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The rhetoric and reality of The rhetoric and

reality of supply
supply chain integration chain integration
Stanley E. Fawcett
Department of Management, Marriott School of Management, 339
Brigham Young University, Provo, Utah, USA
Gregory M. Magnan Received September 2001
Revised April 2002
Albers School of Management, Seattle University, Seattle,
Washington, USA
Keywords Supply chain management, Materials management, Industry
Abstract The terminology ``supply chain management'' is used frequently in today's materials
management environment and is generally associated with advanced information technologies,
rapid and responsive logistics service, effective supplier management, and increasingly with
customer relationship management. Most materials managers are familiar with the supply chain
mantra of ``suppliers' supplier to customers' customer''. However, experience shows that few
companies are actually engaged in such extensive supply chain integration. To obtain an accurate
view of SCM as it is currently practiced, the experience and insight of industry managers engaged
in supply chain initiatives was sought via a multi-method empirical approach involving both
surveys and case study interviews. The findings reveal that supply chain practice seldom
resembles the theoretical ideal. Three different levels of SCM implementation are identified and a
series of limiting factors are discussed. Managers must recognize the tension that exists between
SCM's competitive potential and the inherent difficulty of collaboration.

Introduction
Companies have relentlessly restructured and reengineered to increase
organizational effectiveness and satisfy key customers. In the midst of this
pursuit of excellence, managers have realized that their companies often lack
the resources and competencies needed to achieve competitive success (Fine,
1998; Tyndall, 1998). This realization has led them to look beyond their
companies' organizational boundaries to evaluate how the resources of
suppliers and customers can be used to create exceptional value (Bartholomew,
1999; Blackwell, 1997; Christopher, 1999; Dell, 1999; Nelson, 1998). Efforts to
align objectives and integrate resources across company boundaries to deliver
greater value are known as supply chain management (SCM) initiatives
(Ballou, 2000; Lambert, 1998; Poirier, 1999).
In theory, SCM allows a company to focus on doing exceptionally well a few
things for which it has unique skills and advantages. Non-core activities are
outsourced to channel members that possess superior capabilities in those
areas (Cox, 1999; Laseter, 1998; Quinn, 2000; Rich, 1997; Sheridan, 1999).
Appropriate relationships are formed to assure outstanding performance
levels. ``Teams'' of suppliers, finished goods producers, service providers, and International Journal of Physical
Distribution & Logistics
Management,
Vol. 32 No. 5, 2002, pp. 339-361.
The authors would like to acknowledge and thank the Center for Advanced Purchasing Studies # MCB UP Limited, 0960-0035
for its financial support of this research. DOI 10.1108/09600030210436222
IJPDLM retailers are formed to create and deliver the very best product/service
32,5 offerings possible (see Figure 1). Theoretically, these allied teams of companies
form an integrated supply chain, which competes against other supply chains
in today's global economy (Henkoff, 1994).
The terminology ``supply chain management'' is used frequently in today's
materials management environment, appearing in the trade press,
340 commercials, and brochures for leading professional programs. SCM is
generally associated with advanced information technologies, rapid and
responsive logistics service, effective supplier management, and increasingly
with customer relationship management. Most materials managers are familiar
with the SCM concept and view it as synonymous with collaboration. They
often quote the supply chain mantra of ``suppliers' supplier to customers'
customer'' as their definition of SCM (Elliff, 1996). However, experience shows
that few companies are actually engaged in such extensive supply chain
integration (Akkermans, 1999; Harps, 2000; Kilpatrick, 2000; Thomas, 1999;
Whipple, 1999). Indeed, few companies have adopted and disseminated a
formal SCM definition. Even fewer have meticulously mapped out their supply
chains so that they know who their suppliers' suppliers or customers'
customers really are. Thus, a legitimate question arises, ``How do companies
define and approach supply chain integration today?''.

Research methodology
To obtain an accurate view of SCM as it is currently practiced, the experience
and insight of industry managers engaged in supply chain initiatives was
sought. Specifically, an effort was made to answer two core questions:
(1) Do definitions of SCM vary across functional areas?
(2) Do definitions of SCM vary by channel position?
The cross-functional and inter-organizational emphasis stems from the fact
that SCM is supposed to be a boundary-spanning activity (Bowersox, 1999).
Thus, a multi-method empirical approach involving both surveys and case
study interviews was employed. This multi-method approach provided an
opportunity to develop a broad-based understanding of how managers view
SCM implementation in reality.

Cross-functional mail survey

To document how key functional managers view SCM, a mail survey
methodology was adopted and targeted to three different groups of managers:
purchasers, logisticians, and manufacturing managers. Based on the literature
as well as a series of pre-survey interviews, a four-page instrument was
developed. The initial survey was reviewed by several practitioners and
academics who served as an advisory board. Their feedback was used to
modify the survey instrument. A large-scale pre-test was conducted. Three
mailing lists of approximately 1,500 middle and senior level managers were
compiled from the membership rosters of the National Association of
The rhetoric and
reality of supply
chain integration

341

Figure 1.
A simplified supply
chain
IJPDLM Purchasing Management, the Council of Logistics Management, and the
32,5 American Production and Inventory Control Society.
The survey process followed Dillman's (1978) total design method.
Approximately 100 non-respondents from each group were telephoned to
investigate why they had chosen not to participate in the study. Three answers
dominated the responses:
342 (1) the manager was too busy;
(2) the manager is inundated by surveys and no longer participates in
survey studies; and
(3) the manager's organization has yet to adopt a supply chain philosophy.
Non-respondents were also asked to provide basic demographic data so that
respondent and non-respondent profiles could be compared. No differences
were found.
The pre-test results were reviewed, the survey was modified, and completely
new mailing lists were compiled. These mailing lists consisted of only about
500 names. Based on the pilot-study response rate and the reasons for
non-participation, a more labor-intensive and costly pre-notification survey
methodology was employed. That is, each manager was telephoned and asked
to participate. Approximately 20 per cent of the telephone numbers were
inaccurate. The mailing list was adjusted and the survey sent out. The sample
sizes, number of respondents, and response rates are shown in Table I. The
findings from the two mailings were compared and no statistical differences
were found.

