BY

Dr. Herbert Kotzab,
Assistant Professor
Department of Operations Management,
Copenhagen Business School
Solbjerg Plads 3, DK-2000 Frederiksberg;
E-mail: hk.om@cbs.dk

and

Dr. Andreas Otto
Assistant Professor
Department of Business Logistics
University Erlangen-Nürnberg
Theodorstraße 1, D-90489  Nürnberg
E-mail: otto@logistik.uni-erlangen.de

Abstract

The academic discussion in the logistics field during the past ten years was and is driven by the term ‘Supply Chain Management’ (SCM). Oliver and Webber (1982) introduced this concept as a special form of strategic inter-organizational logistics management with positive results to the overall channel performance. During the years, SCM was undergoing a continuous change from a tool to minimize inventory to a business strategy, which is driven by customer action.

Introduction

From a logistics perspective, today’s markets get more and more complicated to be served. In the  past, logisticians could follow a ‘simple’ marketing strategy by managing a trade-off between costs and service. Choice, service, speed and cost have been the main ‘chessman’ on the economic field for a long time. Management perceived the managerial situation as to have the chance of maintaining a comfortable trade-off between any of these variables; like trading choice against speed, speed against cost or service against cost. The ‘golden logistical rule’ or paradigm has always been – the more service to be offered, the more costs to be calculated. From a marketing perspective, time and conditions have been changed dramatically. In merely every main industrial market the customer wants all of it: instant availability of inexpensive customized products wrapped in a high service bundle (Bovet and Sheffi, 1998). ‘From Push to Pull’ is the new maxim, meaning producing on consumer need, postponing finalization of products as near as possible to the end or the beginning of the channel: to the enduser.

Possibly this scenario paved the way for the remarkable success of SCM concept. Although this issue has been heavily discussed in the logistics area, marketing researchers have not given the phenomena the attention is might deserve (following Weitz, 1998 or Nevin and Jambulingam, 1998). Prominent channel researchers like Stern, El-Ansary and Coughlan (1996) understand SCM as nothing more than physical distribution. However, Alvarado and Kotzab (1999) try to understand SCM as a special form of interfirm governance, a term which has been introduced by Heide (1994). Min and Mentzer (1999) understand SCM as part of a marketing strategy as well as business philosophy.

In our conceptual paper we try to address the question whether SCM can be seen as an extension of traditional marketing ideas (esp. customer focus) into the area of moving, storing and handling goods. The term ‘conceptual’ thereby refers to a methodological approach, which is based on the analysis of SCM-related literature in the marketing and logistics field.

While logisticians traditionally dealt more with optimizing inventory and/or transportation issues in an inter-firms’ framework, supply chain managers act more or less in marketing-dominated areas like new product development, customer relationship management and or customer service management (e.g. Cooper, Lambert and Pagh, 1997). One result of our attempt is the definition of certain management rules, which should be followed when managing supply chains.

With our paper we would like to contribute to a more academic development of SCM-theory, which has been driven mostly by management consultants or high-ranked managers in the past. Practitioners often ‘ignore’ thereby the pioneering work, which has been done in the field of marketing, esp. in the channel research and other fields of the business-to-business marketing.

Supply Chain Management (SCM) – Attempts of definitions and model presentation

The picture of physical distribution or logistics has dramatically changed from solely concentrating on warehousing and transportation to a sovereign logistics function including the management of goods and related information flow  (e.g. Stewart, 1965; Bowersox and Closs, 1996; Pfohl, 1996; Klaus, 1998; Ballou, 1992).

Due to the ‘IT-revolution’ taking place within the 90s, the single-entity-oriented logistics concept has turned to the integrated orientation of SCM. SCM stands for a management concept, which tries to integrate the activities of an entire set of organizations from procurement of material and product components to deliver completed products to the final customer (according to Schary and Skjøtt-Larsen, 1995).

Table 1 presents some common SCM-definitions which can be retrieved from major academic books and journals as well as from the practitioners literature.

