual supply chains are information-based rather than inventory-based.

Physical logistics The importance of the management of physical inventory is being amplied by the following factors; decreasing product life-cycles; decreasing levels of standardization of products and demands for customization; customers demanding shorter delivery lead times; increased levels of competition due to globalization and lowering of tariff barriers; and increasing levels of dynamism (rate of change), complexity (number of changes) and uncertainty (what will change?) in global markets (Stalk and Hout, 1990; Pine, 1993; Handeld and Nichols, 1999). Levels of inventory in supply chains are directly linked to cycle times, and cycle times in physical logistics are largely a function of distance, uncertainty and complexity (Bowersox and Calantone, 1998). From the pointof-view of the movement of physical goods, an integrated supply chain offers the opportunity for rms to compete on the basis of speed and exibility, while at the same time holding minimum levels of inventory in the chain. Rather than goods being held at various points within the chain, they will be moving between these points. Research has shown that companies that have been able to achieve signicant reductions in cycle times have been able to translate this into tangible business benets (Handeld and Pannesi, 1992; Belyea, 2000; Arntzen et al., 1995; Aron, 1998; Brennan, 1998). Despite this potential for providing a source of competitive advantage, it has also recently been shown that the infrastructure necessary to support streamlined product ows lags behind the rapid developments in information technology. Kilgore et al., as a result of interviewing 40 logistics managers found that . . . global trading today depends on an awkward ow of paper and misinformation (Kilgore, 2000, p. 6). As a result, they predict that global shipping infrastructures will come under severe pressure in the next three to ve years as growth in global e-commerce picks up. The major problem areas they identify include: . Fragmented regulatory rules. The example of Japan is cited where up to 17,000 different trade laws can apply to imports, while in China certain products can only be sold through government agencies. . Inadequate intermediaries. Global shipments are estimated to require on average the involvement of 27 separate parties to complete. These include brokers for buying cargo space, carriers for inland transport, compliance intermediaries at both country and regional levels and government agents covering tax and other compliance issues. 255

In terms of Forresters model of industrial dynamics based on information feedback systems, these structural problems are potential sources of delays in the system, the effect of which could subsequently be amplied depending on the policy responses of individual trading partners (Forrester, 1958, 1961). As such, the application of improved information technology will provide a potential source of improvement, but cannot be expected to solve entirely issues resulting from such complex sets of interrelationships. The physical distribution of goods is also affected by distribution centre and facility location decisions. Arntzen et al. (1995) state that the main decision criteria for the logical design of a global outgoing logistics network are: number of distribution centres; where they need to be located; methods of distribution and capacity each should have; customers that each centre will service by product and order type (Arntzen et al., 1995, pp. 71-2). For incoming logistics they see the major issues as being: if they are rationalising the supplier base, which suppliers to drop and which to keep; which suppliers should supply each plant by class of parts (Arntzen et al., 1995, p. 72). Other general issues that need to be considered include the relative merits of tax havens as against extra freight and duty costs; the location of customers and suppliers; length of the material pipeline in time and space; transit time and cost of different transportation options; and design of products for optimal shipping conguration (Arntzen et al., 1995, pp. 71-2). Wheatley (1996) notes that there has been a shift away from applying technological solutions to physical distribution systems such as racking systems, trucks and automated warehousing. He sees the focus moving to information technology as a result of diminishing marginal returns in physical handling technologies, although he does note that these technologies are being embedded in many material-handling systems such as forklift trucks and automated materials handling systems (Murphy, A. cited in Wheatley, 1996). This does not, however, mean that the physical side of the distribution issue is no longer signicant, or is indeed diminished in terms of its ability to provide a source of competitive advantage. Wood reports that survey research conducted in the USA by A.T. Kearney found that only 9 per cent of those surveyed indicated that they had a core competence in transport or logistics (Wood, 1997). This survey also reported that 90 per cent of respondents were planning supply chain initiatives, but that only 18 per cent of respondents felt that their IT implementations adequately supported their supply chain initiatives. Given this low level of basic expertise in traditional logistics functions, it is easy to see that these companies run the risk of seeing IT implementation as a silver bullet that will solve problems more fundamentally rooted in organizational competencies. The A.T. Kearney report therefore concludes:
Companies have failed to pay sufcient attention to areas such as transport and logistics, distribution, and purchasing. The most serious problems companies face are the continuing internal functional focus, a failure to align their IT systems and organizations with supply chain needs, and the traditional nature of their relations with external suppliers and customers (A.T. Kearney report, cited in Wood, 1997).