Case study interviews

The case study method emphasizes in-depth qualitative analysis and provides
an opportunity to contextualize survey findings. Therefore, it was determined
that interviews would be conducted with leading companies at key stages of
the supply chain. A total of 52 in-depth interviews were conducted. The
breakdown by channel position is as follows:
. 14 retailers;
. 13 finished goods assemblers;

Adjusted sample size Completed surveys Response rate (per cent)

Pre-test
NAPM 1,329 96 7.2
CLM 1,369 129 9.4
APICS 1,351 109 8.1
Pre-notification
Table I. NAPM 370 84 22.7
Survey samples and CLM 398 76 19.1
response rates APICS 328 94 28.7
 . 12 first-tier suppliers; The rhetoric and
. three lower-tier suppliers; and reality of supply
. nine service providers. chain integration
Most of the companies were selected because of their reputations for
progressive supply chain practice. Indeed, many had been presenters of
leading-edge practice at national professional conferences. Interestingly, 343
despite their reputations as supply chain leaders, none of the interview
companies managed in a strategic and systematic way beyond the first tier
backward or forward. The insight gained by combining the surveys with the
interviews yielded a rich and robust view of modern supply chain integration
practice.

The status of SCM: a functional view

The almost ubiquitous presence of the acronym ``SCM'' on the programs of
professional meetings over the past five years would lead the casual observer
to believe:
(1) that SCM is a well-defined concept;
(2) that it represents a widely-accepted strategy; and
(3) that general agreement exists as to what constitutes SCM practice.
A closer look at the current state of integrative efforts, however, suggests that
substantive ambiguity exists regarding actual practice. Not only do managers
from various functional areas define SCM in unique and varied ways, but they
also view the integrative nature of SCM differently.

Fad or critical strategy?

During the initial exploratory discussions, managers expressed doubt
regarding their companies' commitment to greater integration. Several
expressed cynicism that SCM was just the latest fad and that it would
disappear from the front-page of popular management practices. They cited
process reengineering as an example of a ``hot topic'' that had emerged quickly
but had no real staying power. One individual compared SCM to TQM, noting
that they both had come to ``mean everything and nothing at the same time''.
With this background, it was important to find out to what extent materials
managers view SCM as a legitimate strategy that can realistically help their
companies achieve long-term success. Managers were therefore asked whether
SCM is a ``fad'' or a ``critical competitive strategy''.
Nearly 88 per cent of all respondents rated SCM to be an important part of
their business strategy (rating of five or higher on a seven-point scale where
1 = passing fad, 7 = critical strategy). The aggregate average score of 5.70
strongly evidences that materials managers view SCM as an important
contributor to organizational competitiveness. Drilling down into the
functional data reveals some variation in viewpoint. Logistics managers are the
IJPDLM most bullish on the importance of SCM. The average logistics rating was 5.92
32,5 with 93.4 per cent of managers rating it at five, six, or seven. As a boundary-
spanning function, logistics is responsible for achieving higher levels of
inventory and delivery performance in a supply chain world and is well
positioned to sense where industry is headed. The responses from the logistics
managers communicate the pressure logistics managers are feeling to work
344 more closely with other supply chain members to meet emerging performance
expectations.
Purchasing managers tended to be more cautious in their evaluation of SCM.
The mean response of 5.48 with 82.1 percent of purchasers rating SCM at a five
or higher suggests that while purchasing managers perceive SCM as an
important strategy, they are not universally convinced of its importance or
staying power. Nearly 20 per cent of purchasers consider SCM to be ``faddish''.
Several purchasers noted that their companies do not use collaborative supply
chain relationships; rather, they continue to use adversarial buyer/supplier
practices that focus on ``price, price, price''. It seems that some purchasers are
instilled with a ``flavor-of-the-month'' mindset and are waiting for the SCM
``rhetoric'' to subside so they can resume the ``old'' practices of price competition.
These purchasers are either personally comfortable with traditional skills and
philosophies or continue to respond to measures that reward non-collaborative
behavior.
Manufacturing managers were positioned almost exactly at the midpoint
between the purchasers and logisticians (manufacturing average strategy/fad
score = 5.73, with 87 per cent of the production managers rating SCM at a five
or higher). This finding is an artifact of the pressure manufacturers feel to
enhance core competencies and outsource non-critical activities. Overall, SCM
has obtained a fairly high degree of credibility as a viable competitive practice
for today's intensely competitive marketplace.

