Arlbjorn and de Haas Framework 2009

7/27/2019 Arlbjorn and de Haas Framework 2009

1/30

Working paper (2009/2)Arlbjrn, J.S. and de Haas, H. (2009), A Framework for Supply Chain Innovation, Department of Entrepreneurship

and Relationship Management, University of Southern Denmark.

1

A FRAMEWORK FOR SUPPLY CHAIN INNOVATION

Professor, Ph.D. Jan Stentoft Arlbjrn*University of Southern Denmark

Department of Entrepreneurship and Relationship ManagementEngstien 1

DK-6000 Kolding

DENMARKPhone: + 45 65 50 13 70

Fax: +45 65 50 13 57E-mail:[email protected]

and

Post.doc., Ph.D. Henning de HaasUniversity of Southern Denmark

Department of Entrepreneurship and Relationship ManagementEngstien 1

DK-6000 KoldingDENMARK

Phone: + 45 65 50 13 74Fax: +45 65 50 13 57

E-mail: [email protected]

* Corresponding author


2/30



2


ABSTRACT

Supply Chain Management is an area that levers competitive advantages for industrial enterprises.When companies have to make innovations with new products and enter new markets in order tostay in business, they also need to make innovations within selected supply chain areas. Butliterature explicitly dealing with supply chain innovation is limited, and there seems to be a lack ofa common vocabulary. This paper introduces a framework for supply chain innovation focusing on

business processes, network structure and technology.


3/30



3


INTRODUCTION

Supply Chain Management (SCM) is a concept invented back in 1982 (Oliver and Webber 1982)

focusing on: (1) perceiving the whole supply chain as a single entity; (2) strategic decision making;

(3) inventories as balancing mechanisms; and (4) increasing emphasis on integration. Since its

introduction, there have been completed comprehensive research on different integration stages

(Stevens 1989), metaphors of SCM as chains and networks (Harland 1996; Hkansson and Persson

2004), discussions on the scope of SCM (New 1997), operationalized SCM frameworks (Closs and

Mollenkopf 2004; Cooper, Lambert and Pagh 1997; Mentzer et al. 2001), definitions of SCM

(Gibson, Mentzer and Cook 2005; Larson, Poist and Halldrsson 2007 and Mentzer et al. 2001) and

how SCM is related to other disciplines (Frankel et al. 2008 and Mentzer, Stank and Esper 2008).

The concept of SCM has, since its introduction, developed from primarily an internal company

perspective to also focusing on external relationships in chains and networks. However, the core

focus is still related to how competitive advantages can be achieved by simultaneously working

with activities and processes that improve services and reduce costs. According to the Council of

Supply Chain Management Professionals (CSCMP 2008):

"Supply Chain Management encompasses the planning and management of all activities

involved in sourcing and procurement, conversion, and all logistics management

activities. Importantly, it also includes coordination and collaboration with channel

partners, which can be suppliers, intermediaries, third-party service providers, and

customers. In essence, supply chain management integrates supply and demand

management within and across companies."

The domain of SCM constitutes a potential area for creating competitive advantages through

innovations. To win the competitive landscape defined by creating one consumer experience at a


4/30



4

time, decision makers must develop a whole new mindset for understanding their global supply,

logistics, and communication network (Prahalad and Krishnan, 2008, p. 14).

The innovation concept has mainly been applied to product and process innovations. Within

these two areas, comprehensive research in innovation has been provided. This is not the case with

what is termed Supply Chain Innovation (SCI). In the 20th century, several innovations have been

developed, such as Industrial Dynamics (Forrester 1958), Materials Requirements Planning

(Orlicky 1975), the pull production systems at the Toyota Production System (Ohno 1988) and new

forms of relationships and partnerships (see e.g. Lambert, Emmelhainz and Gardner 1996), but

these innovations do not appear under the term SCI, perhaps due to the later invention of the term

supply chain. Furthermore, several other innovations have been developed as the logistics and

SCM discipline has matured, albeit a perhaps lesser radical magnitude. There has also been an

increased awareness on how innovations in other company areas affect or even require innovations

in the supply chain functions, such as the three dimensional concurrent engineering model (3-DCE)

by Fine (1998, p. 133) that stresses the importance to foster concurrent engineering in terms of

product, process and supply chain design. Again, such innovations do not appear as SCI. In

practice, several developments point to the need for SCIs, such as the present global financial

crisis, the challenges with global warming, and globalization of trade with outsourcing and off-

shoring manufacturing (e.g. lead-times, transportation, corporate social responsibility).

Since 2005, CSCMP has assigned an award to the company with the years best SCI. However,in literature a limited number of contributions is identified that explicitly addresses what comprises

a SCI. CSCMP does not provide an explicit definition of what constitutes a SCI, but states instead

that an innovation is:


5/30



5

New processes, new technology, or new applications of old processes and technology

that create quantifiable and sustainable results in terms of cost savings, revenue,

customer satisfaction, etc. (CSCMP 2008)

This definition does not include innovation in network structures of a supply chain in terms of,

for example, a reduced supplier base. Other examples of changed supply chain networks structures

is the direct distribution model by Dell Computer (Magretta 1998) and a responsive supply chain

design by Zara (Ferdows, Lewis and Machuca2004).

The purpose of this paper is twofold. First, the paper has set out to clarify how the extant

literature explicitly deals with the concept of SCI. Second, it aims to develop a framework for SCI.

The remainder of the paper is structured as follows. In the next section, we describe the research

method applied in the paper. We then provide a literature review of SCI. In the following section,

we propose a SCI framework. Then follows a section analyzing thirty SCI cases against the

proposed framework. The final section concludes on the purposes of the paper and considers

managerial and theoretical implications of the findings.

