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An inductive framework for enhancingsupply chain integrationJ. Campbell a & J. Sankaran ba ANZ Bank , Wellington, New Zealandb Department of Information Systems and OperationsManagement , The University of Auckland , Private Bag 92019,Auckland, New Zealandc Department of Information Systems and OperationsManagement , The University of Auckland , Private Bag 92019,Auckland, New Zealand E-mail:Published online: 22 Feb 2007.

To cite this article: J. Campbell & J. Sankaran (2005) An inductive framework for enhancingsupply chain integration, International Journal of Production Research, 43:16, 3321-3351, DOI:10.1080/00207540500095852

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International Journal of Production Research,Vol. 43, No. 16, 15 August 2005, 3321–3351

An inductive framework for enhancing supply chain integration

J. CAMPBELLy and J. SANKARAN*z

yANZ Bank, Wellington, New Zealand

zDepartment of Information Systems and Operations Management,

The University of Auckland, Private Bag 92019, Auckland, New Zealand

(Received November 2004)

We report the inductive development of a framework for enhancing the integra-tion of supply chains. The framework has been motivated by the need to enhancethe participation of small and medium enterprise (SME) suppliers and resellersin the supply chain. Extant diagnostics are geared towards enabling enterprisesto evaluate or benchmark themselves on a self-administered rating scale inrelation to their peers. In contrast, the present framework aims to enable small-sized suppliers and resellers to systematically imbibe supply chain integrationpractices, to the extent applicable, from their more advanced trading partners,after possibly adapting them to their own business circumstances. The broadapproach has been to first conduct in-depth case study research into enterprisesthat excel in one or more facets of integration (customer integration, supplierintegration etc.) and then induce items pertaining to various themes andsub-themes of supply chain integration. The resulting framework is thus anempirically well-grounded and fine-grained, actionable complement to extant,broader-brushed mechanisms and diagnostics for supply chain integration.

Keywords: Supply chain integration; Enhancement framework; Assessmentmechanism; Small and medium enterprises; Induction; Case study

1. Introduction

This paper reports the completed first phase of a longer-term investigation into thedevelopment of a fine-grained, empirically well-grounded framework for enhancingthe integration of supply chains. The seed for the research was sown by severalcorporate members of a forum on enterprise systems and supply chain managementthat was based in New Zealand (NZ) and involved representatives from bothacademia and industry. Several corporate members of the forum were well advancedin terms of supply chain integration (SCI) but were experiencing considerabledifficulties in progressing backward and forward integration upstream and down-stream respectively in their supply chains, given several of their suppliers/resellerswere small and medium enterprises (SMEs). (In a tiny economy such as NZ, thisproblem is especially acute given the high proportion of very small SMEs; about95% of enterprises in NZ employ 50 or fewer full-time equivalent employees

*Corresponding author. Email: j.sankaran@auckland.ac.nz

International Journal of Production Research

ISSN 0020–7543 print/ISSN 1366–588X online # 2005 Taylor & Francis Group Ltd

http://www.tandf.co.uk/journals

DOI: 10.1080/00207540500095852

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(Cameron and Massey 1999).) These forum members proposed that insights

gleaned from them with regard to achieving SCI could be diffused to their SME

suppliers and resellers that were respectively upstream and downstream in the supply

chain.

The diffusion of supply chain integration into NZ SMEs mirrors concerns

about supply chain participation by SMEs in the USA and elsewhere—although

the operational definition of SMEs used in the USA is markedly different from

that applicable in NZ. (The APEC Centre for Technology Exchange and Training

for Small and Medium Enterprises (ACTETSME) cites manufacturing SMEs in

the US as comprising at most 500 employees (ACTETSME 2004).) One reflection

of that concern in the USA was the establishment of a Committee on Supply Chain

Integration by the National Research Council (Commission on Engineering and

Technical Systems 2000); the results were subsequently published in a book entitled

Surviving Supply Chain Integration: Strategies for Small Manufacturers. The

committee concluded that individual SMEs needed to assess their own circumstances

in the rapidly changing business environment, identify gaps between supply chain

requirements and own capabilities, and find ways to fill the gaps—although the

committee did not spell out in detail how SMEs could systematically go about

doing so.

We note here that extant frameworks for assessing and systematically

enhancing SCI do not, for the most part, appear to be particularly well grounded

empirically; they tend to be loosely based on the experiences of supply chain

consulting companies. Examples include:

1. Manugistics’ Supply Chain Compass (Fox 1999).2. Benchmarking Success: Stages of Supply Chain Excellence (Benchmarking

Success 2001).3. Riverola: SCM Maturity Model (Riverola 2001).4. DRK: Supply Chain Maturity (McCormack 2001).5. Performance Measurement Group: The Supply Chain Maturity Model

(The Performance Measurement Group 2001).

A significant exception is the 21st Century Logistics diagnostic (Bowersox et al.

1999), which is an instrument that is designed to help organizations recognise

and overcome obstacles that undermine both internal and external integration of

value-added logistical operations. The assessment shows where an organization

is and indicates the areas in which the organization needs to improve to fulfil

the vision of true integration. This entails integration with regard to: customers;

internal functions and activities; material and service suppliers; technology and plan-

ning; measurement systems; and relationships. Altogether, the framework features

seven competencies, each competency typically featuring four–six themes and each

theme being represented by about four indicators.

Subsequently, Stank et al. (2001) employed the 21st Century Logistics diagnostic

to empirically validate the performance benefits of supply chain integration.

Respondent organizations were asked to rate each question on a Likert scale from

1 to 5, 1 being ‘strongly disagree’ and 5 being ‘strongly agree’. The organizations

included manufacturers, wholesalers/distributors and retailers from a variety of

industries. The composite nature of the sample was in keeping with the ‘major

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conclusion of the Leading Edge Logistics research . . . that best practice was

remarkably similar regardless of industry, channel position or firm size’ (Bowersox

et al. 1999: 188). (Likewise, in this journal, Childerhouse and Towill 2002, reported

that ‘exemplars’ in value stream management shared a number of common

and transferable best practices.) The scores for each of the variables were then

summed across all participating respondents to create scores for each capability

and integration competency. Statistical analysis was undertaken for reliability and

validity of the measurement framework. The research statistically proved (through

tests on uni-dimensionality, reliability and internal consistency) the existence of

six unique SCI competencies as well as the overall influence of SCI on logistical

performance. Stank et al. (2001) found that 30% of the statistical variation in

overall logistics performance was explained by variations in customer and internal

integration.

The 21st Century Logistics diagnostic has thus served as a validated

self-assessment framework for firms to evaluate the internal and external integration

of their specific supply chains, in relation to their peers. The present research has

been motivated by a rather different need that was identified by NZ participants

in the research, namely, the requirement of a fine-grained, empirically well-grounded

roadmap for SMEs to enhance their participation in integrated supply chains.

The purport of the roadmap was not so much to enable SME suppliers and resellers

to evaluate or benchmark themselves on a self-administered rating scale in relation

to their peers. Rather, it was to enable small-sized suppliers and resellers of

the participating enterprises to systematically imbibe SCI practices, to the extent

applicable, from their more advanced trading partners, after possibly adapting

them to their own business circumstances. Hence, the goal of the present research

was to develop a framework whereby SMEs could progressively enhance (rather

than merely assess) SCI.

This need was heightened in the NZ context given the especially small scale of

SME suppliers and resellers. Indeed, as one reviewer has suggested, the business

environment that prevails in NZ has had a bearing on the present research and

its motivation. For example, in several vendor industries, the size of the NZ domestic

market permits only a small number of players (the population of NZ is about

four million). As a result, several NZ manufacturers struggle to establish genuine

partner-style relationships with vendors who, of economic necessity, continue to

supply their competitors—a challenge that may not prevail in larger economies

elsewhere in the world. Sankaran et al. (2004) have found that in Australasia,

when the sole vendor of a key input supplies the manufacturer’s competitors as

well, the relationship appears to mature to a partner-style relationship only under

certain conditions. This challenge of establishing close relationships with suppliers

of key inputs is pointed out in Item B.4 of our framework (termed SCIEF, for SCI

Enhancement Framework) in Appendix B.

Below, we clarify the key point of difference between SCIEF and the 21st Century

Logistics diagnostic with reference to one theme of SCI, namely, segmentation.

In the 21st Century Logistics diagnostic, segmentation is represented through the

theme, ‘segmental focus’, which is defined as the development of customer-

specific programmes designed to generate maximum customer success. (Thus,

‘segmentation’ refers specifically to customer segmentation.) Stank et al. (2001)

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developed scores for the following items, each of which were rated by respondents ona scale of 1 to 5.

. My firm has different, unique logistics service strategies for differentcustomers.

. My firm has established a programme to integrate and facilitate individualcustomer requirements across our strategic business units.