The nature of supply chain integration

The initial discussions with materials managers revealed that definitions of
supply chain integration vary, ranging from ``cross-functional process
integration within the firm'' to ``complete forward and backward supply chain
integration''. Four primary types of integration are often described as SCM:
(1) Internal, cross-functional process integration was identified as the crux
of supply chain initiatives.
(2) Backward integration with valued first-tier suppliers was identified as
the most common form of supply chain integration. Of course, a natural
extension of this form of integration involved more extended efforts that
involved second-tier suppliers (that is, the suppliers' suppliers).
(3) Forward integration with valued first-tier customers was also identified
as supply chain integration. The early discussions revealed little
tendency toward integration to the customers' customers.
 (4) Complete forward and backward integration was also associated with The rhetoric and
SCM. This notion was expressed as integration from the ``suppliers' reality of supply
supplier to the customers' customer''. Such extended integration was chain integration
perceived as very rare ± more of a theoretical ideal than a reality.
Respondents were thus asked to indicate the extent to which their firms were
engaged in each of the four types of integration (a seven-point scale was used: 345
``1 = not engaged'' to ``7 = totally engaged''). The data in Table II indicate that
organizations are more comfortable with internal integration efforts than with
external, inter-organizational forms of cooperation. About 60 per cent of all
respondents feel their organizations are somewhat to fully engaged in cross-
functional integration within the firm (rating of five or higher). Tremendous
variability in responses is revealed by the moderate mean of 4.67 (ratings
ranged from two to seven). The relatively low scores for within-firm integration
denote the difficulty of knocking down the walls that impede functional
collaboration and may be viewed as a leading indicator for the challenges that
await inter-organization collaboration.
The data indicate that most organizations are at early stages of inter-
company collaboration. Respondents noted that forward integration efforts
(mean = 4.33) are on pace with, or slightly ahead, of backward integration
efforts (mean = 4.26). While individual companies find themselves at different
points along the integration journey, it seems clear that organizations of all
types and materials managers from all three functional areas are seriously
talking about supply chain integration. Complete integration up and down the
supply chain received the lowest rating, with a mean of 3.37 (just 26 per cent
rated it five or higher). Ultimately, much resource-intensive work remains to be
done to realize the full potential of supply chain integration. Single-firm
integration is challenging; tackling issues such as aligning measures, meshing
information systems, and sharing risks and rewards across organizations is
even more difficult. The fissures that exist between marketing and purchasing
assure that breaches will persist between an organization's suppliers and its
customers.
Examining the functional responses reveals that logisticians perceive their
organizations to be more fully engaged in integration efforts. Purchasers are
the most hesitant in acknowledging their firms' efforts to engage in integrative
endeavors. It is interesting to note that the largest gap in perceptions is found
in the area of internal cross-functional integration. The purchasing mean was
4.30 compared to 4.72 for manufacturing and 4.95 for logistics. Purchasing
managers simply do not see the same emphasis on integration taking place
within their organizations. Purchasers may be excluded from some cross-
functional initiatives (or at least they feel that they are). By contrast, the
customer-facing view of logistics ± where company-wide customer satisfaction
initiatives are at the forefront ± may foster an atmosphere more conducive to
integration and collaboration. A final interesting point is that purchasers, the
experts in establishing collaborative supplier relations, provided the lowest
 32,5

346

efforts
Table II.
IJPDLM

Status of integration
Combined Purchasing Manufacturing Logistics
Variable Mean R Per cent 5-7 Mean R Per cent 5-7 Mean R Per cent 5-7 Mean R Per cent 5-7

Internal process integration 4.67 1 60.5 4.30 1 48.1 4.72 1 65.70 4.95 1 66.60
Forward first-tier integration 4.33 2 51.1 4.15 3 49.1 4.33 2 49.40 4.52 2 56.30
Backward first-tier integration 4.26 3 50.9 4.12 2 46.9 4.28 3 50.90 4.35 3 52.50
Complete integration 3.37 4 25.8 3.28 4 25.7 3.27 4 23.90 3.53 4 27.80
Note: How extensively is your firm engaged in the above integration efforts (1 = not engaged, 7 = totally engaged)
mean scores for backward integration. No other group should have a better feel The rhetoric and
for backward integration; yet, purchasers express greater reticence regarding reality of supply
upstream integration. This frustration represents a serious barrier to supply chain integration
chain integration. Moreover, the fact that manufacturers and logisticians
provide more optimistic evaluations of the progress being made in the area of
upstream supplier integration suggests that many managers are at least
somewhat caught up in the rhetoric of supply chain integration. Such 347
differences in functional perspective promise to further impede the integration
journey.

Degree of functional interaction

Coordination among functions is a critical antecedent to effective supply chain
integration; therefore, respondents were asked to indicate the degree to which
cooperation/interaction takes place among personnel in their organizations.
Seven different dyadic relationships involved in the plan-design-source-build-
deliver sequence were examined (see Table III). The general level of function-
to-function interaction is greater than existed in the broader arena of cross-
functional process integration. Four dyadic relationships obtained aggregate
mean interaction scores greater than 4.90. Certainly, part of the increased
interaction stems from the fact that the different dyads must work together on
a day-to-day basis simply to perform their normal responsibilities. This
finding suggests that the foundation is being established to move toward
greater process integration. This implication is vital to increased supply chain
integration since cross-functional and inter-organizational teams are a basic
building block of supply chain initiatives. The ability of cross-functional
teams to navigate through a firm's history and culture, while attacking the
supply chain problems at hand, has a tremendous impact on that firm's
success in satisfying customers. Companies that have difficulty navigating the
``waters of their own harbor'' must spend the majority of their time and
resources on these issues, rather than collaborating with supply chain
partners.
Purchasers participate in the two most cooperative dyads, interacting at
high levels with both manufacturing and logistics. Logisticians and production
managers also participate in two of the top three interactive dyadic
relationships. The relative strength of the most interactive dyads indicates that
despite the challenges, strong intra-organizational relationships are forming.
As firms outsource an increasing proportion of their direct requirements, the
interaction between purchasing and manufacturing will be increasingly critical
to ensuring timely satisfaction of customer orders. The strength of the
perceived levels of integration between logistics and the purchasing and
manufacturing functions is also encouraging. Together, these three functions
have primary responsibility for the entire order fulfillment cycle. Increased
cooperation among them will support the desires of companies to increase
customer satisfaction while simultaneously increasing asset productivity and
reducing operating costs.
 32,5