RESEARCH METHOD

A literature review of fifty academic peer-reviewed journals has been performed, in which a

specific search in EBSCO Host Research Database (academic search premier) for papers containing

the words supply chain innovation in the field all text (TX) was carried out. Due to discussions

whether there is a difference between logistics and SCM (see e.g. Larson, Poist and Halldrsson

2007), we have also made the similar search for logistics innovation. The list of journals reviewed

is based on the list provided by Charvet, Cooper and Gardner (2008).

Reviews of thirty applications for the CSCMPs SCI award (from 2005 to 2008), selected to be

presented at the annual CSCMP conference, constitute the second data input to this paper. The


6/30



6

following criteria for cases being judged and nominated for the SCI award are found at the

CSCMPs homepage:

- educational intent of case study, not promotion towards a product, service, or organization

- level of significance with regards to the specific supply chain challenge and solutions

impact on the organizations overall supply chain

- quantifiable and sustainable results in: cost savings, revenue generation, and customer

satisfaction

- practical information which would be helpful and relevant to todays supply chain

practitioner

- structure and content: organization/clarity, quality/usefulness of visuals, author knowledge

of subject matter

- innovativeness of solution

The reviews of the SCI award applications have been done through the framework introduced in

this paper.

This piece of research does have some limitations. First, the review of literature has applied the

terms supply chain innovation and logistics innovation. Thus, potential literature that does not

contain these terms, but basically is about SCI, is not covered in the reviews. Second, we have only

reviewed peer-reviewed journals for literature on SCI. Literature in other sources like conference

proceedings, text books and trade journals may contain contributions dealing with SCI. Finally, thecase descriptions are compiled by the applying companies and are thus secondary information. We

cannot guarantee for the validity in these applications. However, the case descriptions reviewed

should all meet certain criteria defined by CSCMP. The cases analyzed have passed a review by a

CSCMP committee and have been chosen to be presented at the annual conferences.


7/30



7

LITERATURE REVIEW

This section contains a literature review on SCI, but first a brief introduction is given to the

concept of innovation. This introduction is not meant to outline the innovation research agenda, but

merely to sketch out the main and well-recognized dimensions on which innovations are discussed.

The research of innovation has a long tradition and can be traced back to some of the prior

work by Schumpeter (1934). According to Bessant (2003), innovation represents the core renewal

process in any organization. But what constitutes an innovation? In literature, several definitions of

innovation are provided. Schumpeter (1934) defines innovation as the introduction of new products

and production methods, the opening of new markets, the discovery of new raw materials and the

implementation of new organizations. In spite of the age of this definition, it has appeal to the

supply chain research area (e.g. with the focus on production methods, raw materials and

organization). Baumol (2002) defines innovation as: The recognition of opportunities for profitable

change and the pursuit of those opportunities all the way through to their adoption in practice.

Innovations do appear in many aspects. According to Johannessen, Olsen and Lumpkin (2001),

some disagreement exists between the definition and measurement of innovation. Furthermore, the

definitions of innovation span from an invention to the introduction of a new idea. There are also

indications that innovation should contain a process. Thus, it is not only the idea, but also the

process toward the introduction of the idea. Furthermore, innovation is the successful exploitation

of new ideas. The definition leads to that innovation contains a degree of novelty a new idea, anew product, a new process, etc.

A framework to understand the innovation space is the 4Ps by Francis and Bessant (2005).

This framework moves beyond the classical separation of innovation as product and process

innovation to also include innovations in positioning and paradigm. The innovation concept has

been used in several other contexts such as organizational innovation, management innovation,


8/30



8

production innovation, commercial/marketing innovation, and service innovation (Trott 2005, p.

17). Finally, a widely applied dimension to classify innovations is in innovation effect that ranges

along an axis from incremental to radical innovations (Tidd, Bessant and Pavitt 2005, p. 12).

Even though we have definitions of innovation to support us in the classification of degrees of

innovation, some authors propose that specific rating of an innovation, e.g. the incremental/radical

scale, depends on the eyes of the viewer (Flint et al. 2005; Johannessen, Olsen and Lumpkin 2001;

and Rogers 1995, p. 11, 2001).

The literature review of contributions within SCI identified a limited number of papers dealing

with SCI. A gross list of twenty two papers did contain the term Supply Chain Innovation in

some way. After a closer review of the papers, only eleven papers published in nine different

journals are in essence dealing with SCI. The papers excluded from the gross list were removed

since these only were using SCI as a goal for a change process, and thus did not explain the term of

SCI, or only contained the term in a reference. Table 1 provides an overview of the eleven

identified papers explicitly dealing with SCI.

TABLE 1

LITERATURE REVIEW ON SUPPLY CHAIN INNOVATION

Research area Relevant aspects Representative authors

Defining and measuringinnovation

Innovation is anything new to the beholder Krabbe (2007)Flint et al. (2005)

Implementing new supply chain technology Bello et al. (2004)Holmstrm (1998)Krabbe (2007)

Santosh and Smith (2008)Sebastiao and Golicic (2008)

Optimizing supply chain business processes Bello et al. (2004)Billington et al. (2004)Cox (1999)Flint et al. (2008)Flint et al. (2005)Holmstrm et al. (2000)Russel and Hoag (2004)Santosh and Smith (2008)

Supply Chain Innovationfocus

Introducing new products (product development) Cox (1999)Flint et al. (2005)Russel and Hoag (2004)


9/30



9

Modeling and scenario building for optimization Bello et al. (2004)Flint et al. (2005)Krabbe (2007)

The innovation process Flint et al. (2008)

The literature review on SCI leads to the following five findings. First, the literature reviewed

seems to agree on the importance and potential of SCI in improving the performance in supply

chain (Flint et al. 2005; Krabbe 2007). Second, there is a lack of a common SCI framework, and a

classification scheme of different types of SCI is missing. Definitions of SCI have not yet attained

much research efforts, even though there seems to be alignment on that SCI consists of

developments in technology and processes (Bello 2004). Third, the present SCI contributions are

mostly concerned with technology development and application. The extant literature on SCI points

to information technology (IT) as an important driver for innovation. Such IT technologies are, for

example, Radio Frequency Identification Technology (RFID), Pick-By-Voice and Advanced

Planning Systems (APS) (Santosh and Smith 2008). These technologies have been enablers of

closer cooperation between vendors and customers through the last ten to fifteen years (Santosh and

Smith 2008). Thus, contributions on SCI are mainly focused on applying new technologies to the

supply chain, or optimizing the supply chain using new technologies (see e.g. Holmstrm 1998).

