S o o W o o k Kim**
Abstract
I lntroductlon
U Literature Revlew
Ill ldentifylng a Typology of SCM Strateales
N . Conclusion and lmpl~cat~on
Abstract
In this research, we seek to create a typology of supply chain management strategies. To pursue this objective, we used the notion of "alignmenf between corporate level strategy and functional level strategy a s the theoretical background or research framework. From t h e research framework, we suggest a set of SCM strategy typologies. and discuss the relevance of these SCM strategy typologies to SCM 1 i t e r a t u r e . B ~ exploring t h e relationship between corporate initiatives and functional initiatives of SCM, this research provides some insight into how SCMstrategies can be developed to create competitive advantage. This brings out the academic and practical value of the SCM strategy typologies this paper suggests.
Key Words: Supply Chain Management Strategy Typology. Corporate Level S t r a t e g y , Functional Level Strategy
This research was supported by t h e I n s t i t u t e of Management Information. College of Business Administration. Seoul National University.
" Assistant Professor College of Business Administration Seoul National University.
E l f %!%it5
I . Introduction
In response to intense global competition and shrinking product life cycles.
organizations have downsized to focus on core competencies and have attempted t o achieve competitive advantage by forming mutually beneficial relationship with suppliers t o capitalize on their capabilities and technology. Supply chain management (SCM) evolved when firms entered into strategic buyer-supplier alliances, and integrated their distribution and transportation activities with logistics providers. However, while many companies have implemented some SCM practices and others have claimed t h a t they used supply chain integration strategies, there isno consensus a s to what these terms m e a n . While recent academic and practitioner journals a r e replete with articles on SCM and/or supply chain integration strategies, researchers have not attempted t o create a typology of supply chain strategies and relate them to a firm's performance.
Kaufman et al. (2000) commented on t h e absence of a typology of SCM strategies a n d t h e need for it in reviewing Clark and Fujimoto's (1991) s t u d y , which classified original equipment manufacturer (OEM) suppliers by t h e auto industry's product development process. They stressed t h a t , though useful. Clark and Fujimoto's work(1991) h a s three weaknesses: (1) it simplified t h e supply chain a s t h e only link between t h e OEM and a supplier: ( 2 ) i t excluded small and medium sized manufacturers a s active participants in t h e process: and ( 3 ) it merely provided a skeletal taxonomy of strategies for these manufacturers rather t h a n a systematic typology. A taxonomy, without defining ideal type, a t t e m p t s to classify firms into mutually exclusive and exhaustive groups (Mckelvey 1982, Miller and Friesen 1984. Doty and Glick 1994. Bozarth and McDermott 1 9 9 8 ) . A typologydescribes ideal types, each of which reflects a particular combination of organizational attributes (Doty and Glick 1 9 9 4 ) . although no existing firms may fit exactly t h e suggested ideal type (Venkatraman 1989. Venkatraman and Prescott 1990, Bozarth and McDermott 1 9 9 8 ) . These unambiguous definitions of taxonomy and typology buttress, t h e argument of Kaufman e t a l . ( 2 0 0 0 ) , in t h a t
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they imply t h a t taxonomies using a s e t of variables resulting in theoretically unjustified clusters or groups. may not reflect practicable internal or environmental managerial characteristics t h a t can be employed by firms.
While businesses realize the strategic roles of manufacturing, finance and marketing in corporate success. the focus of SCM is rarely strategic. Even if top-level managers understand the importance of SCM strategy and pursue strategic SCM, they may not clearly recognize how the firm's SCM strategy can be distinguished from its marketing and manufacturing strategies. This tendency to exclude SChf from t h e strategic debate coupled with unclear understanding of SCM strategy may cause firms to miss exploitable opportunities to increase competitive advantage (Stevens 1989. 1 9 9 0 ) . These arguments underscore the need for creating a rigorous typology of supply chain strategies and examine their relevance to performance improvement.