. My firm uses logistical requirements as a basis of customer segmentation.

. My firm employs initiatives to identify end-customer value-added thatis contributed by logistics.

In the prototype of SCIEF that we report in this paper, segmentation is atheme that represents both customer segmentation and product segmentation.(The former could be subsumed under ‘forward integration’ while the latter, under‘internal integration’, though in the prototype, we list both under ‘internal integra-tion’.) Below, we present the various items pertaining to supply chain segmenta-tion that we induced from case data on our respondent companies.

1. How is the supply chain segmented across the customer base and/or productgroups? For instance, if both hazardous and general goods are distributed:(i) Are they transported by different carriers? (ii) Does end-user documenta-tion vary? (iii) Do packing slips vary? etc.

2. If segmentation is practised,

(a) Is the supply chain velocity of those goods with less stringent require-ments (e.g. general goods) significantly greater than that of goods withmore stringent requirements (e.g. hazardous goods, frozen goods etc.)?If not, why?

(b) To what extent does segmentation eliminate cross-subsidisation amongproducts and reveal true costs?

(c) To what extent does segmentation enhance customer service(e.g. superior provision of product information for hazardous goods)?More specifically, to what extent does the enterprise exploit the useof differential carriers to differentiate customer service provision (e.g.product installation) across product/customer groups?

(d) If distribution channels converge, what synergies does the enterpriserealise? For instance, are customs clearance processes standardized andelectronic interfaces generic?

3. If segmentation is not practised in any significant manner, clarify why. Forinstance: (i) Does the improvement in margins through operational efficiencythat arises from a generic supply chain outweigh any benefits from segmenta-tion? (ii) Does the desire to serve as a one-stop shop to a fairly homogenouscustomer-base push against segmentation? etc.

As the above discussion of segmentation illustrates, the major point of differencebetween the prototype of SCIEF and a framework such as the 21st Century Logisticsdiagnostic, is that the latter is ‘coarse grained’, i.e. dealing with each theme/facet of integration in a broad-brushed manner through, for instance, a handfulof Likert-type questionnaire items. SCIEF, on the other hand, is designed forself-administration with the view of enhancing SCI: A user-organization can

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ascertain if it is realising the manifold forms of customer/product segmentation andbenefits thereof or evaluate if segmentation is of limited applicability, giventhe nature of its business.

Thus, in relation to the recommendations of the Committee on Supply ChainIntegration that had been established by the National Research Council(Commission on Engineering and Technical Systems 2000), the 21st CenturyLogistics diagnostic and SCIEF can be employed in a complementary manner.Individual SMEs can first use the diagnostic to assess their own circumstances;then, they can use SCIEF to find ways to fill the gaps between supplychain requirements and capabilities. We return to this complementarity in theconcluding section of the paper.

The broad objective, then, of the longer-term investigation, of which thecompleted first phase is reported here, is the development, validation and widespreaddissemination of an SCIEF that is designed for self-administration, especiallyby SME suppliers and resellers in supply chains. A critical element of the deve-lopment of such a framework is the systematic documentation, through richcase data, of the various initiatives pursued by exemplary organizations vis-a-visthe different facets of integration, as well as the underlying rationale. Accordingly,this paper reports the in-depth, systematic case study investigation into supplychain integration at two carefully chosen, leading NZ enterprises; it also describesthe incorporation of the insights from these two enterprises into a prototypicalenhancement framework.

The manuscript is laid out as follows. We first review the extant literature onSCI with some focus on the frameworks itemized in this section. We then discussthe qualitative case study methodology employed in the present study, as well asthe choice of leading companies to investigate. We subsequently present our find-ings from the cross-case analysis as well as their incorporation in a prototypicalframework. We conclude with a discussion of ongoing research.

2. Literature review

It is well documented in the literature (e.g. Lee et al. 1997) that the lack ofintegration between members of a supply chain results in operational inefficienciesthat compromise the performance of the supply chain. Conversely, members ofa supply chain all stand to reap strategic benefits if the supply chain is well tuned.This is because an integrated supply chain features strong links (electronic and other-wise) between all organizations in the chain. This enhances the flow of informationthrough the supply chain and hence improves the timeliness and quality of decision-making. Supply chain integration thus promotes greater efficiencies and lower costsin the supply chain, thereby increasing supply chain competitiveness. In this paper,we define SCI as the process of developing linkages within an organization andbetween an organization and its trading partners. This includes the joint managementof key business processes, the development of managerial commonalities and thejoint implementation of information technologies that span the supply chain.

Lambert and Cooper (2000) defined supply chain management (SCM) as theintegration and management of key business processes, management techniquesand information technologies across the supply chain. The development of

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common objectives, goals, policies and financials amongst supply chain partners is

an important prerequisite to facilitate such integration (Chandra and Kumar

2001b). SCM often has the objective of reducing the total amount of resources

required to provide the necessary level of customer service to a specific segment

(Ferguson 2000, Lambert and Cooper 2000). It is believed the integration and

coordination of supply chain activities will lead to a sustainable competitive

advantage for the supply chain (Cooper et al. 1997, Chopra and Meindl 2001)

and greater flexibility and agility to respond to shifts in demand (Chandra and

Kumar 2001b).

There is ambiguity in the terminology used for the concept of SCI in the litera-

ture. Lambert and Cooper (2000) for instance simultaneously referred to integra-

tion as both the end-goal of SCM as well as the process of developing linkages with

trading partners. In their perspective, SCM comprises of three components: the

supply chain network structure (consisting of member firms and linkages between

these firms); business processes (activities that produce a specific output of value

for the customer); and management components (managerial variables by which

business processes are integrated and managed throughout the supply chain)

(see also Cooper et al. 1997).

An organization pursuing SCM needs to consider both internal and external

integration (Daugherty et al. 1996). It is emphasized in the literature that a company

needs to have ‘its own house in order’ before trying to integrate with its trading

partners and as such, many authors believe that a focus on integrating the internal

supply chain is necessary before an organization attempts to integrate with its

business partners (Burnell 1999, Stock and Lambert 2001). As organizations have

traditionally been based around functions, the elimination of functional silos and

the reorganization of the supply chain on a business-process basis is the first step

towards an integrated supply chain (Lambert and Cooper 2000). Internal integra-

tion can hence be seen to involve the achievement of seamless integration of

organizational functions (logistics, production etc.) that is facilitated by reorganizing

the organizational structure around key business processes (Daugherty et al. 1996,

Lambert and Cooper 2000).

Lambert and Cooper (2000) observed that in most supply chains studied to

date there were one or two strong leaders (focal organizations) among the firms

that drove SCM initiatives. Top management commitment from all organiza-

tions involved in these initiatives is also necessary to guide a chain towards

supply chain integration. Cultural compatibility between supply partners is

hence an important consideration in facilitating integration efforts (Daugherty

et al. 1996). The presence of this common ground between trading partners is

seen to enhance communication, trust and knowledge transfer throughout the

supply chain (Ghoshal and Bartlett 1995). A major focus of this collaboration

is to align goals and incentives within the supply chain so that all within the

supply chain work towards maximizing total supply chain profits (Handfield et al.

2000, Chopra and Meindl 2001). It is also important to use defensible costing

methods such as activity-based costing (ABC) to ascertain the benefits of pursuing

supply chain relationships.

Information technology (IT) is another key facilitator of SCI as it allows the

supply chain to be efficient, responsive and innovative. IT has the potential to

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provide the informational basis for reorganizing the supply chain so that it is more

integrated (Chandra and Kumar 2001a). Information is essential to SCM but

compatibility issues between trading partners do hamper cross-enterprise

integration (Chandra and Kumar 2001b). E-commerce and Internet technologies

offer low cost and easily customizable options for supply chain connectivity.

ERP systems have a definite internal focus providing organizational connectivity

and helping to better coordinate functions within organizations.

Given that the intent of the present research is to develop a prescriptive,

self-administered aid for enhancing supply chain integration, it was important to

review and gauge the prescriptive models of supply chain evolution that were

available in the literature; the five models we reviewed were cited in the introduction.

One of the more comprehensive and widely acknowledged models of SCI is the

supply chain compass developed by Manugistics (Fox 1999, Simchi-Levi et al.

2003). The supply chain compass purports to be a roadmap that companies can

use to progress through five stages of supply chain maturity. The model implies

SCI is a staged process and that an organization needs to integrate internally

before it evolves to a more advanced stage of SCI (e.g. external integration). The

supply chain compass includes the changes an organization will experience as

it becomes more integrated. For instance, as an organization evolves through the

stages of the supply chain compass, it moves from a more traditional functional

organizational structure to being organized around a number of key processes.

The accompanying managerial changes and the enabling technologies that facilitate

a particular stage of SCI are also outlined in this model.