348

Table III.
IJPDLM

interaction among
functional personnel
Degree of cooperation/
Combined Purchasing Manufacturing Logistics
Variable Mean R Per cent 5-7 Mean R Per cent 5-7 Mean R Per cent 5-7 Mean R Per cent 5-7

Purchasing and manufacturing 5.21 1 70.0 5.57 1 77.3 5.51 1 77.7 4.65 3 57.1
Purchasing and logistics 5.16 2 67.1 5.47 2 72.4 5.23 2 66.0 4.88 1 64.2
Manufacturing and logistics 4.93 3 65.3 4.87 4 64.0 5.09 3 64.1 4.83 2 67.5
Engineering and
manufacturing 4.91 4 64.6 5.07 3 67.8 5.07 4 65.7 4.64 4 60.9
Purchasing and engineering 4.39 5 47.7 4.78 5 60.3 4.53 5 54.9 3.96 6 31.2
Manufacturing and marketing 4.13 6 40.8 4.18 7 40.1 4.07 7 41.7 4.14 5 40.5
Engineering and marketing 4.07 7 38.2 4.25 6 44.8 4.24 6 43.2 3.79 7 28.6
Notes: Indicate the degree of cooperation/interaction among personnel in your business unit (1 = low, 4 = average, 7 = high)
The data also suggest that there is room for improvement. Three of the four The rhetoric and
dyads that are often involved in integrated product development activities reality of supply
received low interaction scores (below 4.5). One of the areas that has long been chain integration
discussed as needing more cooperation, the marketing/manufacturing dyad
received quite low marks, especially from the production managers. Finally,
logisticians consistently perceive the degree of cooperation among the different
dyads to be at much lower levels than their purchasing and manufacturing 349
counterparts. Such differences of opinion denote the need to spend more time in
training, rotation programs, and other efforts designed to help managers better
understand the roles and responsibilities of other functional managers. These
efforts will help managers recognize and take advantage of the opportunities
for cooperation that are currently untapped. An equally important outcome is
that managers develop the personal relationships needed to bridge cultural,
emotional, and organizational boundaries.
To summarize, materials managers view supply chain integration as an
important competitive strategy. However, a substantial minority of managers
continues to believe that SCM is just the latest in a long list of management fads
that will eventually fall out of favor. This minority believes that their
companies either do not value truly cooperative channel relationships or lack
the staying power to build long-term relationships. Materials managers also
sense that there are varying degrees of emphasis on the different types of
integration. Many companies place most of their SCM emphasis on improving
integration within the four walls of the organization. Few materials managers
see comprehensive integration from ``suppliers' suppliers to customers'
customers'' taking place. While logisticians are the most optimistic regarding
integration, purchasers are the most reticent to note that real integration is
taking place.

The status of SCM: a channel view

One of the most interesting interview observations was how quickly managers
resorted to the common trade press definition of SCM. Almost eight of ten
managers automatically defined SCM as, ``managing the flow of materials from
the `suppliers' supplier to the customers' customer'''. When pressed to share
operational definitions, very few mangers were prepared to share a well-
thought-out definition. Most managers described general approaches and
philosophies regarding the need for and value of integration. In fact, only one of
the interview companies interviewed actually had a formal, written definition
of SCM that was visibly posted and communicated throughout the
organization. At the other companies, managers possessed a general feel for the
integrative nature of SCM, but individual definitions were not necessarily
consistent across organizational areas. In one instance, eight managers who
were sitting around the table each shared different definitions of what they
thought SCM really meant within their organization. The truly interesting
point here is that all eight were members of their firm's supply chain
integration team. Afterward, the team leader noted that the interview was the
IJPDLM first time that the group had ever sat down together to look at many of the
32,5 issues discussed. In effect, while SCM philosophies have many adherents,
definitions are fluid and practices have yet to be routinized. Indeed, perceptions
regarding the integrative nature of SCM varied significantly across channel
position as well as from firm to firm, and even within each firm.

