Supply Chain Management: Definition, Growth and Approaches

Author(s): Paul D. Larson and Dale S. Rogers

Source: Journal of Marketing Theory and Practice, Vol. 6, No. 4, Supply Chain Management
Sponsored by SYNCRA Software, Inc (Fall, 1998), pp. 1-5
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SUPPLY CHAIN MANAGEMENT:DEFINITION,

GROWTH AND APPROACHES
Paul D. Larson
ofNevada,Reno
University
Dale S. Rogers
ofNevada,Reno
University

WHAT IS SUPPLY CHAIN MANAGEMENT (SCM)?

The Supply-ChainCouncil definesSCM as the "effort
involvedinproducing
anddelivering
a finalproduct
fromthe
to
the
customer's
customer"
1996).
(Kranz
supplier'ssupplier
In Macro-logistics,
Steinand Voehl(1998) defineSCM as:
"The systematic
effort
to provideintegrated
to
management
theSupplyValueChainin ordertomeetcustomer
needsand
expectations,fromsuppliersof raw materialsthrough
and on to end-customers."
Lambert,Stock,
manufacturing
and Ellram(1998) use theterm"supplychain"to represent
offirms.TheydefineSCM as "theintegration
an alignment
ofbusiness
processesfromenduserthrough
originalsuppliers
thatprovidesproducts,
that add
services,and information
valueforcustomers."All thesedefinitions
focuson supply
chainactorsorinstitutions,
suchas suppliers
andcustomers.
Otherdefinitions
emphasizeSCM activities.For instance,
1
that"thesupplychainencompasses
all of
states
Quinn( 997)
thoseactivities
associatedwithmovinggoodsfromtherawmaterialsstagethrough
to theend user." These activities
include: procurement,production scheduling, order
processing, inventory management, transportation,
and customerservice. Quinn also quotes
warehousing,
Professor
LaLonde,who definesSCM as: "The deliveryof
enhanced
customer
andeconomicvaluethrough
synchronized
of theflowof physicalgoodsand associated
management
information
fromsourcingto consumption."

In an earlydefinition,
from1989,Copacino(1997) uses the
termslogisticsand SCM synonymously,
stating:"Logistics
and supplychain managementreferto theartofmanaging
theflowofmaterialsandproducts
fromsourcetouser. More
the
consensus
seems
to
be
thatSCM is morethan
recently,
to
Johnson
and
Wood(1996), "supplylogistics.According
chain managementis somewhatlarger than logistics."
Logisticsessentiallyassumescooperationbetweenbuyers,
suppliersand serviceproviders.SCM considersadditional
behavioraldimensionsbetweenactors,such as conflict,
dependenceand power. Logisticsstrivesto minimizetotal
cost while servingcustomers. SCM is concernedwith
ofserving
customers-and
customers'
customers.
profitability
the
focus
of
is
often
Finally,
logistics
intra-organizational,
whileSCM is inherently
inter-organizational.
Another
Centerfor
definition,
developedbyTheInternational
1
in
Excellence
994
and
used
Competitive
byCooper,Lambert
andPagh(1997), is as follows:supplychainmanagement
is
theintegration
ofbusinessprocessesfromend userthrough
original suppliersthat providesproducts,services and
information
that add value forcustomers. Supplychain
managementis not just anothername for logistics. It
includeselementsthat are not typicallyincluded in a
definition
oflogistics,
suchas information
systems
integration
andcoordination
ofplanningand controlactivities.
the followingsevenbusiness
Cooper,et al (1997) identify
customer
processesofsupplychainmanagement:
relationship
management,customer service management,demand
Special Issue

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order fulfillment,
flow
management,
manufacturing
andproduct
and
management,
procurement,
development
commercialization.
Someoftheseprocesses
arenotamong
thetraditional
activities.
Mostcontain
activities
that
logistics
firms
consider
tobe partofthemarketing
effort.
generally
For example, new product development and
commercialization
areoutside
thatmanagement
domainof
executives.
closecoordination
between
However,
logistics
chainmanagers
andproduct
is critical
to
supply
developers
roll-out
ofnewproducts.
thesuccessful

over550,000citations
withabstracts
Thedatabase
contains
canbetakenas the
articles.
topublished
Thus,SCM growth
in ABI/
on "SCM," year-by-year,
numberof citations
ofSCM from1980to
INFORM.Table1 showsthegrowth
SCM articlein an ABI/INFORM
1997. Notethatthefirst
in
1985.
ofarticles
By1997,thenumber
appeared
periodical
roseto 147.