Good typologies should have three main characteristics (Rozarth and McDermott 1998). First, typologies should be based on a generalizable, supported theory relevant to the suggestion of specific types (Doty and Glick 1994). Second, good typologies should define unidimensional constructs, which represent typical theoretical assertions (Miller 1996). Third, it should be possible to empirically test whether the suggested typologies result in significant organizational effectiveness. The primary objective of this research effort was to create and describe a typology of SCM strategy. To pursue this objective, we used the notion of "alignment" between corporate level strategy and functional level strategy a s the theoretical background or research framework. A related objective of this research was to suggest a n empirical framework for investigating the relationship of the proposed SCM strategy types to performance. We also discuss the relevance of these SCM strategy typologies to SCM literature.
II.
L i t e r a t u r e R e v i e w1 . T h e I m p o r t a n c e o f A l i g n m e n t b e t w e e n Corporate a n d F u n c t i o n a l SCM Initiatives
The dynamic n a t u r e of today's m a r k e t s a n d competition placesa premium on a
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firm's ability to anticipate and respond swiftly to changing customer needs.
competitive pressures and technologies. Recently, much a t t e n t i o n h a s been given to determining the competitive importance of SCM. The experience of firms in t h e p a s t two decades a n d a n increasing body of literature on SCM effectiveness have shown t h a t when i t is viewed strategically and managed effectively a s a competitive weapon. SCM can have a dramatic effect on firin profitability ( C a r t e r and Narasimhan 1 9 9 6 ) .
In t h e intensely competitive global environment in which firms operate today.
developing a successful supply chain strategy is critical to a firm's long-term competitive success. A firm's supply chain strategy is closely related to i t s operations strategy encompassing decisions pertaining to sourcing. value partitioning.
managing material flows, transformation, distribution. supplier relations management.
a n d logistics.
Supply chain strategy can be viewed a s t h e p a t t e r n of decisions related to sourcing products, capacity planning, conversion and distribution of finished product, demand management, communication, and delivery. Since these a r e key business processes involved in producing a company's product or service. it is important to link supply chain strategy to the overall business strategy. A firm m u s t develop strategic objectives for managing t h e supply chain based on overall corporate objectives. Based on these high level objectives, a s e t of detailed operations objectives can be developed for each process within t h e supply chain (1,ummus e t al. 1 9 9 8 ) . This cascadingstrategy serves to integrate t h e supply chain processes with t h e overall direction of the enterprise and provides measures for monitoring a n d execution. Prior research h a s recognized t h e importance of SCM in formulating corporate level strategies. For example. Reck and Long (1998) proposed a four-stage model to describe purchasing's strategic contribution to corporate competitiveness. Freeman and Cavinato ( 1 9 9 0 ) also proposed their own four-stage model for fitting SCM into t h e strategic objectives of t h e firm:
financial planning, forecast-based planning, externally oriented planning, and strategic management. Although these conceptual works failed to bring out t h e
role of SCM in specific t e r m s , they were useful in linking SCM with t h e firm's strategic process. The discrete planning stages t h a t t h e s e articles have suggested a r e relevant to t h e development of strategic SCM.
Recently, there h a s been a gradual shift in t h e role of SCM from a tactical to strategic role. The emerging strategic role of SCM necessitates thinking in terms of t h e potential strategic implications of SCM decisions and practices, and interacting with other functional a r e a s routinely t o develop coherent and integrated strategies. In order t o vindicate t h i s move from a tactical to a strategic role. SCM m u s t shift i t s focus from transactional efficiency to strategic effectiveness. To be effective, it must reflect a better understanding of the relationships among SCM practices, supply chain strategies and corporate objectives (Narasimhan and Carter 1 9 9 8 ) .