Fourth, like the general innovation literature, there seem to lack scales for measuring innovation. To

overcome this, Flint et al. (2005) define the degree of innovation based on the eyes of the

beholder, this means that the degree of innovation is not related to a fixed scale, but is a relative

concept depending on the eyes (person, organization, etc.) that see a change. To one person a

change could be a radical innovation, and to another person the same change could be an

incremental innovation. This raises a discussion of how to compare innovations, how to rate

innovations and how to judge what is the best innovation in for example SCM. Finally, current

contributions are mainly conceptual. Empirical studies on SCI practice are under-researched. The


10/30



10

supply chain literature seems not to have attention on innovation (Flint et al. 2005). At the same

time, the innovation literature does not seem to have any focus on SCM. This might be one reason

for why it is difficult to find solid definitions of SCI, classifications of innovations (i.e. radical or

incremental), and drivers for innovations. This paper attempts to bridge this gab by proposing a

framework for SCI.

DEVELOPMENT OF A SUPPLY CHAIN INNOVATION FRAMEWORK

In this section, a framework for SCI is developed. The framework is developed from existing

theory in the SCM and innovation literature. First, a literature review was conducted of major SCM

frameworks in order to extract their key components. This knowledge is then, together with

innovation theoretical elements, used to develop a framework for SCI.

Supply Chain Management Frameworks and Models

In literature, several SCM frameworks and models have been developed in order to provide

overview of the concept and to display coherence between sub-concepts and variables within the

SCM domain. The frameworks and models provide a conceptual foundation for SCM. In Table 2, a

brief review of SCM frameworks and models is listed.

TABLE 2

REVIEW OF SUPPLY CHAIN MANAGEMENT FRAMEWORKS AND MODELS

Author Major SCM Framework/Model ComponentsCooper, Lambert and Pagh(1997) and Lambert, Cooperand Pagh (1998)

Business Processes, Management Components and Supply Chain Structure

Bowersox, Closs and Stank(1999, p. 24)

Flows: Product Service Value Flow, Market Accommodation Flow, Information Flowand Cash Flow. Six integrative competencies: Customer Integration, InternalIntegration, Material and Service Supplier Integration, Technology and PlanningIntegration, Measurement Integration, Relationship Integration

Mentzer et al. (2001) Customer Satisfaction, Supply Chain Flows, Inter-Corporate Coordination, Inter-Functional Coordination, The Global Environment

Chen and Paulraj (2004) Environmental Uncertainty, Customer Focus, Top Management Support, Supply


11/30



11

Strategy, Information Technology, Supply Network Structure, Managing Buyer-Supplier Relationships, Logistics Integration and Supply Chain PerformanceMeasurement

Bowersox, Closs and Cooper(2007, p. 6)

Consumers, Relationship Management, Flows, Constraints, Supply Network,Integrated Enterprise (logistics, procurement, customer accommodation, and

manufacturing) and Market Distribution NetworkSkjtt-Larsen et al. (2007, p.27)

Three perspectives on SCM: As an internal supply chain, Part of a corporate companyenvironment, Part of an external environment. The supply chain system consist of:Activities, Processes and operations and Organizations

Supply-Chain Council (2008) SCOR is based on five distinct management processes: Plan, Source, Make, Deliverand Return

Mentzer, Stank and Esper(2008)

An external view: The domain of SCM includes applying analytical tools andframeworks to improve business processes that cross organizational boundaries. Aninternal view: Operations management includes applying analytical tools andframeworks to improve business processes that cross internal functional boundaries:Time (logistics), Marketing (planning) and Physical transformation (production)

The review of SCM frameworks and models reveals an agreement on the scope of SCM with its

inter-organizational nature in chains and networks of companies through different tiers. In spite of a

different vocabulary, the basic intention is the same to provide superior end-customer value.

Another common threat is a focus on processes that cuts across traditional internal functions (or

silos). The frameworks do all operate with output measures, like improved efficiency, improved

services or reduced costs, although this is more implicit in some of the frameworks than in others.

Other common denominators are their focus on customer demands, relationship management,

integration and IT.

A Supply Chain Innovation Framework

The brief literature review of supply chain frameworks revealed that there seems to be a

consensus on that SCM is about processes both internally and inter-organizationally. Furthermore,

there is consensus on the scope of SCM from internal functions to dyads, chains and networks.

Referring to the brief discussion on innovation literature in general, streams of innovation

literature are concerned with the process of innovation and the management of innovation

processes. This is also the case for SCI literature (see e.g. Flint et al. 2005). When comparing to the

division of the strategy literature into process, content and context (de Wit and Meyer 2004), this


12/30


13/30



13

Customer Service Management (Bolumole, Knemeyer and Lambert 2003)

Demand Management (Croxton et al. 2002)

Order Fulfillment (Croxton 2003)

Manufacturing Flow Management (Goldsby and Garca-Dastugue 2003)

Supplier Relationship Management (Croxton et al. 2001)

Product Development and Commercialization (Rogers, Lambert and Knemeyer 2004)

Return Management (Rogers et al. 2002)

For further examples of process models on supply chain efficiency, we refer to the SCOR modelby Supply-Chain Council (2008, p. 10), the process classification framework by APQC and the

Supply Chain Best Practice Framework by the Supply Chain Consortium (see Moberg et al. 2008).