The term"SCM" has beencriticized.Tompkins

and
that
chain
isa
(1997)
Jernigan
argues "supply management"
and shouldbe replacedwith"demandflow
misnomer,
threeproblems
withSCM-the
leadership."He specifies
words"supply,"
"chain"and "management."
"Supply"
while"demand"
a pull
denotes
impliesa pushphilosophy,
to
customer
for
better
service
and
flow,
approach product
lowerinventory
levels. The wordalso underscores
the
derived
nature
ofdemand
forlogistics
services.
Furthermore,
theword"chain"(whichimplies
a focus
links
onindividual
orplayers
inthechain)shouldbereplaced
"flow."
The
by
latter
wordis saidtoindicate
continuous
movement
andan
integrated
approachto end usersatisfaction.Finally,
is preferred
than"management,"
rather
as it
"leadership"
and
a
to
teamwork,
implies
cooperation dynamic
approach
the
of
DFL
and
SCM
are
harnessing energy change.Perhaps
likeheadsandtails,respectively,
ofthesamecoin.

Table 1
SCM Articles
1980-1997
Published,
Year
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997

Number
0
0
0
0
0
2
0
2
5
4
4
8
9
24
42
73
121
147

Sherman
between
the"demand
chain,"
(1998)differentiates
which
creates
and
the
which
fulfills
demand,
chain,"
"supply
it. He defines
SCM as a "dynamic
of
the
process managing
flowofmaterial
andinformation
acrossdistributed
business Source:www.silverplatter.com.
ABI/INFORM
searched
for
the
of
to
and
for
Chain
processes
purpose profitably
responding
year "Supply
bypublication
Management."
market
demand."
satisfying
A blendoftheseideasyields
thefollowing
definition:
supply
chainmanagement
ofactivities, In 1997,SCM sawseveralsignificant
events.TheSupply(SCM) isthecoordination
withinand betweenvertically
linkedfirms,for the ChainCouncilwas incorporated
as a not-for-profit
trade
ofserving
endcustomers
at a profit
association
Twonewjournals,
purpose
(seewww.supply-chain.org).
ChainManagement:
AnInternational
Journal
andthe
Supply
SCM Growth
Review,published
SupplyChainManagement
inaugural
issues. Two otheracademicjournals,Interfaces
and the
LaLonde(1998)observes
SCM growth
numbers
of Journal
andPractice,
through
Theory
ofMarketing
putoutspecial
sessionsat theannualCouncilofLogistics
theJournal
Management issuecallsforpapers.Morerecently,
ofRetailing
with
Chain"inthetitle.During
the issueda call forpaperson"Creating
andDelivering
Value
(CLM)meetings
"Supply
lastthreeyears,1995-97,thesenumbers
rosefrom13.8 through
Supply-Chain
Management."
to22.4percent
oftotaltrack
sessions.
percent
somemaje*
universities
havechanged
thenames
Moreover,
Another
indicator
ofSCMgrowth
isthenumber
ofarticles
on oftheir
from
orpurchasing
programs
logistics
management
the subjectpublishedin businessand management management
to "supplychainmanagement."In 1997,
databasesis Michigan
StateUniversity
consolidated
theirMarketing
and
periodicals. Amongthe "SilverPlatter"
ABI/INFORM.Beginning
in 1971,ABI/INFORM
covers LogisticsAdministration
withmanyof their
department
andmanagement
andPurchasing
1,000business
intoa newdepartment
approximately
periodicals. Operations
professors
2

Journal
THEORYANDPRACTICE
ofMarketing

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and SupplyChainManagement.In 1998,

calledMarketing
Arizona State Universityestablished a Supply Chain
operations
purchasing,
bymerging
department
Management
and logisticsfaculty,
alongwitha fewothers.
APPROACHES TO SCM
commonapproachesto
Based on theirunderlying
methods,
SCM canbe organizedintothreecategories:technological,
relationaland analytical. Technologicalapproachesare
whilerelational
drivenbyadvancesin computer
technology,
andbetween
within
startbychangingrelationships
programs
driven
are
firms. Analyticalprograms
by tools and
andthe
tostudy
customers,
suppliers,
competitors,
procedures
firmitself.