In spite of these recent developments, viewing SCM strategy a s a functional strategy continues t o be a valid a n d relevant perspective. SCM strategy could be viewed, albeit in a narrow perspective, a s t h e p a t t e r n of decisions related to acquisition of required materials and services t o support t h e operational activities of a firm consistent with t h e overall corporate competitive strategy. Thus SCM strategy could be viewed a s p a r t of a hierarchical chain of strategies ranging from corporate strategy to business u n i t strategy, and t o functional level strategies. In t h i s perspective, functional level strategies and capabilities, including SCM strategy should be consistent and aligned with corporate level strategy. Robeson and Copacino (1994) recognized these arguments. In addressing t h e strategic meaning of SCM strategy t h e y s t a t e d : "Effective corporate strategy requires dynamic balance from very specific functional items to large-scale issues. Because SCM is related to all of major functions within a firm, t h e maintenance of such balance i s more significant." These arguments imply t h a t t h e dual roles of SCM strategy a s corporate and functional strategies m u s t be appropriately recognized by firms t o achieve sustainable supply chain competitiveness. Varadarajan and J a y a c h a n d r a n (1999) also emphasized t h a t corporate strategy and functional strategy should interact to form t h e competitive advantage of individual
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businesses in a firm's portfolio, and decide t h e extentto which a particular business can acquire and sustain a competitive advantage.
Strategic management literature h a s long stressed the importance of linkage- between corporate level and functional level strategies for corporate performance.
Research h a s shown t h a t firms operating in t h e same market segment following similar strategies could have dramatically different levels of performance (Cool and Schendel 1988: Lawless e t al. 1989: Klassen and McLaughlin 1 9 9 6 ) . which could be explained by differences in functional level capabilities and strategies. In other words, significant differences in capabilities and resource allocations could exist across individual companies pursuing t h e same strategies, and such differences might have a critical effect on corporate performance (Narasimhan e t a l . 2001). Succinctly s t a t e d . "poor" consistency between corporate level and functional level strategies might lead t o inferior corporate performance, and
"good" consistency might lead to superior corporate performance (Narasimhan and Carter 1 9 9 8 ) .
Recognizing t h e importance of such consistency in overall corporate performance.
most progressive firms have s t a r t e d t o pay close attention to t h e effect of functional level supply chain capabilities on corporate performance and have attempted to reflect t h i s effect while formulating corporate level supply chain strategy. T h e dynamic nature of today's market environment makes t h i s t a s k difficult. If corporate level strategy does not reflect t h e dynamic market environment well, or t h e functional strategies do not support corporate level strategy, supply chain strategy is less likely t o succeed. Accordingly, functional level supply chain strategy must be internally consistent with other functional and corporate strategies and externally with suppliers' capabilities. In t h e process of formulating functional level supply chain strategy, a firm must first assess t h e internal and external factors t h a t contribute to or limit i t s potential for competitive success. These assessments relating t o internal and external factors provide t h e basic information needed to develop i t s supply chain strategy and future developmental efforts or programs.
This review of t h e literature suggests t h a t preferredset of supply chain strategies can be derived by appropriately linking corporate level initiatives and functional level initiatives encompassing internal operating factors and inter- organizational factors related to supplier and customer relationships. I t is hypothesized t h a t t h i s linkage h a s a crucial impact on corporate performance.
The discussion t h u s far leads u s to posit t h e conceptual framework shown in (Figure 1 ) . I t recognizes t h e d u a l roles of SCM strategy. These a r e distinguished i n t h e research framework by t h e labels corporate level SCM and functional level SCM strategies. It is hypothesized t h a t higher consistency a n d alignment between functional and corporate level SCM strategies will lead to higher levels of performance t h a n when t h e consistency is either lower or a b s e n t .
(Figure 1) Conceptual Framework
2. T h e Kinds of SCM Initiatives
Despite t h e popularity of SCM, there exists no practical. explicit, widely accepted description of SCM or its activities. Conceptually. SCM includes all value-adding activities from t h e extraction of raw materials through t h e transformation processes and through delivery to the end user. The SCM philosophy expands t h e internally focused integrating activities of logistics by bringing multiple organizations along t h e supply chain together with t h e common goals of efficiency and end-customer satisfaction (Harwick 1 9 9 7 ) . Thus. SCM integrates a number of key functions, including purchasing, demand management, distribution planning, quality management, manufacturing planning, and materials management.
throughout t h e supply chain. Terms such a s integrated purchasing s t r a t e g y . integrated logistics, supplier integration, value chain management, supply base management, strategic supplier alliances, lean production. Just-In-Time logistics.
and supply chain synchronization have been used in t h e literature to a d d r e s s certain elements or stages of t h i s new management philosophy ( T a n e t al. 1 9 9 8 La Londe a n d Masters 1 9 9 4 ) .