Supply Chain Technology

The second component of the SCI framework is supply chain technology. By this component we

mean technologies that could be applied in isolation or in combination with other technologies or

elements of the framework to create SCIs. Thus, in this context, it is not the technology by itself

that is an innovation, but merely its appliance in a supply chain context.

Supply Chain Network Structure

This component of the overall SCI framework focuses on supply chain network structure vertical

and horizontal - of the company and its supply chain partners where innovations can appear. Thus,

this component is similar to the component developed by Lambert, Cooper and Pagh (1998) that

separates the structure of the supply chain into three elements: (1) the members of the supply chain;

(2) the structural dimensions; and (3) the different types of process links. Supply chains are

complex business systems that often consist of many members. Not all suppliers or customers


14/30


15/30



15

An important characteristic of the SCI framework is its ability to provide both a more holistic

but at the same time also a more nuanced view of what might be labeled a SCI. Thus a SCI can be

both the implementation of one or more elements within one of the components, or it can be the

composition of more elements from two or all three components. Each of the three components can

vary in innovation effect along the axis incremental to radical. In order to make this dimension

operational, we make use of the work by Davenport (1993, p. 11). The following parameters have

been chosen to describe the continuum: (1) starting point (existing processes vs. clean slate); (2)

frequency of change (one-time/continuous vs. one-at-time); (3) time required (short vs. long); (4)

participation (bottom-up vs. top-down); and (5) typical scope (within functions vs. cross-

functional). Incremental innovations are, for example, small continuous improvements, master data

management, and process optimizations. Examples of radical innovations are implementation of

direct distribution by using the principles of postponement, reengineering business processes by

using state-of-the-art information technology and implementation of cross-functional teams in order

to speed up time-to-market processes.

ANALYSIS OF CASES AGAINST THE SCI FRAMEWORK

This section provides an analysis of the cases being nominated for the CSCMP SCI award over

the period 2005 to 2008. In total, there have been more applications than the thirty applications

nominated, but these have been selected by committees to present their practices at the annualconferences and have thus been part of the final races for the annual awards. The cases were

analyzed against the developed SCI framework and the degree of innovation (incremental vs.

radical) as shown in Table 4. A detailed mapping-analysis of each case can be found in appendix 1.


16/30



16

TABLE 4

CSCMP NOMINATED SCI AWARD CASES DIVIDED ALONG THE SCI FRAMEWORKa

Supply Chain Innovation ComponentsSupply Chain BusinessProcess

Supply Chain Technology Supply Chain NetworkStructure

Incremental 14 10 3

Innovation

Effect

Radical

11Cisco (winner 2008)

Aidmatrix (winner 2007)ROi Mercy (winner 2006)HP Procurement Risk

(winner 2005)

10Cisco (winner 2008)

Aidmatrix (winner 2007)ROi Mercy (winner 2006)HP Procurement Risk

(winner 2005)

3

a The overall number counts more than thirty cases since each case can be rated in more than one component of

the SCI framework.

The analysis of the case companies should uncover what kinds of SCI are in focus and what

degree of innovations they have made. Table 4 shows that there is a significant focus on innovation

in supply chain business processes and supply chain technology, whereas innovation in the supply

chain network structure has only been the focus for a few cases. There seems to be an even split

between radical and incremental innovations in the three areas. In the following, the four winning

case companies will be analyzed regarding their innovations in supply chain business processes and

supply chain technology. In Table 4, the cases are all rated with radical innovation in supply chain

business processes and supply chain technology. Other cases from the data material will be included

to describe the component of supply chain network structure.

Supply Chain Business Processes and Supply Chain Technology

The first component in the SCI innovation framework is supply chain business processes that

are defined as the activities that produce a specific output of value to the customer. The second

component is supply chain technology by which is meant technologies that could be applied in

isolation or in combination with other technologies or elements of the framework to create SCIs.


17/30



17

The first case company is Cisco and is the SCI Award winner in 2008 with radical supply

chain business process and supply chain technology solutions. The starting point was a returns

business area that was more focused on efficiently processing product returns than on seeking ways

to maximize their value. A leadership change meant a fresh look at the inherent value of returned

equipment. The reverse logistics team created a reuse program that gives returned and excess

equipment a second, and sometimes a third life before responsibly recycling it. Vendor ownership

of core processes led to management and compliance gaps, increasing expense and creating risk.

Bringing these core processes back in-house while outsourcing non-core work allowed the team to

tightly control operations, increasing productivity and enabling rapid growth. Establishing

automated data sharing processes reduced losses from under-managed parts inventories and excess

and obsolete parts. There was no off-the-shelf SCM product available to support the new

operational model, the team custom-built IT architecture to manage its inventory. Growing from a

manual process based on exchanging spreadsheets, the group now uses a central database to track

inventory and take requests from internal customers. This case has made radical innovations in their

supply chain business processes, by establishing a whole new business model for handling product

returns and implemented the needed teams and performance measurement elements. Looking at

supply chain technology, Cisco could not find standard IT solutions to support their new business

model and developed a new IT architecture to support the special needs of the returns business for

keeping track of the products. Using the five parameters to describe the innovation, the Ciscoinnovation can be characterized by: (1) a development and implementation of new processes; (2) a

one-time change, however, creating a basis for continuous improvements; (3) a relatively long

development and implementation time; (4) a both top-down and bottom-up participation; and (5) a

the truly cross-functional scope.