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Partnerships, alliances and cooperation The signicance of effective inter-company relationships to supply chain integration is captured in the following story:
Consultant John Champion, vice president of Kurt Salmon Associates, relates the story of a vendor who spent a great deal of time and money to design special product packaging. When the vendor visited the retailers distribution centre, it was stunned to discover that the customer was simply throwing the boxes away. The moral, according to Champion: Get together and talk (Bowman, 1997, p. 29).

threaten the survival of the entire chain (Barratt, 1999; Ghobadian et al., 2000; Landry, 1998a, b; Tolhurst, 2001). Dyer et al. (1998) have found that this does not necessarily mean that all relationships with all supply chain members need to be one size ts all. As a result of comparing supply policies and relationships in the USA, Korea and Japan, they have concluded that:
To optimise purchasing effectiveness executives should strategically segment their suppliers into strategic partners and durable arms-length suppliers in order to allocate different levels of resources to each group (Dyer et al., 1998, p. 73).

Handeld and Nichols (1999) also emphasize the importance of relationships for the effective management of supply chains. They state that the technological and physical transfer elements are understood, and that the issue of relationships is more difcult, less well understood and therefore more fundamentally important:
. . . without a foundation of effective supply chain organizational relationships, any efforts to manage the ow of information or materials across the supply chain are likely to be unsuccessful (Handeld and Nichols, 1999, pp. 9-10).

Tait (1998, p. 21) states that:

Companies that make supplier relationships a priority are rewarded with better nancial performance and greater customer satisfaction.

The difference between the two types of relationships is dened by the nature of the inputs they provide (e.g. those of arms-length suppliers would be typically standardized items not adding to the differential advantage of the end product). This view has support from Lambert and Cooper (2000) who dene these different relationships as managed process links, monitored process links, not managed process links and nonmember process links. Their rationale for this model is stated thus:
. . . integrating and managing all process links throughout the entire supply chain is likely not appropriate. Since the drivers for integration are different from process link to process link, the levels of integration should vary from link to link, and over time (Lambert and Cooper, 2000, p. 74).

In spite of this, a report by A.T. Kearney (A.T. Kearney report, cited in Tait, 1998) found that only a small number of companies really leverage their supplier relationships, with less than 20 per cent of North American and Canadian companies actively involving their suppliers in key business processes. The major reason identied is the need to recognize and include key strategic suppliers as early as possible in order to set joint objectives and align business goals. Traditional supplier relationships include what Dyer et al. (1998) describe as the arms length model, characterized by multiple suppliers, avoidance of long term (or in some cases any) commitments and regular price reviews. The justication for this strategy has been to counteract the bargaining power of suppliers (Porter, 1980; Porter and Millar, 1985). The cooperative model, by way of contrast, focuses on the sharing of information (and in some cases assets) between organizations, recognising areas of common interest and mutual competitive advantage. In the context of a complex rapidly changing supply chain management environment, the cooperative model has become a critical element for effective implementation. The requirement for open communication, trust and recognition of the interdependence of individual elements of the supply chain as technology implementations bridge company boundaries has thrown further emphasis on the importance of such cooperative strategies (Stuart, 1997; Dyer et al., 1998; Landry, 1998a, b; Tait, 1998; Barratt, 1999; Bensaou, 1999; Lumsden, 1999; Rishel et al., 1999; Ghobadian et al., 2000; Kaufman et al., 2000; Kulwiec, 2000; Schonsleben, 2000; Vokurka, 2000). The key driver for this need to recognize the common interest has been a fundamental shift in power toward the customer (Handeld and Nichols, 1999). As the customer begins to dictate terms in the marketplace, issues of interdependency between members of a supply chain become more critical. Winning the custom and loyalty of end users becomes more difcult as the competitive environment becomes more volatile. In this type of environment inefcient and ineffective supply chains characterized by traditional arms-length relationships, and silo type structures can 256