350 SCM as a critical strategy

The initial topic of interest was to evaluate the strategic importance of SCM.
The interviewed managers were asked to indicate on a ten-point scale whether
they view supply chain integration as a management fad (1) or a critical
competitive strategy (10). The question was often asked of multiple managers
who were seated in the same room. This approach created an interesting
opportunity to listen to the discussion as the managers came to a consensus.
Three answers were quite common:
(1) ``Its definitely an important strategy, probably a seven or eight, but it
will be a nine or ten within a couple of years.''
(2) ``Without doubt, SCM is one of our most important areas of emphasis ±
it's a nine or a ten.''
(3) ``The answer really depends on who you ask ± we think it's an eight or
nine, but top management probably puts it at a six or seven. The CEO
has yet to be fully convinced.''
Two other responses were heard from time to time:
(1) ``On a scale of one to ten, SCM is an 11. Its clearly the key to our future
success or failure. SCM is what we do.''
(2) ``What do you mean by supply chain management? We really don't use
that terminology here.''
Overall, managers at the interviewed companies were convinced that SCM is
vital to long-term competitiveness; that is, future success depends increasingly
on synergies created via collaborative relationships. At the same time, many
managers expressed concern that some of their best suppliers also supplied
their toughest competitors. Others worried that some of their suppliers in one
area of business were simultaneously competitors in another product area. A
few even noted that they ship product on their customers' private fleets, raising
the question, ``How do you discipline a carrier for late deliveries when the
carrier is an important customer?''. Defining the boundaries and intensity of
specific relationships in a world where multiple relationships exist between the
same two companies is clearly an area of concern for many managers.
Similarly, most companies participate in multiple, distinct supply chains based
on product category or geographic location. Each supply chain can bring with
it a unique set of opportunities and challenges. It should be noted that there
were no discernible differences in opinion regarding the strategic relevance of
SCM based on channel position.
What is SCM in reality? The rhetoric and
Despite the rhetoric surrounding the notion of managing the flow of materials reality of supply
from the ``suppliers' supplier to customers' customer'', based on the interview chain integration
companies, actual SCM practice focuses more on eliminating the silos that exist
within the organization (see Table IV). Almost 60 per cent of the companies
interviewed have as a primary focus the establishment of world-class processes
within their own four walls (some of these companies are also engaged in 351
supply chain initiatives involving either suppliers or customers). Despite all of
the emphasis on transitioning from functions to ``seamless'' value-added
processes, tremendous angst persists regarding the lack of clear and consistent
communication and cooperation among functional areas. Of course, the goal
behind internal process integration at most companies is to extend these
integrated processes up and down the supply chain as appropriate.
Two other views of SCM were also prevalent (see Figure 2). First, some
organizations have housed their SCM initiatives in the purchasing area and
define SCM as the establishment of close and cooperative relationships with the
immediate supply base. Over 95 per cent of the integration effort is focused on
first-tier suppliers. Specifically, the vast majority of this effort targets the very
most important ± ``A'' ± suppliers (typically 2 per cent to 20 per cent of the direct
supply base). Management of value-added activities further upstream is
typically limited to second-tier purchasing agreements, which are employed to
leverage purchasing volume. In fact, the typical statement regarding the
management of second-tier suppliers is, ``We expect our first-tier suppliers to
manage those relationships''. Few companies follow-up to verify that their
first-tier suppliers are proactively managing their own suppliers. Even fewer
provide training and resources to help their suppliers move toward greater
upstream coordination of value-added activities. Thus, responsibility for
upstream relationships is essentially ``handed off'' to the first-tier suppliers.
Second, some companies organize their SCM endeavors around their
logistics and/or customer service activities and emphasize the development of
closer relationships with vital customers. The use of key customer account
teams is a common practice at these organizations. Ultimately, their efforts look
one-tier forward and focus primarily on ``A'' customers. Interestingly, managers
from both types of companies frequently complain that significant chasms
exist within their companies that prevent intense collaboration with their
marketing or purchasing counterparts. They find it easier to work closely with
other members of the supply chain than with other members of their own
companies.
A final SCM reality also exists, but it tends to be quite rare. A few companies
have closed the gaps that existed among the various internal functions and are
now simultaneously working to extend integration efforts up and downstream.
The focus is on aligning value-added capabilities to better meet the real needs
of their most valued customers. These companies have:
. identified key customers;
IJPDLM Retailer perspective
32,5 . Internal and external integration. ``Hard to get a definition that truly captures the
integration required.'' Focus on first-tier
. ``Integration of product and information processes with product suppliers and service
providers.'' Must build on internal integration
. Eliminating gaps among SC members to get right product at right price at right time in
right condition to consumer
352 . ``Managing inbound and internal processes to minimize inventory while maximizing
customer service.'' First-tier up/downstream
. ``Coordinate design, production, and transit cycles to feed market calendar. Includes
reverse logistics.'' First-tier upstream
. ``SCM is managing product and cash flows from first-tier to cash register.'' Focus on
internal process integration
. The goal is total pipeline visibility. Focus is on internal process integration and closer
relationships with first-tier suppliers
. Do not talk SCM terminology. Focus on internal integration and ``flow of goods and
money from supplier to customer.''
. Efficiency and speed into and through the firm. Emphasis on building unparalleled
processes. Tight first-tier supply relationships
. End-to-end visibility from first-tier supplier to retail store. Internal emphasis on process
excellence extending to first-tier
. ``Business of delivering value to customers and shareholders.'' From forecasting to
delivery of product. Emphasis on first-tier
. ``Coordinated flow of materials utilizing a common information base generated from store
level POS data.'' Extends to second-tier
. ``Coordinating three+ firms involved in manufacturing, sourcing, movement, and
processing of product to end customer.''
. ``Managing flow of merchandise through logistics network to satisfy customer needs.''
Focus on internal flows and first-tier

Finished goods assembler perspective

. ``Management of materials and information flow from suppliers to line-side delivery.''
Focus is on inbound, especially on first-tier
. Internal process integration, moving to ``supplier-to-customer management of value-added
processes.'' Focus is on order fulfillment
. Focus on internal integration and ``managing the physical flow to the customer's
warehouse.'' SCM = Eng + Mfg + Pur + Log + Fore
. From ``dirt to us.'' Definition does not include downstream entities. Focus on making a set
of internal processes world class
. ``End-to-end thinking'' ± even when organization is not executing that way. Begins
internally and extends up/downstream
. Plan and control the efficient and effective flow of materials and information from
supplier to customer. Focus on first-tier backward
. ``Design and coordination of five fulfillment systems.'' Focus on internal integration with
interfaces both up and downstream
. Focus is internal and downstream to customer; i.e. ``doing the right thing to serve the
customer at the lowest landed cost.''
. Internal integration extended both up/downstream. Focus on internal integration.
Table IV. Customer integration most difficult
Supply chain . ``Getting the right product to the customer so that we both make money.'' Internal
management integration and one tier up/downstream
definitions/philosophies (continued)
. Focus on internal and downstream ``processes required to efficiently and effectively The rhetoric and
satisfy customer requirements.'' reality of supply
No formal definition; however, SCM is what this company does. Coordinating a global
chain integration
.