18/30



18

The second case company is Aidmatrix (SCI Award winner in 2007). The Aidmatrix

Foundation and the National Association of Free Clinics (N.A.F.C.) have developed an internet-

based collaboration network servicing free clinics. The web-based tool FreeClinic Link is a

system connecting each member of the free clinic supply chain of care. The value proposition for

each stakeholder participating is maximized through both full capture of benefits and minimization

of transaction costs. FreeClinic Link allows Free Clinics across US to come together virtually. The

system enables each stakeholder to behave in a manner that maximizes the value for the other

stakeholders, creating a truly collaborative supply chain. Leveraging supply chain collaboration

solutions based on products and services from leading industry supporters such as Accenture, i2

Technologies and Sun Microsystems. This case has made radical innovations in supply chain

technology and supply chain processes by their development of a web-portal by combining different

state-of-the-art technologies. The basic business processes are standard supply chain processes,

however, through the IT integration it is possible to automate the collaboration between the parties

in the supply chain.

Using the five parameters to describe the innovation, the Aidmatrix innovation can be

characterized by: (1) a development and implementation of new processes; 2) a one-time change,

however, creating basis for continuous improvements; (3) a relatively long development and

implementation time; (4) top-down and bottom-up participation; and 5) a truly cross-functional

scope.The third case company is ROi Mercy and the SCI Award winner in 2006. This company has

made radical innovations in their supply chain business processes and supply chain technology. The

starting point was a consolidation effort in procurement, and implementation of a common materials

management system and a common item file. The changes were driven in a new team structure with

competences from inside the hospital and from outside, resources that were hired in from the


19/30



19

logistics and supply chain industry. The scope of the changes was truly cross-functional, and

contained both process development and technology development and application. Using the five

parameters to describe the innovation, the ROi Mercy innovation can be characterized by: (1) a

development and implementation of new processes; (2) a one-time change; (3) a relatively long

development and implementation time; (4) top-down and bottom-up participation; and (5) a truly

cross-functional scope.

The fourth case company is Hewlett-Packard (HP) with an innovation within procurement risk

management (PRM). HP won the SCI award in 2005. As the previous winning cases, this company

has made radical innovations in their supply chain business processes and supply chain technology.

The PRM project implemented new tools and processes to handle the risks for the electronic

components market, where prices around year 2000 were increasing due to increased demand. The

innovation is the use of tools and processes from the financial risk management processes at Wall

Street. HP has developed a framework to quantify the impact of product demand, component price

and availability uncertainty on revenue, costs and profits. It is a software tool to support the risk

management process to proactively manage procurement uncertainties and risks. The PRM business

process is cross-functional and links and defines the roles and responsibilities of procurement,

planning, supply chain operations, finance and marketing.

Using the five parameters to describe the innovation, the HP SCI can be characterized by: (1)

development and implementation of new processes; (2) it was a one-time change; (3) relatively longdevelopment and implementation time; (4) participation was both top-down and bottom-up: and (5)

the scope was truly cross-functional.


20/30



20

Supply Chain Network Structure

The third component of the overall SCI framework was not in focus for innovation in the four

winning cases, therefore two other cases have been chosen to illustrate the two dimensions of the

innovation (radical and incremental). The supply chain network structure focuses on the structure

vertical and horizontal of the company and its supply chain partners (Lambert, Cooper and Pagh

1998). From the overall case analysis, three cases is found to have made radical innovations in the

supply chain network structure and other three have made incremental innovations.

An example of a case with radical innovation is LEXMARK who improved their Cash-to-

Cash Cycle time, by application of postponement principles for late dedication of customer specific

products, by using the same engine across more products. Changing labeling and naming of the

product to stickers makes it possible to dedicate in the Final Specification Assembly (FSA).

Downstream shipping modes and routes were defined to optimize product handling, and

implementation of a direct delivery process using Collaborative Planning, Forecasting and

Replenishment (CPFR) techniques with retail partners. Focus on total product cost (supply chain

cost) and not the piece price of the Bill of Material (BOM). The innovation can be characterized by:

(1) new processes; (2) a one-time change; (3) a relatively long development and implementation

time; (4) a top-down and bottom-up participation; and (5) a truly cross-functional scope.

An example of a case with incremental innovation in supply chain network structure is Bakers

Footwear Group. They implemented, as first phase of a change strategy, a direct distributionconcept by sourcing products from manufactures and distribute them directly to the retailers. This

reduced time to market, reduced stock-outs and lowered total landed costs. Phase 2 was a

postponement strategy, by treating the ocean container as a floating warehouse and postpone the

allocation decision until the last minute. The innovation can be characterized by: (1) existing


21/30



21

processes, (2) a continuous change, (3) a relatively long development and implementation time; (4)

top-down and bottom-up participation; and (5) a cross-functional scope.

Summary of the CSCMP SCI award cases

The analysis of the thirty cases of SCI provides as shown that the developed framework with the

three components supply chain business processes, supply chain technology and supply chain

network structure has explanatory value for the understanding and discussion of SCI. The

framework is providing concepts and guiding in the investigation of and the following development

of SCI. Furthermore, based on the studied cases, there seems to be a connection between innovation

in supply chain business processes and supply chain technology. Most of the case companies who

have innovated in supply chain business processes have also made innovations in supply chain

technology to support the new business processes. This was also evident in the four winning cases.

Based on the study of case studies, developments of the supply chain network structure seem to be

lesser presence. However, the two cases outlined above show that there is significant improvement

to be gained in supply chain performance by innovating the supply chain network structure.

CONCLUSION AND IMPLICATIONS

The overall purpose of the paper has been to investigate what SCI is by clarifying how the

extant literature on SCM and innovation explicitly has been dealing with the concept of SCI, and todevelop a framework for SCI.

The literature review identified a limited number of papers that explicitly deals with SCI.