For Lambert and Cooper (2000), the key to these relationships is the level of management and integration required, with highly strategic inputs requiring the highest levels of management and integration by the focal company. They also make a valid point about the importance of monitoring the relationships suppliers and customers have with competitors (non-member process links). This model begs the question of who manages whom, who coordinates what, and how coordination and integration are maintained? The emphasis appears to be very much on managing and controlling partners, perhaps at the expense of setting up mutually benecial partnerships. Others would see the key ingredient as being that of trust (Landry, a, b; Tolhurst, 2001; Ballou et al., 2000). The need to manage and monitor the various members of the chain is obviated (in theory) by the existence of long term mutually benecial partnerships built on high levels of trust. In these circumstances the companies falling into Lambert and Coopers (2000) model as being managed process links, would really be links that would be self-managing (e.g. the partner who is involved in a VMI programme would not ideally require close management). Ballou et al. (2000, p. 16) dene trust in this context as:
. . . a general expectancy held by a channel member that the word of the other can be relied upon. That is, one party has condence in an exchange partners reliability and integrity.

They also state that trust can lead directly to cooperation, or indirectly through the development of commitment. They also cite research indicating a high degree of correlation between commitment, trust and cooperation in intercompany relationships (Morgan, R.M. and Hunt, S.D. cited in Ballou et al., 2000, p. 16). In identifying the importance of trust and commitment for the development of cooperative partnerships, however, Ballou et al. (2000, p. 17) also identify the challenge that this reveals:
Since cooperation is usually among members that either have different reward systems or are legally separate, members need to realize benets from their cooperation. The most challenging situation occurs when the benets

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pool with some members at the detriment of others. Balancing these benets so that all members are better off for their cooperation is the new challenge for supply chain managers.

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Conclusion The integration of supply chain processes can provide an effective means by which costs can be reduced and customer service levels improved. The formula for integration, however, is not a simple one. Organizations that aim to become part of an extended, integrated supply network can also expect that this will require an infrastructure enabling effective information ows and streamlined logistics. A key component of this infrastructure will be based on robust and durable collaborative arrangements with trading partners. The most effective of these networks will be those that are able to get the mix of information requirements, physical logistics and collaboration right, providing shared benets to a majority of partner organizations.