We synthesized the information gained from the five frameworks cited in the

introduction into a summary framework that comprised four sequentially

dependent SCI stages. The first of these stages represents the lowest level of integra-

tion wherein the enterprise operates in disparate, functional silos. The second stage

is obtained when the enterprise becomes internally integrated; it consists of two

sub-stages, basic and advanced internal integration. This reflects the tendency

in the literature to differentiate between the formation of informal internal ties

between functions (as occurs with basic internal integration) and the development

of formal cross-functional processes (advanced internal integration). Stage three,

external integration, reflects the broadening of organizational boundaries to include

supply chain partners with the aim of facilitating more fluid information sharing,

goal commonality and the development of optimized processes. Stage four is the

final stage and reflects the unified operation of all constituents of the supply chain

that enables optimization across the entire supply chain as opposed to local

optimization.

Each stage is accompanied by evolution in the organization of the supply chain

and technological support. A staged evolution in information systems for SCI was

also recommended by Kim and Narasimhan (2002) in this journal. Empirical

data from manufacturing firms indicated that, as the stage of integration moved

from independent operation to internal and on to external integration, the focus

of information systems utilization should shift from infrastructural support

to value creation management and logistical operations. Kim and Narasimhan

(2002) concluded that this change of IS utilization focus could lead to sustainable

competitiveness.

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3. Methodology

As indicated in the preceding sections, several competing frameworks exist inthe literature for the assessment and progressive enhancement of supply chainintegration. We therefore saw fit to develop the prototype of our SCI enhancementframework from the ‘ground up’ through rigorous recourse to qualitative dataanalysis before aligning further development with one or the other framework(such as the 21st Century Logistics diagnostic).

3.1 Site selection

We first needed to identify organizations that we could examine in-depth and thatexemplified one or more facets of SCI, and we settled on two corporate membersof the NZ-based forum referred to above. The first company we studied, NZCom,was a natural choice. NZCom was the NZ subsidiary of a major multinationalcompany, GlobalGroup, and was involved in the distribution of a wide rangeof innovative products to a diverse NZ customer base. NZCom sourced theseproducts from multiple suppliers, many of which were internal suppliers withinGlobalGroup. NZCom sold its products through a network of distributors in NZand the South Pacific. NZCom also had a manufacturing division that suppliedthe rest of GlobalGroup worldwide with a niche-market product. Further,GlobalGroup had been identified by some of the scholarly references cited earlierin this article as being an organization that showed best-practice thinking in supplychain management.

BuildCom was a leading New Zealand manufacturer and distributor of a rangeof building materials. BuildCom’s leadership in SCI was indicated by its pioneeringdevelopment of advanced planning modules in conjunction with a major ERPvendor and by the frequent citation of its SCI initiatives in the NZ business press.

NZCom and BuildCom were of a similar size and had a turnover of aboutNZ$150 million (which at current exchange rates amounts to less than US$100million). They both employed around 200 people, considerably less than the limitof 500 employees that is applicable for SME manufacturers in the USA.

3.2 Data collection

In-depth interviews were the primary data gathering method. Certain companyspecific information was also obtained from company websites, annual reports,company documents and published write-ups in the business press.

Initially, the focus was to interview the ‘single most’ knowledgeable personwithin the organization with respect to his or her understanding of supply chainintegration (Kumar et al. 1993). We chose informants because they were bothknowledgeable about SCI issues and also willing to communicate them. TheDirector (IT and Supply Chain Services (SCS)) was thus selected as the key pointof contact at NZCom because he held a pivotal position with respect to drivingintegration efforts throughout the supply chain at NZCom. For example, forwardintegration was an area of the director’s responsibility that NZCom waspursuing very aggressively. At BuildCom, the key respondent was the Supply

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Chain Process Manager. His position was very much the cross-functional position in

the organization and hence he was responsible for ensuring internal integration as

well as driving integration backwards towards BuildCom’s suppliers. Both the

key informants had also expressed willingness to share their experiences as a result

of our contact with them at the supply chain forum; indeed, NZCom and BuildCom

had played an active role in formulating the research agenda in the first instance.

We also sought additional interviews with other employees within each organization

that the key respondents believed could add value to the study. The Director

(IT&SCS) at NZCom, for example, suggested that it would be useful to speak

to the General Manager (Manufacturing) as well as the E-commerce Development

Manager respectively. The Supply Chain Process Manager at BuildCom likewise

suggested a Product Manager who we also approached.

Table 1 presents the list of respondents as well as the extent of their roles in

the study.

The initial questions used in the interview process were adapted from the

synthesis of the supply chain maturity models, which was described in the preceding

section. An example of such a question is: ‘What is the nature of communication

and information sharing between supply chain members? For example, are demand

and forecast information shared frequently and in a timely manner, or is such

information shared minimally?’ Such a question was developed to ascertain the

level and frequency of information sharing throughout the supply chain, which is

an important component of SCI. We then subsequently asked the key informants

these questions to elicit their opinions. While the literature provided a basis for the

initial interviews, the inductive nature of the research meant that many questions

were derived from concepts that emerged during the interview process. The open-

ended nature of the interviews allowed additional questions to be asked as the

interview progressed, further enhancing the inductive quality of the research

(Yin 2003).

Each interview session was recorded on audiotape to ensure that all relevant

issues were captured. Once complete, the entire interview session was transcribed

from the audiotapes and then analysed using the technique of open coding (Strauss

and Corbin 1998). We subsequently carried out additional interviews with the

key respondents to follow up on points that had arisen from the open coding process

and also to clarify aspects that had been missed out in preceding interviews.

Table 1. List of respondents.

Respondent Firm DesignationNumber ofinterviews

Averageduration

Total number ofhours

1 NZCom Director (IT and SupplyChain Services)

5 1.5 hours 7.5

2 NZCom General Manager(Manufacturing)

1 1.5 hours 1.5

3 NZCom E-commerceDevelopment Manager

1 1.5 hours 1.5

4 BuildCom Supply Chain ProcessManager

6 1.25 hours 7.5

5 BuildCom Product Manager 1 1.25 hours 1.25

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3.3 Data analysis

We gathered an immense amount of data during the interview phase of thisresearch. For this reason, it was necessary to ensure that all appropriate informationrelating to SCI was captured and sorted in a manageable and logical manner. Theprocess of open coding was used to achieve this aim and enabled the data to bepresented in a conceptually coherent form (Strauss and Corbin 1998). Theproduct of open coding is a hierarchy of analytic constructs ranging from indicators(empirical phenomena) that fit into concepts (conceptual labels placed on discretehappenings, events and other instances of phenomena) through to higher-levelcategories (classifications of concepts).

Coding was undertaken through the careful analysis of the interview transcriptsfrom start to finish. At all times we maintained a focus on probing themes thatbegan to manifest in the data. The three facets of the inductive analysis of qualitativedata are indicated below. These are:

1. The repeated definition/redefinition of concepts and categories.2. The re-labelling of concepts and/or categories.3. The iteration between data gathering and data analysis.

A sample of the coding for both NZCom and BuildCom is provided in Appendix A.

3.4 Synthesis of the SCI enhancement framework

We recall the SCI enhancement framework was intended as a fine-grained roadmapthat was designed for self-administration by SME enterprises to enhance theintegration of their supply chains. Thus, the framework would allow user-companiesto be self-aware of their actions (with regard to, for example, functional structure,traditional costing mechanisms, absence of an information backbone etc.). It wouldalso force prospective user-companies to closely examine if the possible undesir-able consequences that ensued from not pursuing a given SCI initiative wereindeed major problems in the first instance, or if these consequences were otherwisecombated or resolved in some manner. Each item in the framework was intendedto focus the user-company on the following two questions (thus, in accordance withthe recommendation of Ho et al. 2002, in this journal that the context–practicesrelationship in SCM not be overlooked, we recognise the contextual nature ofSCI initiatives).

1. If the user-enterprise is using a SCI management concept/idea, is it fullyutilising the potential from this concept/idea?

2. If the user-enterprise is not using a SCI management concept/idea to asufficient degree, does it have sound reasons for not doing so?

Given the imperative of developing a finely grained framework, we were particularlyintent on capturing the inherent richness, arising out of formal qualitative dataanalysis, in the prototype. (Indeed, a major, if not the sole, reason for the induc-tive development of the enhancement framework through in-depth case studyresearch was to ensure depth of data for each item in the framework.) Therefore,we directly synthesized the concepts developed in the open coding process (and theirassociated indicators) into a comprehensive documentation of SCI initiatives.

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Throughout this process, we strove to incorporate as many relevant conceptsand associated indicators as possible in the prototypical framework.

The analysis in the open coding spoke strongly to the inclusion of three facetsof integration in the enhancement framework: internal integration; forward integra-tion; and backward integration. Under each of these facets, we listed sub-themes,e.g. ‘activity-based costing’ in the case of internal integration.