Numerous papers exist on SCM and innovation as separate topics, but few on the combined issue of

the innovation of a supply chain. The focus of many of the papers specifically on SCI, are on the

application of new of technology in the supply chain. However, era los found that technologies,


22/30



22

already known in one industry, are applied in other industries. Other areas in focus in the theoretical

contributions are innovation in processes, integration of suppliers or customers, faster order

handling, etc. (Holmstrm 1998). Two topic areas under the SCI umbrella seem to be less

researched. The first area is the structural part of a supply chain (or the architecture of the supply

chain) and the supply chain network which is well described by e.g. Cooper, Lambert and Pagh

(1997). Looking at the CSCMP award cases, some of the companies have actually been doing

innovation in the supply chain network and achieved radical performance improvements, this could

be by applying postponement principles to products and logistics. We believe that the supply chain

network is an important element in the understanding and possible development of SCIs. The

second less researched area is the measurement of the SCI, the scale or rating of an innovation in

terms of being an incremental or radical innovation. We found no clear definitions of how to

measure the degree of an innovation. A number of papers, among others Flint et al. (2005), Krabbe

(2007), Rogers (1995), Schumpeter (1934), state that an innovation should be rated subjectively

from the eyes of the person or organization seeing or experiencing a change. However, this

challenges the ability of comparisons of innovations in supply chains. A more objective scale is

needed to be able to point at the best in class supply chain solutions.

A framework for SCI is developed, consisting of the three components Supply Chain Processes,

Supply Chain Network and Supply Chain Technology. The framework has been tested on thirty

nominated SCI applications for the CSCMP SCI award. It is found that the framework containsexplanative power to clarify what constitutes a SCI.

Implications

The findings in this paper have both managerial and research implications. Three managerial

implications are found. First, the framework provides a language for conceptualizing SCI. It


23/30



23

provides the basis to sharpen the view on what is meant by SCI. Second, the framework can be used

to stimulate discussions on what and how to do SCI in companies. Finally, the framework can be

used to map and position ongoing and/or intended SCI projects in a company. It provides a basis for

an assessment on current activities to carry on, and to what to look for when scoping new

development initiatives within the domain of SCM. In other words, it can create more

consciousness about what types of innovations are needed and developed, and how these sustain the

creation of competitive advantages.

The paper does also provide implications for research. First, the framework provides the

foundation for theory building within SCI. The next step is to continue to refine the framework for

SCI by conducting empirical qualitative and quantitative studies. Second, measuring the degree of

SCI is an area for future research. This paper has found that changes in technologies, processes and

also in supply chain networks are areas for SCI. Such changes can be either incremental or radical.

However, this raises the basic question if everything has to become an innovation? What about

general continuous optimization of e.g. procurement lead-time? Is this an incremental innovation?

Within the current body of knowledge, the answer would be yes. This is also closely related with

the scale of measurement of SCI. Future research must address if there is some work and basic

improvements to be done before entering the degree of innovation scale. Third, more research is

needed to explore how a SCI evolves during the life cycle of a product and the development of a

market. Does a SCI have a life cycle? In a case where market, demand and supply characteristicsshift to become more predictable, it would be reasonable to think that radical innovations in supply

chains would no longer be the objective, but solely be focused on incremental innovations. Finally,

there is a need to investigate SCI across industries. Are radical SCIs in one industry merely

incremental SCIs in another industry? Thus future research is suggested to address the relationship

between lifecycles of products and markets across industries and the types of SCI developed.


24/30



24

NOTES

Baumol, W. J. (2002) The Free-Market Innovation Machine: Analyzing The Growth Miracle OfCapitalism, Woodstock, Oxon: Princeton University Press.

Bello, Daniel C., Ritu Lohtia, and Vinita Sangtani (2004), An Institutional Analysis of SupplyChain Innovations in Global Marketing Channels,Industrial Marketing Management, Vol. 33, No.1, pp. 57-64.

Bessant, John (2003), Challenges in Innovation Management, edited by Larisa V. Shavinia (2003)International Handbook on Innovation, Elsevier science limited, London, pp. 761-773.

Billington, Corey, and Gianpaolo Callioni, Barrett Crane, John D. Ruark, Julie Unruh Rapp, Trace

White, Sean P. Willems, (2004), Accelerating the Profitability of Hewlett-Peckards SupplyChainsInerfaces, Vol. 34, No. 1, pp 59-72.

Bolumule, Yemisi A., Michael Knemeyer, and Douglas M. Lambert (2003), The Customer ServiceManagement Process, The International Journal of Logistics Management, Vol. 14, No. 2, pp. 15-31.

Bowersox, Donald J., David J. Closs and Theodore P. Stank (1999), 21stCentury Logistics: MakingSupply Chain Integration a Reality, Oak Brook, Il.: Council of Logistics Management.

Bowersox, Donald J., David J. Closs and M. Bixby Cooper (2007), Supply Chain LogisticsManagement, New York: McGraw-Hill.

Charvet, Franois F., Martha C. Cooper and John T. Gardner (2008), The Intellectual Structure ofSupply Chain Management: A Bibliometric Approach,Journal of Business Logistics, Vol. 29, No.1, pp. 47-73.

Chen, Injazz J. and Antonym Paulraj (2004), Towards a Theory of Supply Chain Management:The Constructs and Measurements, Journal of Operations Management, Vol. 22, No. 2, pp. 119-150.

Closs, David J. and Diane A. Mollenkopf (2004), A Global Supply Chain Framework, Industrialmarketing Management, Vol. 33, No. 1, pp. 37-44.

Cooper, Martha C., Douglas M. Lambert and Janus D. Pagh (1997), Supply Chain Management:More Than a New Name for Logistics, The International Journal of Logistics Management, Vol.8, No. 1, pp. 1-14.

Cox, Andrew (1999), A Research Agenda for Supply Chain and Business Management Thinking,Supply Chain Management: An International Journal, Vol. 4, No. 4, pp. 209-211.