case there will undoubtedly be winners and losers as suppliers into these channels also will likely be consolidated. Fein and Jap (1999) identify four strategic responses for manufacturers nding themselves confronted with this situation: (1) partner with the winners: appropriate when the winners are easy to spot; (2) invest in fragmentation: work with marginalized distributors to create alternative channels; (3) build an alternative route to market by forward integration and (perhaps) use of the internet; and (4) create new channel equity: use differentiation and develop brand equity. In the context of Porters analysis of the impact of internet technologies on the competitive environment, the prospect of consolidation is perhaps a very real one in many industries. In this context, the importance of having a coherent supply chain strategy, rather than just a strategy for the operation of the individual enterprise, could become even more important as time goes on. Hicks (1999, p. 26)states that the goal of strategic supply chain planning is . . . to arrive at the most efcient, highly protable supply chain system that serves customers in a market, and that decisions of this nature typically carry high expenditures and signicant risk. He identies two different approaches to supply chain improvement, focusing on either information technology or logistics. The rst has information as the key to supply chain improvement, with the primary focus being on . . . collaborative planning, sharing information and getting companies synchronized with suppliers and customers (Hicks, 1999, p. 26). The second is more internally focussed and is concerned with quantitative analysis of complex logistical problems. He states that the future of supply chain strategy lies in the convergence of these two paradigms, and recommends a four-step process for strategic planning: (1) network optimization: design the least cost network focusing on customer demand; (2) network simulation: test alternative models to predict supply chain behaviour; (3) policy optimization: develop best operating rules (e.g. how much inventory to carry for each product line); and (4) design for robustness: anticipate unforeseen circumstances and possibilities. This nal step is the most difcult, and the most important. As Hicks (1999) states; Optimal answers are not always the best answers. Given the importance of this step, it is interesting that he spends the least amount of time on explaining how this may be achieved. Lummus et al. (1998, p. 50) provide some insight into why this issue is so important by stating:
The explosion of marketing activity and intensity of customer demand has thrown many companies supply chains into a tailspin. Their systems were not designed to meet the requirements currently placed upon them.

Strategy and planning

In examining the strategic nature of integrated supply chain management, and business to business e-commerce in general, the example of the computer industry provides a graphic example. Bovel and Martha (2000) use the examples of Gateway and Dell Computer as companies that have managed to move supply chain management from the realm of operations into a source of competitive advantage:
Gateway and Dell, for example, make good personal computers, but so do Hewlett-Packard, IBM, Compaq, and other vendors. Since all are built from fairly standard components and loaded with identical software, it is difcult to say that one is better than another. What differentiates Gateway and Dell in the eyes of customers is the fact that they can build and deliver a customer-congured PC within ve business days. What sets them apart in the eyes of shareholders is the fact that they can do this with almost no inventory, absolutely no working capital, and far fewer capital assets than most of their rivals (their asset intensity is one-fth that of major competitors) (Bovel and Martha, 2000, p. 28).

They also make the point that these companies are in the minority, with the focus for differentiation still revolving around price, product innovation and cost cutting, rather than an integrated and coordinated value chain. Porter (2001) offers some support for this view, although he sees the integration of a value chain as complementing traditional strategies. In analysing the potential for internet-based technologies to alter competitive environments, he sees a major opportunity for organizations to differentiate themselves on the basis of a distinctive value chain. In fact, he states that this may be one of the few ways in which companies can develop a sustainable competitive advantage using internet technologies, as the overall effect of their adoption will be to intensify competition, lower barriers to entry and increase bargaining power of both buyers and suppliers:
Basic Internet applications will become table stakes companies will not be able to survive without them, but they will not gain any advantage from them. The more robust competitive advantages will arise instead from traditional strengths such as unique products, proprietary content, distinctive physical activities, superior product knowledge, and strong personal service and relationships. Internet technology may be able to fortify those advantages, by tying a companys activities together in a more distinctive system, but it is unlikely to supplant them (Porter, 2001, p. 78).

One strategic outcome of supply chain integration can be channel consolidation, or the concentration of control of distribution channels by a small number of players. In this 257

Although it is desirable to model the behaviour of a supply chain in order to make informed planning decisions, the issue of dynamic competitive environments makes this an activity that is at best difcult, and at worst perilous. Some observations from leading supply chain management practitioners perhaps provide some insights into this dilemma. In an interview with Victor Fung (of the Hong Kong based Li & Fung organization), Magretta notes that one

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way this organization was able to get around the complexity of designing an integrated supply chain, was by breaking up the value chain (Magretta and Fung, 1998). Using what Fung describes as dispersed manufacturing, the group decided to sub contract out a large portion of labour intensive work to Chinese factories, while maintaining control over the front and back end operations:
This is a new type of value added, a truly global product that has never been seen before. The label may say made in Thailand, but its not a Thai product. We dissect the manufacturing process and look for the best solution at each step. Were not asking which country can do the best job overall. Instead, were pulling apart the value chain and optimising each step and were doing it globally (Fung, cited in Magretta and Fung, 1998, p. 106).