4. An SCI enhancement framework

4.1 Preliminary observations

Our approach of inductively analysing the experiences of NZCom and BuildComvis-a-vis supply chain integration was vindicated by our uncovering discrepanciesbetween empirical experience and extant SCI frameworks. For instance, extantliterature commonly portrays SCI as entailing a series of sequentially linkedstages: a distinctive theme is that an enterprise first integrates its internal supplychain linking the various functions before integrating forwards with customersand/or backwards with suppliers. Also, Stank et al. (2001) found that internalcollaboration mediated the relationship between external collaboration and logisticalservice performance: collaboration with external supply chain entities influencesincreased internal collaboration, which in turn improves logistical service.Stank et al. (2001: 40) concluded that was the reason best-practice firms focuson both: ‘external collaboration is a necessary but not sufficient condition forperformance improvement’.

Nevertheless, our findings from NZCom and BuildCom suggest that a simple,‘stages’ framework that posits a precedence relationship between internal andexternal (either forward or backward) integration cannot be easily reconciled withempirical data. At BuildCom, for example, our key respondent clarified that internalintegration did ‘not really’ lead to integration with suppliers: ‘There are a lot ofnice things to have in a business . . . . Really the more seamless relations we haveacross the supply chain the better things are going to happen. The question is howmuch time, energy and resources are we prepared to put into [for] getting those sortsof relationships and with whom do we attack. We are pretty careful, we only havelimited resources to put into relationship-building, be it an electronic relationshipor a closer relationship with people. I don’t think any business has to have a reallyclose relationship with every supplier or [really close] relationships within thebusiness in terms of time you put in to manage them. So we are very carefulabout the time we put into each relationship. It is really just done on a case-by-case basis to satisfy what our needs are and our requirements are . . . . The factthat we had an integrated internal structure—did it lead to an integrated [externalstructure]? No, not really. That’s just driven by . . . either company strategy or onan as-needed basis. [Internal and external integration] could quite well havedeveloped at the same time’.

The above comments reinforce the need to develop an enhancement frameworkthat is grounded in enterprises’ experiences and perspectives of supply chainintegration. Thus, rather than conceive the need for a temporal relationship betweeninternal and external integration, we should instead think in terms of at least three

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facets of integration (internal integration, forward integration and backwardintegration) that are distinct and temporally unrelated. While the literature hasalso suggested the concept of end-to-end integration, we did not include thisfacet in the framework largely because end-to-end integration, as expressedin the literature, essentially represents dual excellence in forward and backwardintegration.

Table 2 presents an outline of the enhancement framework. The full frameworkappears in Appendix B.

4.2 Illustration of the framework

Below, we illustrate the empirical derivation and substantiation of one of theitems in the enhancement framework, namely, activity-based costing, which is asub-theme of internal integration. First we present an extract from the conceptsand associated indicators obtained through the inductive analysis of qualita-tive data from NZCom and BuildCom. Then, we show how the various conceptsand indicators spawned the associated items in the framework.

Rationale for activity-based-costing (NZCom)

. Initiating process change by revealing true costs of activities: ‘Going backthree years ago to when we introduced ABC and this was one of thesingle biggest catalysts to cause a complete shift in the business becauseright up to this time all the supply chain costs were dumped into one bigbucket and then spread on a percent to sales basis. The minute we changed

Table 2. Enhancement framework overview.

Theme Sub-theme (items in the framework)

I. Internal integration I.1 Organizational structure—multi-divisional businessesI.2 Organizational structure—cross-functionalityI.3 Organizational structure—the supply chainI.4 Organizational structure—PC/ITI.5 Supply chain segmentationI.6 Activity-based costing (ABC)I.7 Information technology/information systems

F. Forward integration F.1 Relationship managementF.2 Development of win–win relationshipsF.3 E-commerce connectivity with customersF.4 Benefits of e-commerceF.5 Effort on behalf of the focal organization for e-commerceF.6 Initiatives to ‘encourage’ customers to interface electronicallyF.7 Information technology employed at the customer base

B. Backward integration B.1 Differential selection of suppliersB.2 Differential management of suppliersB.3 Performance measurement of suppliersB.4 Closeness of relationships with key suppliersB.5 Technology in the supply chainB.6 Technology interfaces with suppliers

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that and charged the true activity costs for businesses we found that busi-nesses we thought were doing well were really not doing well at all, as theyhad been subsidised. It really caused process change about the way wedid business and some of the business products were handled. Some ofthe business managers had to change quite drastically what they weredoing. We had to work with them to change their business process’.

. Ability to ‘quickly value and verify what really is the benefit’ to NZCom fromintegration initiatives with customers (especially electronic trading).

. Ability to ‘show the cost of that activity improvement and [the benefit] thecustomer was going to get if he complied and did certain things at his end . . . .If a company hasn’t got an ABC platform it’s very difficult to be able tojustify how big or how small the pass-over is going to be’.

. Ability to ‘keep the price of the product and the technical services completelyseparate and value-related because our businesses may want to increase theirprices for a whole lot of different reasons, market, the whole works’.

. Variation in infrastructure requirements across businesses: ‘The minute one[business unit] starts to have 60% more infrastructure than the other one youwould want to start to say why the difference, and if you are drawing on thesame service support groups, you need to pay for what you are using’.

The above indicators that speak to NZCom’s rationale for institutingactivity-based costing spawn the following items:

1. If ABC is used to attribute costs to individual products/business units withinthe business:

(a) How has it been used to initiate process change in the supply chain (e.g.in customer order fulfilment)?

(b) To what extent is ABC used to swiftly value and verify the real benefitto the company from integration initiatives (e.g. e-commerce) withcustomers?

(c) Towhat extent is ABCused to justify the degree towhich cost savings fromintegration initiatives (e.g. e-commerce) are passed on to customers?

(d) If applicable, to what degree does ABC enable the company to keep theprices of the product and of value-added services (e.g. technical support)completely separate?

(e) If applicable, to what extent do multiple divisions/business units withdifferential infrastructure requirements ‘pay for what they use’, and passon those costs to their respective customers?

Rationale for not using activity-based-costing (BuildCom)

. High cost in implementing ABC: ‘It is more the cost of putting ABC in’.

. ‘It is a very high overhead to manage right now. [For example,] wecurrently [have] to get real-time costing on jobs’.

. ‘We need to put a huge investment in systems’.

. Adequacy of apportioning overhead: ‘Because we are such a very highvolume business, we just have an overhead cost that gets apportioned.

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We make assumptions in terms of how it gets apportioned. To actuallymeasure the detailed workflow . . . hasn’t been a major business requirement’.

. Limited potential for gainful application: ‘[Warehousing aside,] there is not aperceived need in other areas of our business’.

The above indicators that speak to BuildCom’s rationale for not institutingactivity-based costing spawn the second of the two principal items under thatsub-theme.

2. If ABC is not used, explain why. For instance, (i) is it the cost of puttingABC in (overheads such as the need to get real-time costing on jobsand investment in systems), (ii) the adequacy of a simplistic apportion-ment of overheads given large business volumes, (iii) potential for gainfulapplication in only certain elements of the supply chain such aswarehousing? etc.

5. Discussion and conclusion

We have presented the inductive development of a framework that enterprisescan employ to systematically enhance the integration of their supply chains;as before we refer to the framework as SCIEF (SCI Enhancement Framework).SCIEF has been motivated by the need to enhance the participation of SMEsuppliers and resellers in integrated supply chains, particularly in the NZcontext where the authors are based. Accordingly, in the development of theprototype reported here, we first inductively analysed the experiences vis-a-vissupply chain integration of two leading NZ enterprises, NZCom andBuildCom. We then incorporated the case findings into a prototype of SCIEF.

The major difference between extant frameworks (e.g. the 21st Century Logisticsdiagnostic) and the prototype of SCIEF reported here is that the former areeither ‘coarse grained’, i.e. dealing with each theme/facet of integration in abroad-brushed manner through for instance, a handful of Likert-type questionnaireitems, or empirically ill-grounded. The present framework, on the other hand,documents through rich case data the various initiatives pursued by exemplaryorganizations vis-a-vis the different facets of integration (such as activity-basedcosting) as well as the underlying rationale.

Further case studies would be needed before theoretical saturation (Strauss andCorbin 1998) is reached. However, we recall that Bowersox et al. (1999) andChilderhouse and Towill (2002) found that best-practice was similar across firms,regardless of industry, channel position or firm size. This suggests that few additionalcase studies would be needed to complete the development of SCIEF: theoreticalsaturation would be realised sooner than later.