ofoutsourcing
Severalbenefits
logistics
respectively.)
party,
are discussedin theliterature.It is thoughtthat
functions
lowercosts,
can offer
thirdpartyproviders
greaterexpertise,
and
toshippers
service
andimproved
(Maltz 1994; Daugherty
Droge 1997). Thirdpartyprovidersare also believedto
inthesupplychain(TroyerandCooper
facilitate
cooperation
1995).

data
toSCM are:electronic
Severaltechnological
approaches
web
wide
world
a.k.a.
the
Intarnet,
(EDI),
interchange
be
To
resource
and
(ERP).
planning
enterprise
(WWW),
information
access
a
Internet
the
public
provides
precise,
whiletheWWW is a commercialvenuefor
infrastructure,
acrossthe Internet.Crumand
publicationof information
Allen (1990) defineEDI as "the computer-to-computer
exchangeof businessdocumentssuch as bills of lading,
and
invoices,and purchaseorders." Nearly 44 percentof
Analyticalapproachesto SCM includebenchmarking
to theirsurveyindicateduse of EDI. A more
respondents
costing(ABC). Accordingto Cooke (1996),
activity-based
recent
tomeasuretheir
a toolformanagers
survey,of Canadian logisticians,found146/209or
benchmarking
"provides
EDI
firmsto be implementing
69.9
distribution
percentof responding
againstthoseofcompaniesthatstand
operations
there
is
s
EDI'
in
increasing
growth,
out fromthe crowd for theirmasteryof supply-chain (Larson, press).Despite
circlesthattheInternet
inlogistics
to
maybe a more
speculation
(64.8%) ofrespondents
Nearlytwo-thirds
management."
wereinvolved flexible,less expensivealternative
(Harler 1996). Growing
serviceenthusiasts
ofcustomer
a recentsurvey
useoftheExtendedMarkupLanguage(XML) ontheInternet
withbenchmarking
(Rogers,Daughertyand Stank 1995).
ofcontext
found85/159 maymakeEDI obsolete,dueto XML's flexibility
control
ofquality
Another
professionals,
survey,
formats.
transaction
EDI
strict
versus
or 53.5 percentof respondingfirmsto have implemented
(LarsonandSinha1995). Williamsbenchmarking
programs
and WWW overEDI is
The keyadvantageofthe Internet
Walton(1996) notesthatlogisticsorganizations
usingABC
to resolve SCM
intervention
human
of
their
inthelogisticsprocess,and
enabling
performed
"analyzetheactivities
of
Traditional
contentions.
these activities."
applications SCM technology
thendeterminethe costs of performing
different
account
into
taken
not
have
andlogisticspeoplefound
perspectivesand
oftransportation
Williams'survey
in
the
on
actors9
based
areas:transportation, knowledge
supplychain. For
positions
useofABC inthefollowing
significant
to
has
retailer
a
instance,
proximity andknowledgeof
greater
andpurchasing.
warehousing
in
local marketconditions, terms of consumers and
Thesedifferent
as comparedto a manufacturer.
orthird- competitors,
and outsourcing
Carrierreduction,
singlesourcing,
in demand
differences
chain
in
imply
positions thesupply
partylogistics(3PL) are relationalapproachesto SCM.
Demand
and
results.
planning
is a performance
Carrierreduction
planning assumptions
programin
improvement
volumeamong differences
movement
among the actorsleads to a supplychain not
whicha shipperspreadsitsfreight
build-upsofexcessinventory.
fewer transportation
synchronized-and
providers. A recent survey of
found64.6 percent(135/209)to be involvedin
logisticians
thenext
resource
Sales ofenterprise
hired(Larson,inpress). The
planning(ERP) systems,
ofcarriers
the
reducing number
billion
to
reach
are
$20
by
stageinMRPII evolution, expected
ultimateend of a carrieror supplierreductionprogramis
and
MRPII
finance
adds
2001
the
to
one
1997).
down
the
base
(Friscia
year
provider.
singlesourcing-narrowing
tothebasicmaterialsrequirements
considerations
Single sourcingimplies multiplesuppliersor service marketing
controlsystems
and inventory
areavailable,butthebuyerselectsandis usingonly planning(MRP) production
providers
Kodak
Co. selected
Eastman
(Johnsonand Wood 1996).
one supplier.
a
"to
software
ERP
SAP's R/3
present single face to the
business
one
set
of
create
and
processes,regardless
"contractlogistics,"and "third customer
The terms"outsourcing,"
to ultimately
Kodak
With
location."
of
ERP,
in
the
integrate
plans
are
logistics
synonymous
essentially
logistics"
party
lexicon. At a minimum,theyare oftenused together. the followingbusiness processes: order-to-cash,final
humanresources,process
ona contractual
outsource
basis, assembly,finance,procurement,
logisticsfunctions,
Shippers
andservicemanagement
manufacturing,
qualitymanagement
fromthirdparties. (Logisticsinvolvesthemovementand
ofinformation. (Stevens1997).
storageofgoods,as wellas themanagement
The sellerandbuyerofthosegoodsarethefirstand second
SpecialIssue