While t h e long-term strategic goal of SCM is to increase customer satisfaction, m a r k e t s h a r e , a n d profits for all members of the virtual organization, t h e short-term objective is to increase productivity and reduce inventory a n d cycle time ( T a n e t a l . . 1 9 9 8 ) . This narrower definition of SCM objectiveinvolves t h e integration of t h e various functional a r e a s within a n organization to enhance t h e flow of goods from immediate strategic suppliers through the manufacturing a n d distribution chain to t h e end users (Houlihan 1987. 1 9 8 8 ) . Specifically, many manufacturers and merchants have embraced the concept of supply chain management t o improve product development, quality and delivery goals, a n d to eliminate waste. I t h a s enabled firms to exploit supplier strengths and technologies t o support new product development efforts (Morgan a n d Monczka.
1995). a n d seamlessly integrate logistics functions with transportation p a r t n e r s to deliver directly t o t h e point of use. T h a t i s , emphasizing internal competencies requires greater reliance on external suppliers t o support non-core requirements.
particularly in design and engineering support (Prahalad and Hamel 1 9 9 0 ) . The literature indicates t h a t buying firms a r e developing cooperative, mutually beneficial relationships with suppliers and viewing suppliers a s virtual extensions of their firm (Mason 1996: Copacino 1 9 9 6 ) . Superior supplier capability can lead to exceptional quality or rapid integration of t h e latest technological breakthroughs into t h e buying firm's own products through early supplier involvement (Ragatz e t al. 1 9 9 7 ) . Suppliers may also participate earlier in t h e product design process t o render more cost-effective design choices, develop alternative conceptual solutions, select t h e best components and technologies, and help in design assessment (Monczka e t a l . 1994: Burt and Soukup 1 9 8 5 ) .
T h e transportation and logistics functions of t h e retailing industry focus on customer relations which is a different aspect of supply chain management, t h a t is, one of location and logistics issues more often t h a n product transformation. I t s origin can be traced t o a n effort for better managing t h e transportation and logistics functions (Fisher. 1997 : Lamb, 1995: Whiteoak. 1994: T u r n e r , 1 9 9 3 : MacDonald. 1 9 9 1 ) . The goal of t h e transportation perspective of SCM i s t o replace inventory with information t o provide visibility, so t h a t raw materials and finished goods can be replenished quickly a n d arrive a t t h e points of use in smaller lot sizes, especially in a just-in-time system (Handfield, 1994). Therefore.
s h o r t and reliable order cycles, and t h e ability to fill entire orders a r e critical customer service elements. Also, t h e geographical spreads of channel members and cost s t r u c t u r e s become important d e t e r m i n a n t s of t h e structure of logistical support (Fernie 1 9 9 5 : Taylor and Probert 1 9 9 3 ) . (Figure 2) is research model for analyzing t h e association between t h e s e t of six corporate SCM initiatives and nine supply chain functional initiatives described above.