commoditization gravitate competition toward price, and sources of differentiation become more difcult to establish. The potential for an integrated supply chain to provide an alternate source of differentiation both highlights the importance for organizations of developing a competency in this area, and begs the question as to why it is still the domain of a minority. Some explanation for this phenomenon is perhaps provided by examining issues relating to the implementation of integrated supply chain management solutions.

Implementation issues
Michael Dell (founder of Dell computer) describes his model for supply chain coordination and integration as virtual integration:
Virtual integration means you basically stitch together a business with partners that are treated as if theyre inside the company (Magretta and Dell, 1998, p. 74).

Based on collaborative partnerships with suppliers, strong and direct relationships with customers, and the coordination of disparate supply chain elements, Dell has managed to create a US$12 billion company in 12 years. From a strategic point of view, what is interesting about both of these examples, is the similarity of the basic strategic approaches. Both have tackled the difcult problem of coordinating the supply chain by avoiding traditional approaches such as vertical integration. Control and coordination have been attained through the development of a core competence in control and coordination, rather than by trying to control all the many functions required to make and deliver a product. In terms of Porters notion of developing a distinctive value chain, both approaches are entirely consistent, as each has been able to create a sustainable competitive advantage through a distinctive competence that is not easily copied. It is also apparent that for organizations to develop a competence in the management and integration of supply chains, logistics and supply chain management need to be given a higher level of strategic importance (Meade, 1998; Natarajan, 1999; Philip and Pedersen, 1997). Much of the evidence, however, indicates that this is not a common phenomenon. Natarajan states that this is due to three major factors: (1) lack of a logistics strategy; (2) lack of alignment between logistics strategy, overall business strategy and supply chain strategy; and (3) lack of integration with other functional area strategies and proper deployment of the logistics strategy. This view is supported by Philip and Pedersen (1997, p. 357) who concluded after studying EDI implementations in Ireland that:
Most companies have introduced EDI at an operational level only with no clearly identiable view to obtaining strategic benets from its implementation.

General Putzger (1998) states that the key criterion in implementation is correct choice of information technology, and that the use of third-party providers for both transportation and information management is the option chosen by successful performers. Bowman (1997) says that many companies are unsuccessful in implementation because they simply are unable to come to agreement on terms. He notes that this has been an important reason for the development and adoption of the standards supporting the supply chain operations reference (SCOR) model (discussed below). In documenting implementation in a European company, Hammant and Fisher (1997, p. 100) list seven critical success factors: (1) a committed organization, from the board down; (2) effective programme management; (3) consistent, pre-emptive communications; (4) positive action to identify and manage key risks before they become issues; (5) a well-dened and managed programme baseline, changed as necessary; (6) a succession of manageable delivery milestones to maintain momentum and condence; and (7) an actionable, owned, manageable and measurable set of business benets. Gourley (1998) makes the point that involvement of the distribution centre (DC) staff (i.e. in a supply chain improvement program within a DC) in implementation, as well as suppliers and other stakeholders, has been a factor critical to success. In the case he cites, the company actively encourages the involvement of staff in decision making, and welcomes input from suppliers to identify areas for potential productivity improvements. Larkins and Luce (2000) recommend a number of stepping stones for the implementation of supply chain management practices in the pulp and paper industry: . start small, with a single link with which you can have a good relationship; . start internally with a single business process; . focus on long-term, sustainable and cost effective business improvements that will benet both you and your link; and . educate staff and promote buy-in from stakeholders. Further evidence supporting these criteria comes from the case the implementation of an advanced planning and scheduling (APS) system at LEGO in Denmark (Moller, 2000). The three major lessons learnt in this case were: (1) do not be too ambitious with the timing and expectations for rapid results; 258