Moreover, the richness of the prototype presented here belies the small numberof firms that have been investigated thus far. This richness has been possible fortwo reasons. The first is the depth of data gathered in the field investigations ofthe two firms. The second reason is the very deliberate selection of NZCom andBuildCom: the contrasting firms were chosen for the purpose of extending theframework as much as possible in lieu of merely having one setting replicatethe findings from the other.

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We recall from the introduction that the 21st Century Logistics diagnostic andSCIEF can be employed in a complementary manner: SCIEF would be a fine-grainedand actionable complement to broader-brushed frameworks such as the 21st CenturyLogistics diagnostic. Given the rough correspondence between SCIEF and the 21stCentury Logistics diagnostic, subsequent case study research of exemplary enterprisescould conceivably entail the progressive use of codes/concepts that are borrowed fromthe diagnostic. This would be in lieu of in vivo codes/concepts, i.e. those that areinduced from interview/observational data in a tabula rasa manner, starting fromscratch. The selection of enterprises to investigate and analyse will be guided by theprinciple of theoretical sampling, i.e. organizations will be selected on the basis of theirpotential to help extend the framework rather thanmerely replicate it. (The enterpriseschosen could be those that score highly on one or more dimensions of supply chainintegration, in relation to benchmarks developed through the 21st Century Logisticsdiagnostic.) This will help round off the development of SCIEF prior to testing,validation and dissemination.

In operational terms, while enterprises can use a coarser-grained, self-assessmenttool such as the 21st Century Logistics diagnostic to benchmark themselvesagainst leading enterprises, the elements of SCIEF could represent ‘drill-down’,actionable complements. Thus, an enterprise, which scores low on segmental focusin relation to 21st Century Logistics benchmarks, can ‘drill down’ segmentationthrough SCIEF and examine what it is doing or not doing in comparison withleading enterprises that comprised the benchmark scores. It should be noted,however, that several themes in SCIEF (such as those pertaining to e-commerceintegration) are not fully represented in the 21st Century Logistics diagnostic;thus, a modified version of the diagnostic would be needed for the purpose ofdeveloping benchmarks.

Appendix A: Sample coding for NZCom and BuildCom

Challenges to integration at NZCom

. Multiplicity.

. Multiple business groups.

. ‘Servicing many different markets’.

. Multiple product types (‘industrial products, high-tech products and med-ical products’): ‘Where you are in single product [situation,] it is mucheasier to do than multiple [products]’.

. Multiple sources of supply: ‘The problem for us is that we might offer arange of products to a particular channel and they are from such multiplesources of supply it is just that much more difficult for us . . . We have todeal with different suppliers in different countries even though their globalcountry competency is different’.

. Multiplicity of autonomous regional subsidiaries: ‘Historically theNZCom world has been divided up’ into the US, Canada, Europe,Japan, etc.

. Multiplicity of systems worldwide: ‘There have been different ITplatforms throughout the world. Europe has been different from the US

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that is different than Canada that has been different than Japan. And thenyou have had a nest of Asian countries and a nest of Latin Americancountries that have AS400 platforms as an example. So we have had adisparity in terms of systems’.

. Variability.

. Variation in source of supply: not ‘very constant; . . .we are actually hav-ing [some sources within the GlobalGroup family] discontinued as asource of supply for us as they are costing us money . . . As we continueto transfer manufacturing processes around the world, like in Asia, thereare whole supply chain issues coming into play. About where manufactur-ing locations are sited; how much of a product do we manufacture in onecompany compared to another’.

. Variation across countries of multi-national suppliers: ‘I don’t know howmany occasions that we have suppliers that are the same in many countriesbut we just can’t deal with them’.

. Variation in replenishment lead-times: ‘There is huge variation in factorylead time, and transit times, and bits and pieces. We often have to invest ina whole different strategy to provide a seamless supply locally here to ourcustomers. We have had to build in a whole lot of safety stock here tocover for all eventuation occurring’.

. Variation across NZCom regions in backward integration: ‘In the USand in Europe they have been particularly strong in driving integrationefforts back into the supplier. In Asia Pacific we are probably just startingto get to grips with that and starting to do that back into the supplier’.

Salient characteristics of the process of effecting SCI at BuildCom

. Presence of an underpinning philosophy: ‘The more seamless relations wehave across the supply chain the better things are going to happen’.

. Case-by-case nature: ‘It [SCI initiatives] is really just done on a case-by-casebasis to satisfy what our needs are and our requirements are’.

. The need ‘to have a real commercial reason for everything we do in thebusiness . . . Although we are one of NZ’s largest users of technology andleading information systems for manufacturing, we categorically will notput technology in for technology’s sake. It has got to be solving a specificproblem or issue or opportunity that we are faced with so when I say thereis a drive for technology, I would rather say that there is a drive to be ableto control the inventory and materials’ flow backwards through the supplychain more than we have . . . . As long as we use this knowledge [gainedthrough data from ERP] to add value to our business, then the effort isworth it’.

. Eschewal of textbook prescriptions that lack commercial relevance toBuildCom: ‘We are not a business who will do things because a textbooksays it is the way things should be done. [Thus,] there has been no consciouseffort to create cross-functional teams, and I suppose cross-functional teamshave evolved’.

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. Careful deployment of limited resources: ‘We are pretty careful, we onlyhave limited resources to put into relationship building, be it an electronicrelationship or a closer relationship with people. . . . The question is howmuch time, energy and resources you are prepared to put into getting it’.

Extraneous factors that enhance supply chain performance at BuildCom

. Minimal susceptibility to the bullwhip effect owing to inventory pooling:‘We are forecasting straight from the end market place and because thereis very limited inventory held between us and the market that effect is verysmall. We hold the vast majority of inventory for the market place so there isnot much inventory in the supply chain at all’.

. Large market share: ‘Because we have a large market share in the industry,building consents is a very accurate indicator of the level of demand activityon this business . . . . Our forecasting is very good’.

Appendix B: Supply chain integration enhancement framework

I. Internal integration

I.1 Organizational structure—multi-divisional businesses

If the business is multi-divisional,

I.1.1 What is the extent to which logistics personnel are decentralized into thevarious divisions as opposed to being centralized in a stand-alone functionalgrouping? If some or all personnel are not decentralized, what is the rationale?

I.1.2 To what degree are logistics support personnel physically co-located withmarketers in the interest of better communication to enable, for example,superior customer service delivery?

I.1.3 Do supply chain/logistics personnel report to either only business-level supplychain manager(s) or only to divisional-level marketing managers, or are theydually accountable?

I.1.4 Are performance reviews conducted jointly by division-level managers andgroup-level logistics/supply chain manager(s)?

I.1.5 If decentralization is practised, what methods are used to ensure thefunctional professionalism of supply chain personnel? For example, arethere monthly meetings within each logistics discipline (e.g. materials man-agement) to enable functional employees to leverage ideas with their counter-parts in other divisions?

I.2 Organizational structure—cross-functionality

I.2.1 If the organization lacks a matrix structure, to what degree do inefficien-cies result thereby? For instance: (i) Are there time delays in translatingmarketing ideas into a marketable product due to communication problemsbetween departments? (ii) Do functional staff members not take into accountthe knock-on effects of their decisions on other departments?

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I.2.2 To what degree are key planning processes performed in a cross functional

manner? For instance: (i) Is the sales and operations planning process a cross-

functional process that includes input from many functional departments

(marketing, sales, operations etc.)? (ii) Is the forecasting process a cross-func-

tional process between marketing and operations? If not, explain why. For

example, does a sufficient capacity cushion in the business alleviate the need

to consider the other functional departments in sales/operations planning?

I.2.3 What cross-functional techniques are used to improve information flow in

the business? For example, are there formal meetings between marketing and

operations to ensure that any new information (such as a promotion) is fed

into the planning system?

I.2.4 To what degree are cross-functional personnel required to sign off on impor-

tant purchase orders?

I.2.5 To what degree is there a deliberate initiative to foster internal integration

by the cross-training and rotation of staff in a variety of functional areas?

Does the performance appraisal programme support this? For example, is a

regular (e.g. annual) development process used to determine cross-functional

opportunities for employees?

I.2.6 To what degree are cross-functional teams developed, on an as-needed basis,

for initiatives that bridge a number of disciplines for a significant time period?

(An example might be the constitution of a multi-functional team for estab-

lishing a 10-year customer service promise.)

I.2.7 If the organizational structure remains functional to a considerable extent and

cross-functional teams execute only selected processes, to what extent have key

personnel in the supply chain moved between functions in the organization?

I.2.8 To what extent are processes re-structured to better integrate internally?

For example, is operations positioned as the locus of supply chain activities

to pull back-end functions together? Are there definite plans to develop other

activities, such as R&D, into more cross-functional processes?