laBrn%%l[lt
(Figure 2) Research Model
Corporate Suoolv Chain Manaeement Initiatives
Supply C h i n Information Jwt.ln.Timc Customer Gmgnphiul
lnlgntion Shving (CJIT, Rclaionrhip Rclntionrhip Pmximily
(SCO (1s) (SR) (CR) (GP)
*
-
Firm's Performance
Financial Paformmcc (Fin) Curtoma Sairfaclion (Cur) Mldra Pnformmcs (Mkt)
v
-
Suoplv Chain Functional Initiatives
Emphasis StrcngUl Customer custom^
on Curloms S,,pplia
/
Produst Desigd Just-In W i l y I Customo Snvicc oncntcd(FX) Objectives Linkage DCYC1opmmt -Time Conlml
i
Onmution Satisfaction Logistics(ECO) , (SL)
j
(PD) (FJIT) (QC):
(CSS) (COL,SuoolvlMsterials M.n.cmmrat l r r u n I Inlcrval Omrsllons Issuet ~ u r t o m r r r Rcl.ted 1ss.n
Ill. Identifying a Typology of
S C M
StrategiesThe first theoretical dimension underlying t h e six SCM strategy typologies is a form of supply chain integration related to inter-organizational.collaborative integration. This includes strategic alliances, a n d collaborative integration, close a n d interactive long-term relationships with a firm's external suppliers. This can be supported theoretically from previous studies (Ohmae 1 9 8 9 : Bowersox 1 9 9 0 ; Gronroos 1990: Treacy a n d Wiersema 1 9 9 5 : Morash and Clinton 1 9 9 8 ) , which show general agreement t h a t a t a fundamental level, supply chain integration begins when the external relationship with suppliers becomes important. T h a t i s , within t h e firm's network, t h e relationship is "core", r a t h e r t h a n "peripheral", in either t h e firm's i n p u t or o u t p u t sector (Anderson e t a1.1994). For example. in t h e co-development of new products, suppliers a r e a n essential p a r t of t h e development team a n d a r e "cor; in t h e firm's i n p u t sector. T h u s , supply chain integration can be conceptualized a s connoting a progressive involvement between a firm a n d suppliers in a relationship t h a t implies combined resources, expanded
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joint capabilities, and enhanced competitive positions for t h e firms involved (Johnson 1 9 9 9 ) .
Treacy and Wiersema (1995) noted t h a t such linkage of supply chain integration and supplier relationship is especially important to support corporate strategies related t o differentiation. Supply chain management literature points t o examples of special value-added services for downstream customers or logistical agility.
where service offerings a r e continuously tailored to unique and changing key customer requirements through efficient supply chain integration a n d productive supplier relationships (Novack e t a l . 1 9 9 5 ) . Stanley and Wisner ( 2 0 0 1 ) argue t h a t a s product requirements a n d quality expectations increase over time with intensification of competition, integration of t h e firm's internal and external supply chains h a s an importantrole a s a key determinant in t h e successful transformation of incoming materials to final products and services. Such integration requires strengthening relationships with the firm's external suppliers.
improving communication, and creating heightened awareness of service and product quality. Stevens (1989) in a study of integration stages of SCM emphasized t h a t external integration with suppliers was essential for on-time delivery of high quality products shipped directly to t h e point of use. In a field s t u d y of managers in t h e United Kingdom. Armistead a n d Mapes (1993) found t h a t increasing t h e level of integration along t h e supply chain improved quality a n d operating performance, thus supporting the argument of Stevens (1989). A study by Narasimhan and J a y a r a m ( 1 9 9 8 ) also supports this a r g u m e n t . These arguments emphasize t h a t supply chain integration coupled with stable supplier relationshipsmay be highly related to enhanced differentiation capability through improvement of flexibility and customer service. An interesting point is t h a t geographic proximity is included a s a corporate initiative. This suggests t h a t strategic location decisions emphasizingthe geographic proximity of t h e suppliers a n d buyers may increase t h e effect of combining supply chain integration/supplier relationship a n d flexibility/quality control/customer related initiatives. The pursuit of geographic proximity t o suppliers and customers c a n be related to t h e order penetration
point of t h e supply chain. The order penetration point is t h e s t a r t i n g point of physical response to orders from customers, atwhich push by demand forecast and pull by customer order come together. In the case of customized/differentiation focused product. t h e level of product variety is high ( P o r t e r 1 9 8 0 : Miller 1 9 8 7 ) . and demand is unstable (Miller 1 9 8 8 ) . Also, the level of support and cooperation among supply chain members for dealing effectively with demand uncertainty is relatively high ( L a s s a r a n d Kerr 19961, because it is expected t h a t hierarchical governance s t r u c t u r e by strategic partnership between buyer and supplier and behavior-based contract among supply chain members will prevail (Eisenhardt 1989 Lassar a n d Kerr 1 9 9 6 ) . According to these characteristics, firms with customized/differentiation-focused product would t r y to obtain information on final demand more quickly t h a n firms offering standardized products with a focus on cost leadership. T h u s , t h e likelihood t h a t t h e order penetration point is established in t h e downstream of supply chain is high. These arguments implythat firms with customized/differentiation focused product emphasizing flexibility, quality, and customer satisfaction, need strong strategic partnership withkey suppliers through high level of supply chain integration, and such need can lead to t h e selection of location close to suppliers a n d customers.