Conclusion The conguration and operation of supply chain activities and resources provides signicant potential for developing new and alternate sources of sustainable competitive advantage. In fact, in many industries, this may provide one of the last sources of such an advantage as product standardization and

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(2) ensure accurate alignment between requirements and system functionality; and (3) critical importance of data accuracy. Parnell (1998) recommends that a range of issues need to be considered when planning for implementation. He emphasizes the importance of business processes supporting new systems, the importance of education in demand management and system optimization, and the need for performance measures to support behavioural change. Tyndal et al. (2000) identify three critical elements that need to be assessed and balanced to enhance chances of successful implementation. These are value (relationship between cost and benets), risk (probability of success dependant on time span for tangible results), and method (the approach adopted by the company to balance value and risk). Value they see being determined by the need to be realistic about benets. This means having a practical time frame for deriving a return on their investment, and being realistic about the size of that return. Linked to this notion of return is the need to understand the true nature of supply chain costs. Included, should be internal and opportunity costs, real inventory costs, subcontractor costs, systems costs, support costs and asset costs. They also recommend: mitigating risk by focusing on short-term projects as it will be easier to set action plans, targets and specic time horizons for short term projects; implementing in stages to avoid the temptation of trying for a silver bullet solution; and taking care of basics such as data accuracy at an early stage. In summarizing their approach, Tyndal et al. (2000, p. 59) state:
The value of working in stages and by segments is best captured in a wholly counterintuitive maxim: do less with more. In other words, put more resources onto fewer, more implementable initiatives, and make them accountable for results.

model is to:
. . . create a business model for supply chain management that can be used worldwide regardless of industry or geographical location. SCOR isnt meant to be a one size ts all solution for doing business. Instead, its supposed to give organizations a common language to discuss supply-chain issues, develop benchmarking measurements and give direction to the development of supply-chain management software (Saccomano, 1998, p. 27).

The model is based around four generic supply chain management functions of planning, purchasing, manufacturing and distribution. Across these four functions information and material ows are analysed at three separate levels:
At Level 1, a rm denes its performance targets and gathers the information needed to build its own SCOR model. At Level 2, it creates its own supplychain conguration that takes into account assets, product volume and mix, and technology requirements. With this information a company can determine its expected performance so that at Level 3 it can work on netuning its performance (Saccomano, 1998, p. 1).

Froehlich et al. (1999, p. 473) have identied that structural issues will need to be identied and addressed prior to implementation:
E-commerce places new demands not only on delivery technology, but on the way that business processes are designed. At present, technology is forcing organizations to embark on e-commerce before they have built a coherent model of the business processes they need.

The need to have the basic business processes right has also been identied as a signicant potential inhibitor of implementation. An Anderson Consulting (1994) report has found that inaccurate data, existing systems infrastructure and entrenched business practices are common major barriers to implementation of advanced technologies and innovative management methods. The importance of getting existing processes in line with new technologies and methodologies serves to highlight the role of planning, as well as supporting the use of standardized frameworks for implementation. One such framework is the SCOR model. SCOR model The SCOR model was developed in the mid-1990s by a cross industry consortium of over 70 companies in the USA called the Supply Chain Council. SCOR denes common supply chain management processes and matches these with best practice, benchmarked performance measures and use of software. The purpose is to provide a generic framework for measuring supply chain performance and identifying areas for improvement (Allnoch, 1997). The intent of the SCOR 259