I.2.9 If the organization lacks a matrix structure and if cross-functionality is

pursued to only a limited extent, what is the rationale? For example,

(a) Is it because most functions already have a good appreciation of the

priorities and concerns of other functions? (For example, does the sales

force have an appreciation of how the decisions it makes will influence

the operational costs of the business?)

(b) Does a lack in the perceived return on investment from pushing cross-

functional relationships further prevent the organization from pursuing

a matrix structure?

I.2.10 If the organization lacks a matrix structure and if cross-functionality is

pursued to only a limited extent, are there currently staff members who already

act in a cross-functional manner, either formally or informally? For instance:

(i) Are there management personnel, in formal cross-functional positions, who

bridge the gap between the functional departments? (ii) Do at least senior

executives (e.g. Operations Director) maintain very cross-functional

roles, i.e., does cross-functionality manifest at least at the upper levels of the

organizational hierarchy (if not throughout)? (iii) Do functional personnel

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already develop cross-functional relationships on an as-needed basis? Forexample, do the marketing personnel who sell imported products have acloser connection to the supply chain through necessity? (iv) Do some market-ing personnel work cross-functionally, as a result of their operational back-ground, and proactively inform other functions affected by their decisions?

I.2.11 If the organization lacks a matrix structure and if cross-functionality ispursued to only a limited extent, is the execution of some processesdeliberately confined to specific departments/functions for some organiza-tion-specific rationale? (For example, demand forecasting might involveprincipally only operations because marketing might lack the requisitestatistical skill-sets).

I.3 Organizational structure—the supply chain

I.3.1 To what extent do businesses/organizational departments see close relationswith the logistics function as a key factor in the provision of excellent custo-mer service? If the company is multidivisional, how does this influence thepositioning of this department? For example, are personnel decentralized intothe individual businesses?

I.3.2 What means are employed within the organization to foster the serviceorientation of the logistics department? (For example, the logistics groupmay be designated as the Supply Chain Services Group.)

I.3.3 To what extent do individual businesses/divisions take ownership of thesupply chain? How is this manifest? For example:

(a) Are supply chain managers willing to promote the supply chain as beingowned by the businesses?

(b) Is there regular discussion, in non-crisis periods, between marketers (forexample) and logistics personnel about different ways to go to market?

(c) Do the other businesses/divisions proactively come and seek logisticalassistance when faced with problems?

(d) Does the logistics group allow the activities of its staff to be controlledby the divisions/businesses rather than dictate the activities that thesestaff will perform?

(e) Is the support of the businesses/divisions sought to endorse invest-ments for the supply chain? For example, is there a requirement toget sign-off from the businesses/divisions to support major supplychain investments that will have organization-wide benefits?

I.3.4 To what extent do the business units/departments have a good idea ofsupply chain management processes and ideals (for example, is the marketingdepartment conscious of problems, such as expediting and stock-outs, thatmay occur if operations is not informed of sales forecasts)?

I.4 Organizational structure—PC/IT

I.4.1 To what extent are the synergies between IT and SC exploited in the organi-zation? For example, are both departments located under one sponsor toobviate negotiations between the supply chain and an external IT depart-ment? If not, what is the rationale?

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I.4.2 If a multidivisional company, if PC/IT is not decentralized:

(a) Is this to enforce commonality of systems amongst these departments?(b) Is this because PC/IT has a small critical mass of IT personnel and it

does not making sense to split these personnel out?(c) Does operating from a central position make it easier to pool resources

and schedule personnel?

I.4.3 To what extent does the organization foster close interaction betweenPC/IT personnel and other functions? For example, do PC support personnelwork ‘on the road’ with sales personnel to assist them to get the most out oftheir technology?

I.4.4 To what degree do strategically positioned technical personnel report toupper management? For example, does the e-commerce developmentperson report directly to the GM?

I.5 Supply chain segmentation

I.5.1 How is the supply chain segmented across the customer base and/or productgroups? For instance, if both hazardous and general goods are distributed: (i)Are they transported by different carriers? (ii) Does end-user documentationvary? (iii) Do packing slips vary?

I.5.2 If segmentation is practised,

(a) Is the supply chain velocity of those goods with less stringent require-ments (e.g. general goods) significantly greater than that of goods withmore stringent requirements (e.g. hazardous goods, frozen goods etc.)?If not, why?

(b) To what extent, does segmentation eliminate cross-subsidization amongproducts and reveal true costs?

(c) To what extent does segmentation enhance customer service (e.g. super-ior provision of product information for hazardous goods)? More spe-cifically, to what extent does the enterprise exploit the use of differentialcarriers to differentiate customer service provision (e.g. productinstallation) across product/customer groups?

(d) If distribution channels converge, what synergies does the enterpriserealise? For instance, are customs clearance processes standardizedand electronic interfaces generic?

I.5.3 If segmentation is not practised in any significant manner, clarify why. Forinstance: (i) Does the improvement in margins through operational efficiencythat arises from a generic supply chain, outweigh any benefits from segmen-tation? (ii) Does the desire to serve as a one-stop shop to a fairly homogenouscustomer-base push against segmentation?

I.6 Activity-based costing (ABC)

I.6.1 If ABC is used to attribute costs to individual products/business units withinthe business:

(a) How has it been used to initiate process change in the supply chain (e.g.,in customer order fulfilment)?

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(b) To what extent is ABC used to swiftly value and verify the real benefit

to the company from integration initiatives (e.g. e-commerce) with

customers?

(c) To what extent is ABC used to justify the degree to which cost savings

from integration initiatives (e.g. e-commerce) are passed on to custo-

mers?

(d) If applicable, to what degree does ABC enable the company to keep the

prices of the product and of value-added services (e.g. technical support)

completely separate?

(e) If applicable, to what extent do multiple divisions/business units with

differential infrastructure requirements ‘pay for what they use,’ and pass

on those costs to their respective customers?

I.6.2 If ABC is not used, explain why. For instance: (i) Is the relatively high cost

(overheads such as the need to get real-time costing on jobs, and investment

in systems) of putting in ABC a barrier? (ii) Is a simplistic apportionment

of overheads adequate, given the business volumes? (iii) Is there potential

for gainful application in only certain elements of the supply chain such as

warehousing?

I.7 Information technology/information systems

If an ERP system is not used:

I.7.1 To what extent do users have difficulties in accessing all the desired

functionality of legacy systems? For example, are users required to sign

in and out of different programs? What methods have been identified to

alleviate these problems? For example, have software bridges been developed

to connect disparate modules?

I.7.2 To what degree has the legacy system proved problematic with respect to

achieving line of sight throughout the organization? What methods have

been explored to overcome this (e.g. the prospective implementation of an

ERP system)?

I.7.3 To what extent have there been difficulties in forecasting and planning due to

inefficient methods for sharing information within the organization? What

results from this (e.g. high levels of inventory and expediting)?

I.7.4 To what extent has a multitude of disparate databases created extra work

(e.g. maintenance) and difficulties for the organization’s IT resources?

I.7.5 To what extent has a lack of a common organizational IS platform inhibited

integration efforts with trading partners?

I.7.6 If the business is a subsidiary, to what extent has there been a disparity

throughout the group in terms of inconsistencies amongst processes, applica-

tions and systems? To what degree is there a current drive to overcome these

problems (e.g. by the implementation of a group-wide ERP system) and why?

If the business/group is pursuing the implementation of an ERP system:

I.7.7 What methods have been used to ensure that the new system meets the needs

of all users? For example, did the implementation involve business personnel

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from different functions or in the case of subsidiaries, representatives from thedifferent businesses in the group?

I.7.8 What methods (e.g. ‘Is vs. Should’ process mapping) have been used indetermining the required functionality of the system? To what degreehas consensus been achieved across the departments/subsidiaries about thisfunctionality? How was such consensus obtained?

F. Forward integration

F.1 Relationship management

F.1.1 If the organization does not deal directly with end customers, to whatextent does it try to achieve a level of connectivity with key end-users(for instance, developing connectivity with influential installers of productto ensure brand loyalty or capture end-user ideas for new productdevelopment)?

F.1.2 What methods are used to engender trust with trading partners? For instance:

(a) Are specific individuals, such as sales managers, responsible for creatingrelationships with customers?

(b) To what degree are the interests of existing distributors considered firstand foremost in comparison to pursuing other goals, such as expansionof the distributor base? For example, is product/territorial demarcationused to protect major distributors and subsequently build trust withthem?

(c) To what extent are there attempts to align strategic goals with distribu-tors in times of intense competitive pressure to jointly make the productmore competitive?

(d) What types of value-added support are given to customers? Forinstance: (i) marketing support; (ii) provision of extensive productusage/installation information; (iii) provision of services such as busi-ness seminars; (iv) product training; (v) provision of distributor salesanalysis information etc.

F.1.3 In the recruitment of new distributors, to what extent is the encroachment,if any, of the new distributor upon sales of the existing distributor base, aconsideration?