network of suppliers. First-tier upstream

. Global network delivers products/services from raw materials to end customers via
engineered flow of information, cash and materials
Supplier perspective
. Integration of decisions that affect the flow of materials through the firm to the customer.
353
Internal and one tier up/downstream
. Emphasis is on internal integration and better cooperation one tier up/downstream.
Trouble ``getting arms around SC concept.''
. ``SCM is a business process and not an organization'' designed to smooth the flow of
materials and information
. Recognize value of ``suppliers' supplier to customers' customer'' notion, but do not have
formal shared definition
. ``Managing the information and value-added processes that occur from order receipt to
delivery to customer.'' One tier backward
. ``A process involving cross-functional teams, supply base, and internal customers.''
``Aligned customer/supplier expectations.''
. ``Ability to effectively align internal operations and supplier's operations to meet customer
needs.'' Focus one tier backward
. Formulating SC position/strategy. Focus on improving communication within and outside
firm. One tier up/downstream
. ``Manage materials and information from order to receipt of payment from satisfied
customer.'' One tier up/downstream
. Manage flows from ``suppliers' supplier to customers' customer.'' Strong first-tier customer
orientation ± extending to suppliers
. No formal SCM definition. Recognize need to establish closer relationships and technology
linkages up/downstream
. Talk definition ± ``from origin to end consumer'' ± but are far from it. Focus on supply
and distributor relationships
. ``The linking of external demand to external supply and the facilitation of information
flow.'' SCM seldom extends more than one tier
Service provider perspective
. Managing the ``nuts and bolts'' to get product to end customer efficiently/effectively.
Integrated activities and processes
. Linkages and collaboration from manufacturer to customer, ranging from transaction to
alliances. One tier up/downstream
. New approach to logistics involving process integration up/downstream to achieve
greater efficiency/service
. No formal definition, but recognize need for cooperation. Internal process integration to
support downstream collaboration
. Management of the entire end-to-end acquisition process from requirement to payment.
Focus on first-tier upstream
. ``We are a conduit ± physically and emotionally ± between manufacturers and their
customers.'' Seamless and integrated process management
. ``To add value to our customers' products by managing movement.'' Managing
information and relationships rationally
. SCM is relationship management. 3PLs bridge gaps in the SC. Recognize end-to-end
notion, but manage triadic relationship
. SCM involves elimination of non-value-added activities one tier up/downstream. No
shared working definition Table IV.
IJPDLM
32,5

354

Figure 2.
Different views of
supply chain integration

. evaluated these customers' competitive requirements and critical

success factors; and
. are striving to build processes back into first-tier suppliers that will
deliver quality and responsiveness at the lowest possible total landed
cost.
It is vital to note that even at these companies, 95 per cent of the analysis and
process development takes place among the triad of their company plus one tier
forward and one tier backward. While these companies are establishing
processes, capabilities, and relationships that will give them a sizeable lead in
the competitive race, they are far from achieving the ``end-to-end'' integration
envisioned by the SCM concept. For now, finding a supply chain where
seamless value-added processes are managed from the ``suppliers' supplier to
the customers' customer'' remains an elusive challenge.
Because of the variability in definitions that exists at each channel level, it is
difficult to say that real differences exist based on channel position ± at every
channel position, SCM involves process management and tighter relationships.
Perhaps the greatest uniqueness in definition exists among third-party service
providers ± they consistently view themselves as the conduit that facilitates
greater inter-organizational process integration. The other distinction of note is
not based on channel position, but on organization size and resource
availability. Smaller, resource-constrained companies regardless of channel The rhetoric and
position worry that their larger channel ``partners'' will use SCM reality of supply
opportunistically to extract value and squeeze margins. These smaller chain integration
companies also question whether they will ever have sufficient leverage to
effectively drive SCM initiatives.
A final comment on today's reality of SCM should be made. The word
integration is widely used to describe the intensity and nature of supply chain 355
relationships. True integration ± where objectives are aligned, communication
is open and candid, resources are pooled, and risks and rewards are shared ±
remains rare. The more appropriate descriptors are cooperation and
collaboration. In fact, many managers view the notion of true integration with
skepticism since such integration is tantamount to yielding ``sovereignty'' and
potentially limits the company's ability to respond quickly to major changes in
the competitive environment. Many managers fear being hitched to a plow
horse when a quarter horse is needed and vice versa. They also worry that a
current supplier may become a future competitor or that a current customer
will backward integrate into their domain. As a result, they prefer fluidity in
their supply chain relationships. Today's materials managers are at relative
ease with the notion of enhanced collaboration, but the prospect of true
integration takes them out of their comfort zones.