The benets of the model reported in the literature include: the potential for strategic level improvements in supply chain management through the use of the benchmarking tools (McGrath, 1997); provision of a common platform for communication between trading partners that does not require specialized training or expertise (Asgekar, 1998); identication of points of leverage in the supply chain enabling more effective allocation of resources (Allnoch, 1997); provision of clear standards, processes and performance measures for the management of a supply chain at the industry level (McGrath, 1997); and the enabling of more rapid development of supply chain management software applications (Saccomano, 1998). Huang and Mak (2000) take the view that models such as SCOR are useful, yet limited in their application because they fail to model the interfaces between trading partners, and because they ignore product development processes. Saccomano (1998) also notes that Supply Chain Council members have identied that the model is also decient in the areas of asset recovery, maintenance, repair and customer service. These shortcomings perhaps provide some explanation for the low levels of implementation that have been recently reported (Stedman, 2000). Although it is apparent that some large and well known organizations have accepted the guidelines provided by SCOR, Stedman (2000, p. 46) reports that . . . the number of companies that have fully implemented the guidelines and have had positive results is relatively small. Agile vs lean supply chain models The requirement for organizations to become more responsive to the needs of customers, the changing conditions of competition and increasing levels of environmental turbulence is driving interest in the concept of agility. What it really means for an organization to be agile, as opposed to just being efcient, effective, lean, customer focused, able to add value, quality driven, pro-active rather than reactive etc. has been the source of considerable debate and academic conjecture. Christopher (2000) makes a clear distinction between speed (meeting customer demand in the context of shortened delivery lead times), leanness (doing more with less) and agility (responding quickly to changes in demand in terms of both volume and variety). Naylor et al. (1999, p. 108) go further in stating that:

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Agility means using market knowledge and a virtual corporation to exploit protable opportunities in a volatile marketplace.

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The notion of agility is therefore recognized to be holistic rather than functional, and of strategic rather than tactical importance. The concept has also been extended beyond the traditional boundaries of the individual organization to encompass the operations of the supply chain within which the organization operates. The effectiveness of an organizations response to rapidly changing market conditions will be largely determined by the capabilities of trading partners. A manufacturer with key suppliers that have poor quality and delivery records will nd it very difcult to provide high levels of customer service, even in stable environments. Place this manufacturer in a rapidly changing environment and it will be eliminated from participation in the competitive game altogether. In this context reliability of supply becomes a critical issue that can best be facilitated by the sharing of accurate and timely information with suppliers. At the downstream end of the supply chain, this same manufacturer will again nd it hard to operate in this environment if distribution channels are unable to respond due to physical logistics or information ow related issues. In this sense the development of strategies for competing on the basis of Agility become very much strategies for the management of the total supply chain. Towill (1997) expresses this in terms of creating a seamless supply chain where territorial boundaries between trading partners are eliminated and they become part of the one organization. Christopher (2000, pp. 38-9) has identied a number of characteristics that a supply chain must have in order to be truly agile. These include market sensitivity (through the capturing and transmission of point of sale data), creating virtual supply chains (based on information rather than inventory), process integration (collaboration between buyers and suppliers, joint product development, etc.) and networks (confederations of partners linked together as against stand alone organizations). An underlying assumption of this model is that of open relations between the supply chain participants, the sharing of information and the use of technology to create connectivity (i.e. the ability for organizations to share information in real time). Christopher (2000, p. 43) also stresses that agility in individual organizations can be signicantly hindered by the level of complexity in terms of brands, products, structures and management processes. In developing a model for achieving agility in manufacturing organizations, Zhang and Shari (2000) identied a number of agility providers (practices, methods, tools, techniques facilitating a capability for agility). As a result of surveying 1,000 companies, and conducting case studies in 12 of them, they concluded that practices related to people and organizational issues were both more effective and important for manufacturers. They also found that the internet, mass-customization and virtual organizations were only used by a small percentage of respondents, and usually only partially. Narasimhan and Das (2000), based on the result of an empirical study of purchasing managers in manufacturing rms, found that a key determinant of the ability of manufacturing to make rapid changes was the selection, development and integration of suppliers with appropriate capabilities. Gunasekaran (1999) has proposed a conceptual model for the design of agile manufacturing systems based on the four 260

key dimensions of strategies, technology, people and systems. He also notes that most of the literature in this area focuses on strategies or techniques, but there is little or no focus on the integration issues. He further states that there is a lack of empirical studies testing hypotheses based on theory in this area. This view is supported by Sheather and Hanna (2000, p. 5) who state that:
. . . there is a dearth of empirical evidence regarding the operational characteristics of supply/buy networks, the appropriate performance measures, the principles of structural intuition underlying their operation and theoretical models to guide empirical research.