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Sherman(1997)
WhileERP integrates
manyactivities,
it fallsshortas a toolforSCM. He arguesthat
suggests
and
ERP focuses
financial
traditional
onlyon supporting
andhasjust
fulfillment
manufacturing/demand
processes,
intologistics
processsupport.Further,
recently
expanded
ERPfailstosupport
demand
creation
traditional
processes,
suchas researchand development,
research,
marketing
andsales. Therecent
ofnewfirms
proliferation
marketing
ofa
automation
theemergence
salesforce
suggests
offering
market.
ERPsystems
mustsupport
new"bestofbreed"
key
chainbasedonposition
inthesupply
business
requirements
etc.
service,
manufacturing,
e.g.retail,
WELCOME TO THE SPECIAL ISSUE
for possible
were submitted
Twenty-two
manuscripts
in the SCM specialissueof theJournalof
publication
andPractice.
Theory
Marketing
Eightoftheseappearbelow,
rateof36.4percent.Theissueincludes
foran acceptance
articlesand one
fourrelational
fouranalytical
articles,
twooftheanalytical
article.
However,
(invited)
technological
interms
useor
totechnology
ofsoftware
papersarelinked
development.

ofanother
modeltheimpact
VokurkaandLummus
typeof
the
chainperformance.
salestoolonsupply
Usingpromotion,
Sales
demand.
erratic
stimulates
department
marketing
anunstable
sales
chaincosts-ofservicing
butsupply
increase,
chaintotalcosts
rate-alsorise.Themodeldevelops
supply
dueto
income
as wellas incremental
ofmarketing
decisions,
tolookbeyond
direct
Itis important
promotion
promotion.
thesuccessofa campaign.Inthefourth
coststodetermine
and final analyticalarticle,Ronald Tibben-Lembke
discussesreverselogisticsin termsof thetotalcostof
onthe
focuses
SCMtypically
(TCO) framework.
ownership
toconsumer.
flowofgoods,from
forward
However,
producer
some-times
way,e.g.thecaseofproducts
things
gothewrong
Aneffective
reverse
returned
system
logistics
byconsumers.
chainmorecompetitive.
canreduce
TCO,andmakea supply
"how
therelational
articles
Joshileadsoff
Ashwin
byasking:
resist
manufacturers
andwhy
dorelatively
supplier
dependent
revealthatmanufacturers
results
research
power?"Survey
arelow,butdonotresist
when
norms
whenrelational
resist
SCM
normsare high. The mostinteresting
relational
SCM
centers
oninterdependence.
thiswork
from
implication
betweenfirms.
levelsof interdependence
impliesgreater
a power
is
if
this
However,
asymmetrical,
interdependence
destabilize
the
chain.
riseswhich
imbalance
may
supply