Table 1:             Selected Attempts to Define Supply Chain Management – alphabetically ranked by author

The presentation of the definitions shows clearly that the key element of SCM is the integration of activities in response to customer requirements. In fact, Bechtel and Jayaram (1997) present an integration-continuum between “pure awareness” and “pure integration” of supply chain activities. They champion the view of SCM as a “seamless demand pipeline” with the enduser as the driving force in the entire system (p. 18). Inspired by Cooper, Lambert and Pagh (1997), Kotzab (1999) presents a schematic of a SCM model in Figure 1, below.

Figure 1:  Basic Supply Chain Management Model

It is important to note that the basic SCM model in Figure 1 suggests the orchestration of activities at the inter-organizational level as well as the departmental level.  Consequently, SCM leads to improvements in channel performance among all channel members, not only within the focal firm.

Supply Chain Management principles – bringing Marketing into logistics action?

Beyond the understanding of Thompson’s (1967) notion of “long-linked” technology, the management of supply chains deals with individual actors who are passing customer required objects (products) in a uniform direction from the raw material stage to the final point of destination. The use of the term “customer-required” refers to the nature of the activities, which initiated by an end-user driven information flow. Otto and Kotzab (1999) present in their work certain SCM-rules as suggested by literature. Out of these the following general principles for managing supply chains may be identified (see Table 2).

Table 2-a: Attempt to condense SCM-principles

From a marketing channel perspective, these activities are rather common than unknown. Since the 50’s and 60’s channel researches like Alderson (1957) and/or Bucklin (1967) can be seen as famous promoters of postponement. Bowersox (1969) describes in his Journal of Marketing Research contribution the effects of cooperation and collaboration within the supply chain. Nevertheless, it took about 30 years to diffuse these thoughts into the logistical area.

Another indication of the marketing influence to SCM can be found e.g. in the SCM-model suggested by Cooper, Lambert and Pagh (1997) (see Figure 2).

Figure 2:  Supply Chain Management model as suggested by Cooper, Lambert and Pagh (1997)

Within this model, the authors differentiate between supply chain management components and supply chain business processes. This structure combines not only departments inside the focal company but also the tier suppliers and following customers. Thereby the authors refer to the integration of marketing partnership programs, exchange of marketing data, new product development processes, planning and control of activities beyond the logistics area and the installation of new product development processes across the supply chain.

Some of the examples of SCM-applications in business practice often refer to the extension of the scope from logistics to marketing issues. E.g. in most of the Efficient Consumer Response models the set-up of inter-organizational groups including marketing relevant departments (marketing and sales, key account management, category management, store promotion, etc.) is requested. The work of these groups is driven by end-user action based on actual sales data gathered at POS-level (e.g. Efficient Consumer Response Europe, 1996 and 1997 or Salmon, 1993).

Conclusion and Outlook

Although the basics of SCM refer to logistics, our study also shows the influence of marketing to SCM managing supply chains according to end-user requirements. SCM presents itself as an interesting field for marketing channel researchers to be investigated.

We can identify a “struggle of dominion” between various scientific disciplines. Representatives of operations management and research, IT or total quality management also claim SCM as their relevant field of study. The IT-dimension of SCM seems to be rather a relevant topic referring to the challenges of exchanging data and similar issues. Therefore several IT-software-competitors like i2, Manugistics or SAP are introducing special software packages with the label “SCM”. The software often presents itself as a sophisticated Supply Chain-Planning-Software-package, disregarding the non-technical dimension of managing supply chains.

It is our strong contention, that the tradition of channel related research in marketing holds a rich reservoir for the academic as well as for the practitioner. Thereby we refer to the work, which was done in the field of conflict management (e.g. Pondy, 1967), management of power (e.g. Emerson, 1962 or Etzioni, 1975), commitment (e.g. Gundlach et al., 1995; Anderson and Weitz, 1992) and channel control (Little, 1970; Stern et al., 1996). Researchers are welcomed to analyze how these theories can deepen the existing knowledge of SCM. Understanding a supply chain as the orchestration of independent actors towards common actions, future research should analyze how the results of social network analysis (e.g. Granovetter, 1978; Wassermann and Faust, 1994; Burt, 1995) or the collective action debate  (e.g. Olson, 1992) could contribute to the theory development of SCM.

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Articles, Marketing
Logistical Marketing Approach, seamless demand pipeline, Supply Chain Management, Supply Chain Management principles