Croxton, Keely L. (2003), The Order Fulfillment Process, The International Journal of Logistics

Management, Vol. 14, No. 1, pp. 19-33.


25/30



25

Croxton, Keely L., Douglas M. Lambert, Sebastin J. Garca-Dastugue, and Dale S. Rogers (2002),The Demand Management Process, The International Journal of Logistics Management, Vol. 13,

No. 2, pp. 51-66.

Croxton, Keely L., Sebastin J. Garca-Dastugue, Douglas M. Lambert, and Dale S. Rogers (2001),The Supply Chain Management Process, The International Journal of Logistics Management,Vol. 12, No. 2, pp. 13-36.

CSCMP (2008) cscmp.org/education/awards/09guidelines.asp, January 3, 2008

Davenport, Thomas H. (1993), Process Innovation: Reengineering Work through InformationTechnology, Boston, MA: Harvard Business School Press.

de Wit, Bob and Ron Meyer (2004), Strategy: Process, Content and Context An Internationalperspective, 3th. ed., New York: Thomson Learning.

Flint, Daniel J., Evert Larsson, Britta Gammelgaard and John T. Mentzer (2005), LogisticsInnovation: A Customer Value-Oriented Social Process, Journal of Business Logistics, Vol. 26,

No. 1, pp. 113-147.

Flint, Daniel J., Evert Larsson, and Britta Gammelgaard (2008), Exploring processes for CustomerValue Insights, Supply Chain Learning and Innovation: An International Study, Journal of

Business Logistics, Vol. 29, No. 1. pp. 257-281.

Ferdows, Kasra, Michael A. Lewis, and Jose A.D. Machuca (2004), Rapid-Fire Fulfillment,Harvard Business Review, Vol. 82, No. 11, pp. 104-110.

Fine, Charles H. (1998), Clockspeed, Reading: Perseus Books.

Forrester, Jay W. (1958), Industrial Dynamics: A Major Breakthrough for Decision Makers,Harvard Business Review, Vol. 36, No. 4, pp. 37-66.

Francis, Dave and John Bessant (2005), Targeting Innovation and Implications for CapabilityDevelopment, Technovation, Vol. 25, No. 3, pp. 171-183.

Frankel, Robert, Yemishi A. Bolumole, Reham A. Eltantawy, Antony Paulraj, and Gregory T.Gundlach (2008), The Domain and Scope of SCMs Foundational Disciplines Insights andIssues to Advance Research,Journal of Business Logistics, Vol. 29, No. 1, pp. 1-30.

Gibson, Brian J., John T. Mentzer, and Robert L. Cook (2005), Supply Chain Management: ThePursuit of a Consensus Definition,Journal of Business Logistics, Vol. 26, No. 2 pp. 17-25.

Goldsby, Thomas J. and Sebastin J. Garca-Dastugue (2003), The Manufacturing FlowManagement Process, The International Journal of Logistics Management, Vol. 14, No. 2, pp. 33-52.


26/30



26

Harland, Christine M. (1996), Supply Chain Management: Relationships, Chains and Networks,British Academy of Management, Vol. 7, special issue, pp. 63-80.

Holmstrm, Jan (1998), Business Process Innovation in the Supply Chain a Case Study of

Implementing Vendor Managed Inventory, European Journal of Purchasing & SupplyManagement, Vol. 4, No. 2-3, pp. 127-131.

Holmstrm, Jan, William E. Hoover Jr., Perttu Louhiluoto, and Antti Vasara (2000), The OtherEnd of the Supply Chain, The McKinsey Quarterly, No. 1, pp. 63-71.

Hkansson, Hkan and Gran Persson (2004), Supply Chain Management: The Logic of SupplyChains and Networks, The International Journal of Logistics Management, Vol. 15, No. 1, pp. 11-26.

Johannessen, Jon-Arild, Bjrn Olsen and G.T. Lumpkin (2001), Innovation as Newness: What is

New, How New, and New to Whom?,European Journal of Innovation Management, Vol. 4, No.1,pp. 20-31.

Kim, Bowon (2000), Coordinating an Innovation in Supply Chain Management, EuropeanJournal of Operational Research, Vol. 123, No. 3, pp. 568-584.

Krabbe, Michael (2007) Leverage Supply Chain Innovation Industrial Engineer, December, pp26-30.

Lambert, Douglas M., Martha C. Cooper and Janus D. Pagh (1998), Supply Chain Management:Implementation Issues and Research Opportunities, The International Journal of Logistics


Lambert, Douglas M., Margarat A. Emmelhainz and John T. Gardner (1996), Developing andImplementing Supply Chain Partnerships, The International Journal of Logistics Management,Vol. 7, No. 2, pp. 1-17.

Lambert, Douglas M., Sebastin J. Garca-Dastugue, and Keely L. Croxton (2005), An Evaluationof Process-Oriented Supply Chain Management Frameworks, Journal of Business Logistics, Vol.25, No. 1, pp. 25-51.

Larson, Paul D., Richard F. Poist and rni Halldrsson (2007), Perspectives on Logistics vs.SCM: A Survey of SCM Professionals,Journal of Business Logistics, Vol. 28, No. 1, pp. 1-24.

Magretta, Joan (1998), The Power of Virtual Integration: An Interview with Dell ComputersMichael Dell,Harvard Business Review, Vol. 76, No. 2, pp. 72-84.

Mentzer, John T., Theodore P. Stank, and Terry L. Esper (2008), Supply Chain Management andIts Relationship to Logistics, Marketing, Production, and Operations Management, Journal of

Business Logistics, Vol. 29, No. 1 pp. 31-46.


27/30



27

Mentzer, John T., William DeWitt, James S. Keebler, Soonhong Min, Nancy W. Nix, Carlo D.Smith, and Zach G. Zacharia (2001), Defining Supply Chain Management, Journal of Business

Logistics, Vol. 22, No. 2, pp. 1-25.