F.1.4 Are customers managed differentially according to, for instance: (i) the sizeof the distributor with respect to sales volume; (ii) the influence of the parti-cular distributor within a region; (iii) the dollar value of a distributor’s busi-ness etc.?

F.1.5 What performance rewards are given to customers to encourage them togrow their business? For instance: contribution to sales advertising; technicalservice; growth rebates; marketing assistance; market/sales analysis; pricerebates etc.

F.1.6 Does the organization manage the inventories of its key customers? If not,what is the rationale? For instance, is there already sufficient complexityin product lines to ensure distributors are tied in? Alternatively, is existingcomplexity in the stocking of product prohibitive of such initiatives?

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F.1.7 Is the use of collaborative planning invoked with customers?F.1.8 To what extent are there regular meetings with trading partners to resolve

conflicts/problems and develop a shared direction for the supply chain?

F.2 Development of win–win partnerships

F.2.1 What criteria are used to identify distributors with whom to enter intolong-term relationships? For instance: (i) the existence of joint trust,cultural compatibility and goal commonality (in areas such as takingcosts out of the supply chain) that have been built up over time due toexperience with this distributor; (ii) the distributor’s possessing goodbusiness sense and good business systems that facilitate forwardintegration; (iii) the distributor’s being a worthy representative in themarketplace etc.

F.2.2 To what extent has the development of win–win partnerships with customersbeen driven by top management in both organizations?

F.2.3 To what degree are there connections between personnel in the organiz-ation and their counterparts in trading partners? What is the depth inthe organizational hierarchy to which such communication extends,e.g. is it just at the level of top management or does it percolate to thelowest levels?

F.2.4 What methods are used to ascertain the benefits of establishing a win–winrelationship with a distributor? For example, is there open sharing of orderprocessing costs and physical distribution costs between the organizationsto help in ascertaining hard cost (dollar savings) and soft cost (resourcealleviation) benefits?

F.2.5 To what degree is ABC used to quantify the benefits of entering into a win–win partnership? If ABC is not used, how are the benefits resulting from thispartnership objectively determined?

F.2.6 To what extent do both organizations become involved in helping each otherdetermine the benefits resulting from entering into a win–win relationship?In any event, how is the sensitive situation resolved where a customer believesthe benefits arising from an initiative (e.g. e-commerce) are higher than theyactually are? For instance, is that customer invited into the organization toappreciate its efficiency first-hand and walked through how the benefits maybe smaller than imagined?

F.2.7 How are the benefits from moving closer with customers, for example, savingsfrom order consolidation or e-commerce, passed on to customers? For exam-ple, is a logistics rebate used that stops when the customer ceases to conso-lidate orders? If instead savings are reflected in price reductions, how does theorganization cope with putting prices up if the customer no longer complieswith, for instance, stipulations for logistics rebates?

F.2.8 To what extent has trust facilitated the sharing of information? For example,information about actual sales and growth opportunities; inventoryavailability, etc.

F.2.9 To what extent does the organization assist customers in optimizing theirown processes and operations with the aim of improving supply chainefficiency?

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F.2.10 To what degree do both parties get ‘locked in’ with each other in thedevelopment of a win–win relationship? For instance, is it difficult forcompetitors to replicate this relationship with the distributor and likewise isit difficult to uncouple such a relationship?

F.3 E-commerce connectivity with customers

F.3.1 Are customers presented with a variety of e-commerce options (EDI, orderingthrough a website etc.) that cater to their individual needs? For example, EDImay be appropriate for customers who trade large volumes with the organi-zation; the additional resources required for EDI (over other options) pay offthrough productivity gains. Likewise, ordering off a website may be moreappropriate for small-volume customers (due to problems of double-entry).

F.3.2 What functionality has been included in the Internet interface to facilitatecustomer buy-in (for example, the ability for customers to enjoy 24� 7 self-service, discrete order placement, quicker turnaround of orders and onlineproduct information)?

F.3.3 If applicable, why are there differences in the customer base with respect tothe distributors’ uptake of electronic integration? For instance: (i) Are somemajor distributors technologically immature or lack IT resources? (ii) Aresome market segments more electronically savvy than others? (iii) Are somedistributors unable to participate because of ideological beliefs? How willthese differences be addressed?

F.3.4 If e-commerce connectivity has not been developed with the customer base,what is the rationale behind the use of manual methods of order placement?For instance: Is it the high cost of developing electronic interfaces with cus-tomers? Is there a lack of top management support for the initiative? Is therea perceived inability of the customer base to be able to utilize such technology(perhaps because of store-level ordering and small-sized distributors) andhence for both organizations to achieve productivity gains? Are technologi-cally immature customers unable to take advantage of such a situation?

F.4 Benefits of e-commerce

F.4.1 To what extent is the current e-commerce rollout primarily concerned withreceiving information from customers (e.g. purchase orders)? If this is thecase, how has the organization gained customer buy-in given the majorityof productivity benefits are with the organization at present?

F.4.2 Once the customers receive information, how will this balance of benefitschange? For instance, when receiving information from customers, are thebenefits mainly with the organization and when sending information are thebenefits mainly with the customer?

F.4.3 To what extent has/will the development of e-commerce linkages withcustomers free up the customer service resource? How will this resourcebe utilized? For instance, will the freed resource be used to perform morevalue-added requests for customers (e.g. resolving a product applicationquery for a customer)?

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F.4.4 To what extent is there a desire to expand the e-commerce interface from justreceiving information to sending a variety of information (such as invoices) inthe future? With reference to customers who already trade electronically withthe organization, are savings realised for the organization in postage, cash-cycle and productivity gains? Are customers enjoying automated reconcilia-tion when receiving invoices?

F.4.5 To what degree has e-commerce resulted in joint benefits for the organizationand the participating trading partners? For instance: (i) Does e-commerceallow trading partners to easily and electronically share supply and demandinformation? (ii) Does it improve line of sight? (iii) Does it take costs out ofboth the organization and its customers? Have these savings been identified?

F.4.6 To what extent is the e-commerce initiative constrained by operationalexcellence in terms of order turnaround and delivery in the organization?Are there any plans to purposely differentiate order delivery in future tomake e-commerce a more attractive and speedier solution for customers?

F.5 Effort on behalf of the focal organization for e-commerce

F.5.1 Does most of the onus for enabling e-commerce connectivity fall on theorganization at present? If so, what is the reason for this? For instance:(i) Are customers not up to speed technologically and do they need help toenable an interface? (ii) Do the benefits mainly lie with the organization atpresent and do customers therefore attribute low priority to e-commerce?

F.5.2 To what extent has seamless e-commerce connectivity been supported bycareful planning (e.g. ensuring that all the platforms, digitization and productstandardization have been set up prior to connecting with customers)?

F.5.3 To what extent has the development of e-commerce interfaces with customersinvolved interactions between the e-commerce development staff and entitiessuch as IT, sales, marketing and customers? If very little, why?

F.5.4 What methods are used to eliminate excuses from customers for not orderingelectronically? For example:

(a) Being very flexible and prepared to do most of the initial work in gettingthe customer connected electronically such as by enabling an interface.

(b) Being prepared to change functionality in line with customer wants (e.g.expressing order quantities in customer-specified units and being able toincorporate store IDs for direct-to-store delivery).

(c) Having a flexible approach with a lot of functionality to send andreceive ASNs, invoices etc.

F.5.5 To what degree, in the e-commerce implementation, has significant processchange been avoided by progressively adding functionality to the e-commerceinterface?

F.5.6 To what degree has e-commerce gained internal buy-in by having thee-commerce development team provide support for the functional areas ofthe organization?

F.5.7 To what extent is the organization currently looking at process change toposition tasks currently performed by the e-commerce team into functionalareas (e.g. the positioning of digitization in marketing)?

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F.6 Initiatives to ‘encourage’ customers to interface electronically

F.6.1 To what extent is top management driving electronic trading with customersthrough, for example, an edict from the MD/GM that all new distributorsmust be able to trade electronically? Have e-commerce growth targets beendeveloped to reinforce this?

F.6.2 If a top management edict (or equivalent initiative) has been used to enforceelectronic trading, has this caused a conflict with departments/businesses thatare attempting to grow sales? What means have been used to overcome suchconflict?

F.6.3 Is there a tendency for customers who have been set up electronically tododge electronic trading? What has been the reason for this? For example,has there been a lack of controls to prohibit electronically enabled customersto order manually from the CSRs?