Cooper (1994) discusses t h e relevance of geographical proximity to functional initiatives. He n o t e s t h a t many logistics systems incorporate a distribution center a s t h e point a t which p a r t s a r e sequenced for delivery to t h e assembly line. T h a t i s , while t h e p a r t requirements have to be forecast in t h e first instance, and then shipped in bulk, t h e assembler will want each individual p a r t to arrive on-time a t t h e assembly line when needed. Therefore, a distribution center located near a n assembly line will be given t h e t a s k of putting p a r t s into a sequence dictated by t h e production m a s t e r schedule and delivered accordingly. Increasingly these centers a r e being s e e n a s extensions to t h e production line r a t h e r t h a n simply places where goods a r e kept before they are needed. The above discussion supports t h e contention t h a t geographic proximity would benefit t h e relationship among supply chain integration/supplier relationship a n d flexibility, quality, and
customer related initiatives.
The second theoretical dimension underlying t h e strategy typologies is t h e effect of J I T . T h e interruption of manufacturing processes due to p a r t s and materials shortages induces costs which may be greater t h a n shortage costs commonly used in inventory models. This is typical in J I T manufacturing systems which produce to d e m a n d , and a r e based on low-stock policies and short delays for delivering finished products. In such systems, p a r t s shortages can lead to t h e complete system being idle. Therefore, t h e implementation of J I T manufacturing systems has been intimately related to t h e use of supplier relationships and contracts which can reduce delivery delays (Sulem and Tapiero 1993: Dong e t al. 2 0 0 1 ) . Fawcett and Birou (1993) assert t h a t cooperative purchasing/supplier partnerships a r e a m e a n s to developingJIT purchasing agreements. In a n e r a where time-to-market responsiveness through t h e efficient use of J I T system and supplier relationship is a s t a n d a r d element of competitiveness and productivity, building a local network of suppliers and integrating them with assembly plants a r e critical (Krafcik 1988. Chapman and Carter 1 9 9 0 ) . These studies emphasize t h a t t h e shorter t h e distance among supply chain participants, t h e better is t h e competitive situation, a n d t h u s suppliers need to be close to customers for frequent J I T delivery.
Lummus (1995) and Dion e t al. (1992) have discussed t h e effect of J I T a t t h e functional level. Lummus (1995) argued t h a t rapidly changing environment needs high level of product variety with minimal cost and.flexibility to fulfill various customer demands. J I T provides both dedicated production lines and reduced s e t u p times. Therefore, a company using J I T enjoys greater flexibility and increased ability to provide product variety. Through face-to-face and telephone interviews. Dion e t al. (1992) found t h a t t h e operational changes t h a t resulted from J I T were:increased quality in purchased materials a s well a s t h e finished products, volume flexibility. closer relationships with J I T suppliers, and higher customer service levels. Flexibility, quality control. a n d customer related initiatives a r e pursued with functional level J I T in this typology. Geographic
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proximity is pursued a s a corporate initiative i n this typology. This suggests t h e compatibility of J I T a n d geographical proximity. In other words, a n important factor for successful implementation of J I T systems is t h e close geographic proximity of suppliers a n d customers (Clarke a n d Mia 1 9 9 3 ) .
