What is Supply Chain Management?
The concept of Supply Chain Management is based on two core ideas. The
first is that practically every product that reaches an end user represents the
cumulative effort of multiple organizations. These organizations are referred
to collectively as the supply chain.
The second idea is that while supply chains have existed for a long
time, most organizations have only paid attention to what was happening within
their “four walls.” Few businesses understood, much less managed, the entire
chain of activities that ultimately delivered products to the final customer.
The result was disjointed and often ineffective supply chains.
Supply chain management, then, is the active management of supply chain
activities to maximize customer value and achieve a sustainable competitive
advantage. It represents a conscious effort by the supply chain firms to
develop and run supply chains in the most effective & efficient ways
possible. Supply chain activities cover everything from product development,
sourcing, production, and logistics, as well as the information systems needed
to coordinate these activities.
The organizations that make up the supply chain are “linked” together
through physical flows and information flows. Physical flows involve the
transformation, movement, and storage of goods and materials. They are the most
visible piece of the supply chain. But just as important are information flows.
Information flows allow the various supply chain partners to coordinate their
long-term plans, and to control the day-to-day flow of goods and material up
and down the supply chain.v
Supply Chain Management (SCM) is a concept that is gaining in popularity and importance. However,
SCM is not a concept without problems. These problems include the lack of a universally accepted
definition of SCM, the existence of several different and competing frameworks for SCM, issues with
terminology and the relative lack of empirical evidence supporting the benefits attributed to SCM. The
purpose for this paper is therefor to bring some clarification to the concept of SCM by exploring some of
the more prevalent SCM definitions, frameworks and terminology.
INTRODUCTION
Supply Chain Management (SCM) is a concept that is gaining in popularity and importance. From a
practitioner point of view, an Accenture report (in co-operation with Stanford and Insead) states that SCM
is critically important or very important to 89% of the surveyed executives. Furthermore, SCM is
increasing in importance as 51% of the executives stated that their investments in SCM have increased
significantly over the last three years (Accenture 2010). SCM has also been frequently discussed and
researched by practitioners and academics over the last two decades. Stock and Boyer (2009) describe
how the number of SCM articles continues to grow on a yearly basis after the “rapid surge” that started in
the middle of the 1990s. Additionally, the number of academic dissertations dealing with SCM-related
topics has steadily increased since the early 1990s (Ibid.).
One reason for the increased interest in SCM is that organizations progressively find themselves
reliant upon having effective supply chains, or networks, to successfully compete in the global market
economy (Lambert 2008). In the competitive global environment, performance can no longer solely be
determined by the decisions and actions that occur within a firm as the execution of all members involved
contributes to the overall results of the supply chain. Similarly, Wen et al. (2007) mean that competition
has changed from being between individual enterprises to increasingly being between supply chains. As
organizations form global alliances, it is imperative that they understand how SCM can be successfully
applied (Halldorsson et al. 2008); especially as organizations face challenges including mitigating risks
and disruptions in the supply chain (Neureuther, 2009). For these reasons, there is a need for companies to
manage not only their own organizations but also their relationships with other companies in the same
supply chain (Croxton et al. 2001; Stock et al. 2010).
Naturally, another reason for the increased interest is the potential benefits of SCM. Benefits include
improvement in returns on investments (ROI) and returns on assets (ROA). “Ultimately, the goal of SCM
is to achieve greater profitability by adding value and creating efficiencies, thereby increasing customer
satisfaction” (Stock and Boyer 2009, p.703). Ideally, improvement of the supply chain translates to
Journal of Management Policy and Practice vol. 11(4) 2010 11
benefits for all supply chain members. Costs decrease as a result of reduced redundancies, lower
inventory levels, shorter lead time and lessened demand uncertainties. Improved process performance
result in enhanced product quality, customer service, market responsiveness, and target market access
(Fisher 1997; Lambert et al. 2005; Lee et al. 1997; McCarthy and Golicic 2002; Sabath and Fontanella
2002; Stank et al. 2001; Tan et al. 2002; Tummala et al. 2006). Performance is thus improved through
better use of internal and external capabilities creating a seamlessly coordinated supply chain, elevating
inter-company competition to inter-supply chain competition (Burgess et al. 2006; Lummus and Vokurka
1998; Mentzer 2004; Lambert 2008).
Problems
However, the concept of supply chain management is not without problems. One major problem is the
relative lack of empirical evidence supporting the benefits attributed to supply chain management
(Lambert et al. 2005 Stock et al. 2010). Similarly, most of the research concerning supply networks in
operational in nature and has been based on case examples of focal companies such as Benetton, Toyota
and Nissan (Jarillo and Stevenson 1991). Lamming et al. (2000) pointed out that a problem is that these
studies concentrated on a particular industry, typically the automotive industry. Thus, managers in other
industries lack theoretical foundation for managing their particular businesses since networks vary not
only between industries but along range of other aspects. Likewise, most of the research related to
strategic relationships is dyadic in nature. It describes primarily how two companies can improve their
relationships, but it seldom includes an actual supply chain (Stock et al. 2010).
Another major problem for SCM is the lack of a universally accepted definition of SCM. The apparent
lack of empirical research supporting benefits of SCM is, unfortunately, logical when a generally
accepted definition does not exist. Burgess et al. (2006) analyzed 100 randomly selected SCM articles and
found that 12 articles posited unique definitions, 21 referred to existing definitions, 9 used slightly
modified versions of existing definitions, and 58 left SCM undefined. The problem with lack of a
universally accepted definition has been highlighted during the last decade by some of the leading
scholars in the field. Mentzer et al. (2001) discussed the issue already in 2001. In 2005 Lambert et al.
stated that SCM has been frequently used as a synonym for logistics, operations management or
purchasing or a combination of the three. Even when people consider SCM as a value adding flow from
material to product, it can be viewed as a flow within a firm or from raw material to end consumer.
Lambert et al. (ibid, p.25) finally mention that to some SCM is seen as “the management of relationships
both between corporate functions and across companies”.
In their recent paper, Stock and Boyer (2009) reviewed 173 definitions of SCM across a multiplicity of
journals and books. They not only argue that too many definitions exist, but also that the lack of a single
definition has significant negative impact for both practitioners and researchers. They write (ibid, p. 691.):
“Without an inclusive or encompassing definition, it will be difficult for researchers to develop supply
chain theory, define and test relationships between components of SCM, and develop a consistent stream
of research that “builds” on what has gone before…Without the adoption of a uniform definition
accepted by researchers, confusion will continue to hinder the study and further development of SCM;
and research will extend in various directions, rather than build upon itself (i.e. creating synergy in
research). For practitioners, the absence of a comprehensive SCM definition makes it more difficult for
supply chain executives to claim authority and responsibility for the “right” combination of functions and
processes. It also makes it more difficult to benchmark against other companies and industries on supply
chain metrics, job responsibilities, and other human resource issues, because of the differences that exist
from one company to the next.”
Similarly, several different and somewhat competing frameworks for SCM exist. Yet despite the
existence of these frameworks, the field lacks a commonly accepted framework. There is also little
consensus regarding how supply chain management actually should be implemented and measured (e.g.,
Lambert et al. 1998; Bowersox et al. 1999; Mentzer 2004). Lockamy and McCormack (2004), for
example, argue that supply chain management is more difficult to operationalize in practice than some
academics or consultants seem to claim.
In addition, a multitude of popular terms are connected to SCM. However, one could also argue that
these popular SCM terms – such as collaboration and integration - are poorly defined in the context of
SCM. Even so, the academic community is embracing new concepts, for example sustainable supply
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