Supply chain visibility

While managers find it relatively easy to express support for SCM, few
companies have invested the time and effort needed to fully understand the
supply chains in which their firms operate (see Table V). Only a couple of the
interviewed companies have mapped their supply chains. These companies
have a well-grounded idea of how their core supply chains work and who the
key participants are. Even so, these companies have yet to exploit their
mapping efforts to comprehend and communicate the dynamics of the supply
chain. Analysis of channel costs, value propositions, critical success factors,
profitability, and channel power is still in its infancy. By contrast, these
companies actively investigate role-shifting opportunities with immediate
channel partners and employ second-tier purchasing agreements where
leverage advantages exist. Their advanced supply-chain understanding is
beginning to provide competitive momentum.
Two points stand out for the remaining companies:
(1) they have no formal supply chain map; and
(2) they lack knowledge at the second-tier level.
Managers at these companies confidently discuss the number and type of
customers or suppliers at the first-tier level. Although they typically needed
to check with a counterpart to get information about the other side of the
organization, at least someone somewhere in the organization has access to
this information. However, when asked to provide information about the
extended supply chain, the standard response was, ``Nobody around here has
IJPDLM Retailer perspective
32,5 . No formal SC map. Struggle a little with total costing. Lack second-tier knowledge
. No formal SC map. Still have not fully adopted process maps. Lack second-tier
knowledge
. Overall network computer modeled. Macro version posted on wall. Management focus is
on first-tier and 3PLs
. No formal SC map. Map key processes to first-tier to drive role-shifting. Limited
356 second-tier
. No formal SC map. Many internal processes lack transparency. Lack second-tier
knowledge
. No formal SC map. Working to increase process transparency. Limited second-tier
knowledge
. No formal SC map. Working on process transparency and business rules. Limited
second-tier knowledge
. No formal SC map. Time spent looking at policies, procedures and processes. Lack
second-tier knowledge
. No formal map of entire SC. Some process mapping to first-tier. Lack second-tier
knowledge
. No formal map of entire SC. Internal processes being mapped and roles redefined. Lack
second-tier knowledge
. No formal SC map. Key processes mapped and managed carefully. Lack second-tier
knowledge
. No formal SC map. Well-defined internal map of value-added process. Lack second-tier
knowledge
. No formal SC map; processes are mapped and process owners identified. Lack second-tier
knowledge
. No formal SC map. Careful mapping of internal processes. Lack second-tier knowledge
Finished goods assembler perspective
. Formal map goes to third-tier. Have not taken much advantage of knowledge gained
from mapping
. No SC map. Process map all major value-added processes. Functional gaps. Meager
second-tier knowledge
. No SC map. Lack second-tier knowledge except for one commodity
. No SC map. Lack second-tier knowledge. Some processes mapped
. No SC map. Internal processes mapped. Employ ``as is'' and ``should be'' maps. Lack
second-tier knowledge
. No formal SC map. Lack second-tier knowledge. Mapped material flows to guide
consolidation/milk runs. etc. . . .
. No SC map. General map of process, but does not include all players or specify roles.
Lack second-tier knowledge
. Very general SC maps, but do not include all players or specify roles. Lack second-tier
knowledge
. No formal SC map. Internal SC intricately mapped. Track 400 first-tier suppliers. Lack
second-tier knowledge
. Greatly reduced supply and customer base has increased visibility. Some second-tier
knowledge. ``Simple chain''
. Downstream channels mapped. First-tier upstream has been mapped. Lack second-tier
knowledge
. Formal process maps for first-tier up/downstream and service providers. Limited
Table V. second-tier
Supply chain visibility . No formal mapping. Most info retained in minds of key managers. Track first-tier for
± mapping the consolidation
supply chain (continued)
First-tier supplier perspective The rhetoric and
. No formal SC map. Only starting to evaluate role-shifting opportunities. No real reality of supply
second-tier knowledge
. No formal SC map. Have a good grasp of one tier up/downstream. Very limited chain integration
second-tier knowledge
. No formal SC map. Many processes mapped. Gaps between supply and marketing. Lack
second-tier knowledge
. No formal SC map at corporate. Visibility by commodity. Lack second-tier knowledge 357
. No formal SC map. Mapping focused on internal processes. Limited second-tier
knowledge
. No formal SC map. Lack view of processes and interdependencies. Lack second-tier
knowledge
. No formal SC map. Good view one tier up/downstream. Lack second-tier knowledge
. No true SC map. Purchasing maps define leverage points and aggregation opportunities.
Lack second-tier visibility
. No formal SC map. No resources for process mapping. Lack second-tier knowledge.
``ABC'' classification
. No formal SC map; however, do evaluate role shifting one tier each way. Lack second-tier
knowledge
. No formal SC map. Processes are loosely coupled. No formal role shifting. Lack
second-tier knowledge
. No formal map of entire supply chain. Detailed process maps at first-tier. Incomplete
second-tier knowledge
. No formal SC map. Limited process mapping. Lack second-tier visibility
Service provider perspective
. No formal SC map. Good view one tier up/downstream, especially with ``A'' firms. Lack
second-tier knowledge
. No SC map. Value-added processes mapped. Lack total SC view. Limited role shifting
. No formal SC map. Too complex and huge variety of acquired items. Focus only on
first-tier
. No formal SC map. Have a good grasp of first-tier customer needs Lack second-tier
knowledge
. No formal SC map. Have good grasp of one tier each way. Lack second-tier knowledge
. No formal SC map. The view for 3PLs really focuses on one tier each way. Lack
second-tier knowledge
. No formal end-to-end SC map. Extensive mapping of customers' processes. Lack
second-tier knowledge
. No formal end-to-end SC map. Map delivery process from manufacturing to customer.
Lack second-tier view
. No formal SC map. Limited process mapping. Lack total and ABC costing capabilities.
Lack second-tier knowledge Table V.

that information,'' or, ``I could only guess.'' The predominant focus at these
companies is on modeling internal processes and establishing policies and
procedures to help them manage key relationships with first-tier customers
and suppliers. The goal is to use mapping to enhance process transparency
and help close the gaps that impede coordination of key value-added
activities.
To rationalize to a chaotic environment, today's companies are working
more aggressively to make processes and relationships transparent. Even so,
few organizations fully understand the dynamics of their supply chains.
IJPDLM Managers find it far easier to talk about SCM than they do to actually dedicate
32,5 the time and other resources needed to create a clear picture of their most
important supply chains. In this respect, supply chains are competing more as
groups or clusters of companies than as cohesive teams.