The third theoretical dimension underlying t h e strategy typologies is supply chain linkage facilitated by electronic exchange of information. Dion e t al. ( 1 9 9 2 ) indicated t h a t increased sharing of sales projection d a t a with J I T suppliers and t h e establishment of electronic d a t a linkage with suppliers is relatively unrelated to J I T implementation. When considering t h e relevance of JIT and geographic proximity mentioned above, this is aninteresting result, suggesting the substitution role of electronic linkage (through the utilization of advanced information systems and techno1ogies)for geographic proximity. T h a t is. electronic linkage with suppliers may change t h e traditional perspectives on t h e necessity of geographic proximity. Internet or Web-based E-commerce adoption can improve the capability of remote monitoring and precise prediction based on demand information.
product variety, a n d market situation. Accordingly, it can be expected t h a t even firms with customized/differentiation-focused product may shift order penetration point closer to manufacturing through t h e utilization of E-commerce. The u s e of electronic linkage makes it possible for manufacturing firms to achieve proper balance between shifting order penetration point upstream for dealing effectively with demand uncertainty a n d t h e maintenance of quick response capability relative to customer d e m a n d s , which Berry e t a l . (1994) have emphasized.
Electronic linkage can reduce t h e significance of physical distances by improving t h e flow of information on goods and services a n d by achieving t h e electronic exchange of various information ranging from product design to contract negotiations through t h e utilization of advanced telecommunications. Computer technology supports globalization by radically changing the economics of communication, so geographic proximity may be even less a requirement for effective collaboration a n d business interaction (Adam e t al. 1997).
The theoretical validity of t h e above typology can be deduced from t h e
triangular.supp1ementary relationship among supply chain i n t e g r a t i o n . J I T , a n d electronic linkage with s u p p l i e r s . S u p p l y chain i n t e g r a t i o n concepts a r e manifest i n n u m e r o u s initiatives for JIT m a n u f a c t u r i n g , continuous r e p l e n i s h m e n t , a n d vendor-managed inventory. T h a t i s , supply chain i n t e g r a t i o n accelerates t h e flow of information a n d p r o d u c t s , acquiring a p p r o p r i a t e information a t t h e point of s a l e a n d t r a n s m i t t i n g it i n s t a n t l y t o manufacturel-s a n d s u p p l i e r s to c r e a t e r e p l e n i s h m e n t o r d e r s ( M a g r e t t a 1 9 9 8 ) . However, a successful supply chain i n t e g r a t i o n s t r a t e g y d e p e n d s mainly on t h e utilization of advanced information s y s t e m s a n d technologies, which c a n lead to global m a r k e t expansion a n d increased control over working c a p i t a l . B a n e d e e a n d Golhar ( 1 9 9 3 ) a s s e r t e d t h a t t h e success of J I T d e p e n d s o n t h e timely a n d effective exchange of information between m a n u f a c t u r e r s a n d t r a d i n g p a r t n e r s , a n d J I T firms benefit more from ED1 t h a n non-JIT f i r m s , t h u s s u p p o r t i n g t h e above a r g u m e n t . O n e of t h e most common information technologies for s u c h supply chain integration is t o establish electronic commerce. including electronic d a t a i n t e r c h a n g e ( E D I ) s y s t e m a n d t h e I n t e r n e t ( W a n g a n d Seidrnann 1 9 9 5 : P r e m k u m a r a n d Ramarnurthy 1 9 9 5 : Lee e t a l . 1 9 9 9 : R a g h u n a t h a n 1 9 9 9 : E a r l 2 0 0 0 : Arora 2 0 0 0 ) . E-commerce c a n i n t e g r a t e diversified b u s i n e s s e s a n d organizations s u p p o r t i n g t r a d i n g benefits t o each supply chain p a r t n e r , a n d m a n u f a c t u r e r s c a n i n t e g r a t e t h e key s u p p l i e r s more tightly i n t o t h e s u p p l y chain t h r o u g h t h e utilization of E-commerce. S u c h i n t e g r a t i o n with s u p p l i e r s t h r o u g h E-commerce h a s g r e a t potential to increase logistics productivity, provide c u s t o m e r s with high level services, a n d further.
accomplish key s t e p s to logistics success. t h u s accelerating inter-organizational integration w i t h c u s t o m e r s ( C h i u 1 9 9 5 : Banerjee a n d S r i r a m 1 9 9 5 ) .