F.6.4 What methods have been used to facilitate buy-in from the customerbase? Possible methods include: (i) educating customers that theorganization is e-enabled; (ii) pushing the benefits that can be obtainedby trading with customers electronically; (iii) training the sales force torecognise the potential for distributors to use electronic commerce;(iv) aggressively advocating and encouraging, through constant contactwith customers and edicts, electronic business interfaces; (v) addressingconcerns that individual customers may have with ordering electronically;(vi) providing free semi-consulting to distributors about e-business issues;(vii) providing a smorgasbord of e-commerce options to be flexible tocustomer needs etc.

F.6.5 Are incentives provided to encourage customers to trade electronically(for instance, a one-off deal or a rebate for placing the biggest electronicorder in the month)?

F.7 Information technology employed at the customer base

F.7.1 If point-of-sale (POS) data is not captured from customers, what is therationale? For example, are existing forecasts accurate enough (perhapsbecause the organization has a large market share that closely equates toaggregate demand) that the return-on-investment on capturing POS data isnegligible?

F.7.2 To what extent is CRM technology used to capture the current and latentneeds of customers in an effort to improve SCI? If this does not occur, explainwhy.

B. Backward integration

B.1 Differential selection of suppliers

B.1.1 What criteria are used when selecting key material suppliers? For instance:(i) alignment with key organizational objectives such as R&D capabilities;(ii) the ability of the supplier to add value to products and grow with theorganization.

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B.1.2 When selecting key raw material suppliers, what factors are more importantthan price in the relationship (for example, cultural compatibility, R&Dprowess, quality of products etc.)?

B.1.3 How are suppliers of less important products selected (e.g. primarily on pricefor a given quality level)?

B.1.4 What emphasis is placed on price in the selection of a supplier? Are suchsuppliers still watched quite closely (irrespective of the importance of asupplier) due to competitive pressures?

B.2 Differential management of suppliers

B.2.1 How is management resource differentially apportioned across the supplierbase? For instance: (i) Do the higher volume/value suppliers receive greatermanagement time, systems support and allocation of overhead? (ii) Does theorganization differentially manage suppliers based on whether they supplyraw materials that are key or non-key? If no differentiation occurs, what is therationale?

B.2.2 To what extent is there an organizational focus on driving capital out of thekey raw materials?

B.2.3 To what degree is the sharing of demand/forecast information developedwith key raw material suppliers? Does the organization have the onus ofproviding accurate forecasts for key suppliers and does it let other suppliersforecast for themselves?

B.2.4 How do the levels of communication vary between key and non-key rawmaterial suppliers? For instance, are there multiple points and levels of con-tact with key suppliers and single points of contact for non-key suppliers?

B.2.5 To what degree is there a desire to work through problems with key suppliersrather than change suppliers? What is the rationale behind this (e.g. acknowl-edgement of the time taken to develop relationships of this type)?

B.2.6 To what extent do suppliers engage in vendor-managed inventory (VMI) forthe organization? If VMI is not undertaken, what is the rationale? Possiblereasons include: (i) small size of operation; (ii) tendency of suppliers to pushproduct and disrupt the organization’s inventory management policy; (iii) lackof a high, globally integrated picture as with major multi-nationals, etc.

B.2.7 Is the use of collaborative planning invoked with key suppliers?B.2.8 To what extent are there regular meetings with key suppliers to resolve

conflicts/problems and develop a shared direction for the supply chain?

B.3 Performance measurement of suppliers

B.3.1 How is the performance of suppliers measured? For instance: (i) Is supplierperformance measured through process-centred metrics for order fulfilmentand in relation to the performance of other suppliers? (ii) Are there periodicreviews of key suppliers to examine strategic and operational issues? (iii) Aremeasures such as the lead-time from plants, quality of products that aredamaged in transit, ability of the international supplier to handle a complaintfor incorrect shipment, etc. tracked?

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B.3.2 To what extent are the above performance measures used to rationalise

suppliers?

B.3.3 If the business is a multi-national subsidiary, to what degree have global

performance measurements been used? To what degree has the use of

global supply management and quality evaluations been constrained by a

lack of local organizational resources?

B.4 Closeness of relationships with key suppliers

B.4.1 To what extent have win-win relationships been facilitated with key suppliers

by deliberately partnering with companies that are similar in terms of goal

commonality, cultural compatibility and management structure?

B.4.2 To what extent does the organization share processes with key suppliers?

For example, is the supplier seen as part of the R&D team? How is this

manifest (e.g. the joint use of each other’s labs, cross-fertilization of ideas,

the sharing of CAD technology etc.)?

B.4.3 If joint R&D is practiced, how are ownership issues established? For instance:

(i) Is it mainly trust-based in terms of who gets the patent? (ii) Is it less

important who owns R&D if both parties are going to increase their business?

B.4.4 To what degree is information shared with key suppliers? For example, are

forecasts and replenishment schedules automatically fed into the planning

systems of key suppliers? What technology is used to support this (e.g.

email, EDI, common group systems)?

B.4.5 If the organization has not entered into full-scale partnerships with suppliers

(wherein both organizations are almost intertwined and operate as one unit),

what is the extent of partnerships with key suppliers? For instance, are

product ideas and technologies shared, if not financial information?

B.4.6 What benefits have occurred through supplier partnerships? For example, has

improved information sharing allowed inventory and capital to be removed

from the supply chain? How has this benefit been passed to the organization

(e.g. by way of a price reduction)?

B.4.7 To what extent has the organization focused on helping suppliers improve

processes that are impacting on the business (e.g. service-related issues)?

B.4.8 If applicable, what factors have discouraged the organization from entering

into full-scale partnerships with key raw material suppliers? For example,

(a) To what degree has a concentrated industry with just a few major

players prompted caution with regard to supplier partnering?

(b) Have difficulties in developing trust with suppliers and an industry

mindset to ‘play things close to your chest’ prompted this positioning?

(c) Is there a desire not to invest too much in a relationship until a relation-

ship has been built up with a supplier over time?

(d) Has the desire to avoid getting locked in with suppliers and hence retain

the ability to switch suppliers in the future had a bearing on supplier

relationships?

(e) Are there currently insufficient system and procedural linkages with

suppliers to facilitate full-scale partnerships?

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(f) Do variations in supply from sources adversely impact supplierpartnering?

B.5 Technology in the supply chain

B.5.1 To what degree have advanced planning system(s) (APS) been implementedin collaboration with suppliers? If APS has not been considered, why?

B.5.2 If applicable, to what degree has APS provided benefits to the organization?For instance: (i) Has APS allowed better coordination of information andmaterial flows in the supply chain? (ii) Has it allowed the automation of keyprocesses (such as the determination of inventory levels), thus freeing upmanagement time to deal with strategic issues? (iii) To what degree doesthe APS assist in the synchronization of planning and decision-makingthroughout the supply chain?

B.5.3 If applicable, is the organization using the APS to evaluate the potential tointegrate further with suppliers by automating information flows (such asforecast updates) and automating the ordering and replenishment process?Is it used to improve the linkages through the supply chain, in essence,allowing customers to pull product through from suppliers?

B.6 Technological interfaces with suppliers

B.6.1 To what extent can orders be placed electronically with suppliers? What arethe reasons for variations across suppliers? For instance: (i) If a subsidiary,are suppliers within the global group easy to connect with because of commongroup systems? (ii) Are there considerable differences in the technologicalcapabilities of suppliers?

B.6.2 If electronic interfacing has not been pursued with suppliers, what has beenthe rationale? For instance:

(a) Perceived low payback from the substantial amount of effort that needsto be put in by both parties to achieve electronic ordering.

(b) Inability of both parties to dedicate resources into understanding thelarge number of issues that need to be resolved to facilitate thisconnectivity (e.g. ownership of the process, demarcation of responsibil-ity etc.).

(c) Difficulties in developing electronic relationships with suppliers outsidea global group.

(d) A lack of trust that prohibits the investment in close electronic inter-faces, coupled with insufficient history of trading with some suppliers.

(e) Reluctance of the supplier to develop relationships with the organiza-tion because it is not their biggest customer.

(f) Difficulties in having both parties see the long-term benefits ofe-commerce and resulting difficulty in financial justification.

B.6.3 What benefits have arisen from the development of electronic connectionswith suppliers? For instance: (i) Has it improved the line of sight throughoutthe supply chain? (ii) Has it allowed the organization to exert more control

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over a supplier’s poor process by, for example, providing electronic forecastsfor the supplier? (iii) Has it allowed the organization to optimize and removecosts from the supply chain?

B.6.4 To what degree has there been an effort to electronically connect withkey service providers? For example, have technological interfaces with trans-port providers to track consignments been established?

Acknowledgments

The authors acknowledge with deep gratitude the participation in this researchof corporate members of a forum on Enterprise Systems and Supply ChainManagement that is based at the University of Auckland Business School. Theyare very grateful to two reviewers whose insightful comments have greatly helpedto enhance the manuscript. They also thank Dr Kabossa Msimangira for commentson earlier drafts of the present manuscript.

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