Conclusions and implications

358 Today's marketplace is more fiercely competitive than ever before.
Globalization, technological change, and demanding customers constantly
push the performance bar upward. To help their companies succeed in this less
kind and less predictable world, managers must follow the advice of Thomas
Edison when he said, ``If there is a better way, find it''. SCM has been identified
as the better way. For several years, SCM proponents have argued that the very
nature of competition is changing. They have claimed that the day is rapidly
coming when companies will no longer compete against other companies, but
supply chains will compete against other supply chains for market supremacy.
In other words, companies will choose sides and form ``cohesive teams'' that
will compete across borders in the quest to increase productivity and capture
global market share. This is the rhetoric of SCM.
While the SCM ideal of collaborative competition ± competing as allied
teams of companies ± has gained many adherents, actual practice does not
resemble the theory of SCM. Nobody is managing the entire supply chain from
suppliers' supplier to customers' customer. The ``end-to-end'' transparency
needed to understand and manage the entire supply chain simply has not
materialized for the vast majority of supply chains. Even among the best
supply chain companies, integrative practice tends to span only a triad of
companies ± typically the company plus one tier up and downstream.
Collaboration with service providers to close the inbound and outbound gaps in
the channel is increasing; yet, true collaboration beyond the first-tier in either
direction is rare. Such extended cooperation is limited to second-tier purchasing
agreements, occasional second-tier supplier audits, and some second-tier
training, which takes place on a very selective basis. In most instances, the
responsibility for managing beyond the first-tier is ``handed off'' to the first tier
with only minimal measurement and follow-up. This is the reality of SCM. That
is, the majority of resources dedicated to SCM are focused on a very limited set
of activities involved in coordinating the ``hand off'' of information, strategic
plans, and physical product among channel members.
It must be remembered that SCM is a relatively new approach to business
and that the boundaries of practice are still evolving. The interviews suggest
that three levels of SCM practice can be discerned:
(1) In its simplest form, SCM is viewed as the application of new
information technologies to help increase the quality of information and
speed its exchange among channel members. This is a very attractive
but very simplistic view of SCM and while it often leads to improved
performance, it generally delivers less than targeted results.
 (2) The second level of SCM practice tends to recognize a set of fundamental The rhetoric and
building blocks, which lead to closer channel relationships. The core reality of supply
building blocks include linked information systems, integrative inter- chain integration
organizational processes, aligned goals, consistent measures, shared
risks and rewards, and cross-experienced managers. While managers
agree on the core elements of SCM, an overall supply chain framework
has not emerged and supply chain strategy is often ad hoc and 359
fragmented.
(3) The most advanced level of SCM practice builds on the previous
conceptualizations, but recognizes that SCM is a cultural orientation or
philosophy that guides decision making. A true supply chain mindset
promotes the building of a world-class supply chain team through the
selection of the right team members and the establishment of
appropriate relationships. Two competencies are critical to the success
of this advanced level of SCM: supply chain design and supply chain
integration.
Most companies are currently engaged at the first level of SCM sophistication.
Their emphasis is on technological solutions to their competitive challenges ±
they believe that better information capabilities will deliver significant
improvements in productivity and responsiveness. Early adopters of supply
chain practice have discovered that real collaboration goes beyond information
exchange and are working diligently to establish other integrative mechanisms
to enhance coordination with truly important first-tier suppliers and customers.
Only a few companies have truly begun to establish a SCM culture that
permeates decision making. These companies have begun to map their supply
chains, analyze value propositions and core competencies, and evaluate the
appropriateness of existing and future supply chain relationships. They
recognize that cultures change slowly and that systematic supply chain
analysis is a resource-intensive effort. For these companies, SCM is a long-term
journey.
At each level of practice, SCM holds considerable promise and managers are
moving forward, promoting SCM as a vital competitive weapon. These
managers must be aware of the following potential limiting factors highlighted
by the interviews:
. A lot of rhetoric has surrounded SCM, making it a buzzword. SCM's
cache has led managers to simply add the term supply chain to
traditional practices without adopting the mindset or developing the
infrastructure that underlie SCM. Excessive hype has created cynicism;
therefore, managers should take care to not oversell SCM as the panacea
to their competitive challenges.
. SCM definitions vary widely from company to company and even from
manager to manager within the same company. As a result, not only do
SCM practices lack cohesion and visibility but supply chain strategies
IJPDLM lack specificity and reach. Managers must be precise in their discussions
32,5 of specific practices ± this is true both within the firm and among
channel members.
. A functional divide exists between the purchasing and marketing sides
of most organizations. This chasm often consists of physical and
360 emotional distance and is embedded in the company's organizational
structures and culture. At many companies, it is easier to develop
cooperative relationships with external supply chain members than it is
to break down the silos that exist around individual functions. No
standard organizational form has emerged to bridge the chasm.
. Chain complexity is a major challenge. Likewise, most companies
participate in multiple supply chains. Further, defining the boundaries
and intensity of specific relationships in a world where multiple
relationships exist between the same two companies complicates supply
chain design and management.
. A strong focus on immediate returns limits companies' ability to
transform cultures and establish appropriate processes and
relationships. Cultures change slowly and long-standing practices are
difficult to move away from. Serious commitment must be demonstrated
for change to occur.
Regardless of function or channel position, managers believe that SCM can help
their companies thrive in today's intensely competitive marketplace. However,
they do recognize the tension that exists between SCM's competitive potential
and the inherent difficulty of collaboration. That is, while seamless processes
that bridge organizational boundaries are an appropriate goal, establishing
them is anything but easy. Optimism regarding SCM must therefore be
tempered by a realistic view of the challenges found at every twist and turn on
the road to supply chain collaboration.

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