"Collaborative
Inthelead-off
article,
Planning,
Forecasting
thedyad,inapplying
LiuandCostellolookbeyond
ofEfficient Phillips,
thePromise
& Replenishment
(CPFR):Realizing
'"BalanceTheory"to a supplychain triad
Heider's
Collaborative
ConsumerResponse
Technology,"
through
dealer,andconsumer).Usinga laboratory
hownewtechnologies
enable (manufacturer,
Rich Shermandescribes
within
these
study
loyalty
relationships
experiment, authors
between the
chainmanagers
tostrengthen
relationships
supply
with
that
manufacturer
satisfaction
triad.Results
suggest
Itisthelinkages
firms
thataremost thedealercan be enhanced bothdealerandconsumer
between
organizations.
by
ofthesupply
chain.CPFRappears loyalty
theweakest
often
portion
havean
tothemanufacturer.
Thus,manufacturers
of Efficient incentive
to be a way to trulyrealizethe potential
consumer
to workwithdealersin developing
Consumer
oflooking
theSCM concept
Thisreinforces
Response(ECR) thatmanyconsumer
product loyalty.
beyond
wereso excitedaboutin theearlyand mid 1990s. thecustomer,
firms
customer.
tothecustomer's
wasinvited
Rich'sarticle
bytheeditors.
Mail
iswritten
article
relational
A third
byBertKeilerman.
start
withAmyZeng'soptimization surveyresultsshow that U. S. intra-state
Theanalytical
articles
trucking
in meeting
motorcarrier
increases
two important
SCM decisions: deregulation
flexibility
model,whichintegrates
oftransportation
service
needs. Greater
flexibility
number
ofsources
andlotsize. A nonlinear
programmingshipper
is
SCM.
can
facilitate
Thus,
deregulation
transportation
oily
is
to
minimize
to
total
costs,subject
algorithm developed
results
alsosuggest
that
inSCM. Thesurvey
a
silent
partner
constraints
and
meetingbudget
quality
product/service
ontransit
time
tendtohavea negative
impact
and rurallocations
standards.Biggs,Li and Rogersuse simulation
on-time
and
delivery.
theimpact
on
ofback-orders
designto study
experimental
in a material
SCM performance,
planning A finalrelational
requirements
lodesat
article,
byMorashand Clinton,
Backorders
occurwhenstockis not SCM in an international
(MRP)environment.
context.Different
nations(and
available,and ordersare placedagainstfuture
capacity.
onSCM. This
seendrawn
todifferent
perspectives
Whilemarketing
as a sales tool, cultures)
mayuse backorders
studyis partof theongoingGlobal SupplyChainBest
themas a scheduling
recognizes
challenge.The PracticesResearchbeingconducted
production
at MichiganState
demonstrates
theimpact
ofbackorders
into University.
article
interjected
schedule
themaster
(MPS)tooearly-lowersales
production
andhigher
costs.Thus,marketing
andproduction
must
work So, welcome
tothespecialissue! We hopethefollowing
to
serve
downstream
customers.
andfurther
willstimulate
research
inthe
discussion
articles
together
chain
of
area
management.
exciting
supply

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AUTHOR BIOGRAPHY
Paul D. Larson(Ph.D.,University
ofOklahoma)teacheslogistics,
andsupplychainmanagement
attheUniversity
purchasing,
ofNevada,Reno.From1990-%,hetaughtmarketing
andretailing
attheUniversity
ofAlberta.Dr. Larsonhas publishedover
25 articlesintheleadinglogistics/marketing
researchinterests
include:supplier/carrier
and
certification
journals.His current
communication
in
and
chain
reduction,
third-party
logisticsservices,
technology buyer/supplier
relationships,
supply
methods.
performance
improvement

AUTHOR BIOGRAPHY
Dale S. Rogers(Ph.D., MichiganStateUniversity)
is theDirectoroftheCenterforLogisticsManagementand an Associate
Professor
ofMarketing
ofNevada. Priorto entering
and Logisticsat theUniversity
thedoctoralprogram,
Dale workedas a
Director
and
Director
of
for
a
and
software
He
has
also
been
Project
Marketing
logisticsconsulting
company.
employedin
materialsmanagement
and manufacturing
at theHarrisCorporation,
and as an instructor
withtheOldsmobileDivisionof
ofGoingBackwards:ReverseLogistics
GeneralMotors.Dale has publishedin severallogistics
journalsand is theco-author
TrendsandPracticesandtwopreviousbookson logistics.
SpecialIssue

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