Conclusion Implementation of technologies and methodologies for the management of supply chains is likely to be accompanied by signicant intra and inter-organizational change. This will manifest itself in particular in the area of process re-design, and in many cases the development of entirely new processes. An important factor in determining the success (or otherwise) of any implementation will be choosing the right areas of focus, and understanding the implications of the implementation for all trading partners. The difculties and complexities inherent in implementation have led to the development of frameworks (e.g. SCOR) to enable this process. It is interesting to note that evidence suggests that adoption and application of these frameworks is at best limited. The literature suggests, therefore, that implementation is best attempted through an incremental rather than big bang approach.

Contribution and further research opportunities

Contribution Whether the process for integration is vertical or virtual, the requirement for integration of supply chains is inherently strategic, and a potential source of competitive advantage for multiple trading partners. The nature of the integration model is an implementation issue that needs to be addressed with a view to customer needs and other variables such as industry and market characteristics. One theme that appears to hold constant throughout the literature in this area is the importance of taking a holistic view, and the systemic nature of interactions between the participants. The recognition of the inter-dependence of all partners in a supply network appears to be an important pre-cursor to effective integration. In this sense, organizations moving to implement integrated supply chain management systems could be seen to be formalising strategies to better manage this inter-dependence, and to leverage it to mutual advantage. At the same time, it is also apparent that this requirement to take such an holistic and systemic view of the supply chain acts as an impediment to more extensive implementation. The strategic nature of adopting a supply chain-wide perspective, on the one hand provides signicant potential benet, and on the other requires trading partners to think and act strategically. This is easier said than done within a stand-alone organization, let alone across a diverse and dispersed group of trading partners. The challenge for developing more effective and integrated networks is to encourage such a mindset, and use it to promote adoption and implementation of enabling technologies and methods. In other words, this review of the literature serves to highlight the inter-dependence between integration (technologies, logistics, partnerships), a strategic view of supply chain systems, and

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implementation approach. All three need to inform and underpin each other in order for management of supply chains to be able to deliver on the promise of benets for all trading partners. Further research The need for further research to capture both the characteristics of successful implementation, and the factors determining the level of implementation is captured by Akkermans (1999, p. 566) when he states:
. . . the operations management literature has shown very little empirical evidence of successful strategic moves towards supply chain management [and later] . . . we do not yet have causal relationships between the various factors driving effective supply chain management and their interrelations with performance improvements in areas like inventory management, supply chain costs, and customer satisfaction.

There has been some research into a range of barriers to extensive adoption, particularly with regards to EDI usage, with cost, ease of implementation and conicting standards being identied as restricting wider use. An emergent theme in the literature is the discussion of implementation in terms of extent (i.e. formal electronic links with suppliers and customers, application of barcodes to incoming goods, formal cooperative agreements with suppliers, etc.), focus (part of an overall strategic plan), and expected benet (source of competitive advantage vs adding cost to the business). Using this model there is an opportunity to pursue a range of questions. What is the true extent of implementation of techniques and methodologies used for the management of the supply chain? Do organizations that implement supply chain management techniques progress from a basic implementation to a more extensive one over time? Are there signicant demographic factors that impact on the decision to implement such as company size or industry sector? Can companies be distinguished from one another on the basis of this extent of implementation model? Given the apparent contradiction in the literature between promised benets and still limited evidence of extensive implementation, the examination of factors creating and reinforcing this apparent gap would appear benecial.

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