From t h e above description of t h e SCM s t r a t e g y typologies, we c a n recognize t h e following two key issues for t h e development of effective SCM s t r a t e g y : 1 ) t h e concurrent p u r s u i t of efficient supply chain integration a n d productive supplier relationship, a n d 2) t h e p u r s u i t of e i t h e r geographic proximity with s u p p l i e r s a n d c u s t o m e r s or electronic linkage with t h e m t h r o u g h advanced information s y s t e m s a n d technologies. T h e s e two i s s u e s a r e referred to a s "the
key issues" in t h e ensuing discussion.
Two typologies suggest t h e possibility of utilizing different approachesfor the concurrent pursuit of supply chain integration a n d supplier relationship. An approach is t o establish robust customer relationship. On-time delivery directly to customer's points of use and contacting t h e end users periodically to get feedback, are t h e construct variables for customer r e l a t i o n s h i p . P a r t i c u l a r l y . on-time delivery directly to customer's points of use is similar togeographic proximity. This m e a n s t h a t t h e two variables for customer relationship may replace t h e effect of geographic proximity. Another approach is to concentrate efforts on product design and development reflecting various customer demands through formal or informal information sharing with suppliers and customers.
T h a t is, in this typology, firms can place relatively more emphasis on internal operations capabilities such a s product design a n d development and quality control. Efficient supply chain integration or productive supplier relationship is not easy to accomplish. T h a t i s , systematic analysis of dynamic relationships among supply chain partners' capabilities. t h e balance of power with external suppliers and customers, and other environmental factors, should be comprehensively considered. Also, for achieving geographic proximity with suppliers and customers either directly or via electronic linkage through advanced information systems and technologies, considerable investments a n d structural capabilities a r e needed. Viewed in this light, t h e establishment of
SCM
strategy assimilating t h e two key issues cannot be achieved in one move, a n d t h u s there is a need for a more manageable and gradual SCM strategy implementation. Typologies not reflecting properly t h e two key issues described above a s such can be considered gradual approaches. Actually. Bowersox ( 1 9 8 9 ) . Stevens ( 1 9 8 9 ) . Byrne and Markham (1991), a n d Hewitt ( 1 9 9 4 ) have asserted t h a t t h e improvement of each internal function should precede external integration with suppliers and customers.IV. Conclusion and l m ~ l i c a t i o n
The effect of SCM strategy h a s become increasingly evident in t h e p a s t decade.
b u t a robust model linking SCM strategies to competitive priorities h a s yet to be developed. Given t h e number of SCM techniques t h a t have been introduced in recent years, managers need a decision framework to help t h e m implement SCM strategies t h a t a r e consistent with t h e competitive directions of t h e firm t h a t allocate scarce functional resources efficiently.
T h e theoretical basis for t h e derivation of SCM s t r a t e g y typology is t h e strategic use of a firm's SCM capabilities and distinctive competencies for competitive advantage. Such strategic reach of SCM is a n inevitable consequence of c u r r e n t t r e n d s i n manufacturing, purchasing. design a n d development, logistics and marketing: t h e p u s h for high quality and flexibility, high degree of custo- mization, lean manufacturing, focus on customer preferences. and designing processes and systems t h a t enable "quick r e s p o n s e to changing m a r k e t conditions ( N a r a s i m h a n 1997). This m e a n s t h a t t h e strategic use of SCM should be strongly influenced by t h e efficient linkage among various SCM functional capabilities and alignment between corporate level strategy and functional level s t r a t e g y . Although past researchon SCM a n d manufacturing strategy stressed t h a t SCM decisions should be strategic a n d m u s t be aligned with a firm's business strategy.
few empirical studies have a t t e m p t e d to examine the causal linkages among them ( N a r a s i m h a n and J a y a r a m 1998). BY exploring t h e relationship between corporate initiatives and functional initiatives of SCM. t h i s research provides some insight into how SCM strategies can be developed to create competitive advantage. This brings out t h e academic and practical value of t h e SCM s t r a t e g y typologies t h i s paper suggests.
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