Moberg, Christopher R., Kate Vitasek, Theodore L. Stank and Abr Pienaar (2008), Time toRemodel, CSCMPs Supply Chain Quarterly, Vol. 2, No. 3, pp. 36-48.

New, Stephen J. (1997), The Scope of Supply Chain Management Research, Supply ChainManagement: An International Journal, Vol. 2, No. 1, pp. 15-22.

Ohno, Taiichi (1988), Toyota Production System: Beyond Large-Scale Production, New York:Productivity Press.

Oliver, R. Keith and Michael D. Webber, "Supply-Chain Management: Logistics Catches Up withStrategy," in: Martin G. Christopher, Logistics: The Strategic Issues, London: Chapman and Hall,

1992, pp. 63-75.

Orlickly, Jospeh (1975),Materials Requirements Planning, New York: McGraw-Hill.

Prahalad, C.K. and M. S. Krishnan (2008), The New Age of Innovation: Driving Cocreated ValueThrough Global Networks, New York: McGraw-Hill.

Rogers, Dale S., Douglas M. Lambert and A. Michael Knemeyer (2004), The ProductDevelopment and Commercialization Process, The International Journal of Logistics


Rogers, Dale S., Douglas M. Lambert, Keely L. Croxton, and Sebastian J. Garca-Dastugue (2002),The Returns Management Process, The International Journal of Logistics Management, Vol. 13,

No. 2, pp. 1-18.

Rogers, Everett M. (1995),Diffusion of Innovations, 4th ed., New York: The Free Press.

Russell, Dawn M. and Anne M. Hoag (2004), People and Information Technology in the SupplyChain: Social and Organizational Influences on Adoption, International Journal of Physical

Distribution & Logistics Management, Vol. 34, No. 2, pp. 102-122.

Santos, Dos Brian L. and Lars S. Smith (2008), RFID in the Supply Chain: Panacea or PandorasBox?, Communications of The ACM, Vol. 51, No.10, pp. 127-131.

Schumpeter, J.A. (1934), The Theory of Economic Development, Boston: Harvard University Press.

Sebastiao, Helder J. and Susan Golicic (2008), Supply Chain Strategy for Nascent Firms inEmerging Technology Markets,Journal of Business Logistics, Vol. 29, No.1. pp 75-91.

Skjtt-Larsen, Tage, Philip B. Schary, Juliana H. Mikkola and Hebert Kotzab (2007),Managing theGlobal Supply Chain, Copenhagen: Copenhagen Business School Press.


28/30



28

Stevens, Graham C. (1989), Successful Supply Chain Management,Management Decision, Vol.28, No. 8, pp. 25-30.

Supply-Chain Council (2008), Supply Chain Operations Reference-model. Scor Overview

Version 9.0.

Tidd, Joe, John Bessant and Keith Pavitt (2005),Managing Innovation: Integrating Technological,Market and Organizational Change, Chichester: John Wiley & Sons Ltd.

Trott, Paul (2005), Innovation Management and New Product Development, 3rd edition, London:Pearson Education.


29/30



29

APPENDIX 1: AN OVERVIEW OF NOMINATED APPLICATIONSTO THE CSCMP SUPPLY CHAIN AWARD

2008

CaseNr.

Company Title Supply Chain BusinessProcess

Supply ChainTechnology

Supply Chain NetworkStructure

Increm. Radical Increm. Radical Increm. Radical1 Cisco Systems Inc.

(winner)Unlocking Value fromProduct Returns X X

2 Dynamic WorldwideLogistics Inc. andInstaknow.com, Inc.

Instaknow-ACESyncronized Global SupplyChains

X

3 Genco and Sky-Trax,Inc.

Tracking SolutionsX

4 Lockheed MartinAeronauticsCompany

Forecasted Raw Materials(FoRM) X

5 OceanGuaranteed

with APL Logistics,Con-Way FreightInc.

Creating the Industrys First

Day-Definite, GuaranteedOcean LCL service

X

X X

6 Party Lite Gifts andChicago Consulting

Optimal PackagingX

7 US Air Force withBooz Allen Hamiltonand Morgan BorszsConsulting

Transforming the UnitedStates Air Force SupplyChain: ExpeditionaryLogistics for the 21st Centry(Elog21)

XX X

2007

CaseNr.




Increm. Radical Increm. Radical Increm. Radical8 Aidmatrix (winner) FreeClinic Link

Empowering a Supply Chainof Giving

X X

9 Bakers FootwearGroup, Inc.

Fashionably Late is NotFashionable When Dealingwith Trendy Footwear

X X X

10 John Deer andSmartOps X X X

11 Kraft Foods andIDEO

Customer Supply ChainInnovation and CollaborationModel

X

12 Liquor ControlBoard of Ontario

New Item SubmissionSystem X X

13 Motorola Supply Chain TransformationDrives High-PerformanceResults

X

14 OceanSchedules.com,

Innovation for the Ocean-Transportation Industry

X


30/30



APPENDIX 1: AN OVERVIEW OF NOMINATED APPLICATIONSTO THE CSCMP SUPPLY CHAIN AWARD (CONT.)

2006

CaseNr.




Increm. Radical Increm. Radical Increm. Radical15 CEAG / FRIWO A Quantum Leap in Reducing

Working Capital, X16 Hewlett-Packard Buy Sell Process X17 IBM The Road to an On Demand

Supply Chain X X18 Kelloggs and CSCS A Closed-Loop Returns

Management System, TurningFailures into Profits

X

19 Mercy ROi (winner) ROI, Resource Optimization& Innovation X X

20 P&G Forces of Business and Forcesof Nature Building andAgile Supply Network

X

21 The Dow ChemicalCompany, X X X

2005

CaseNr.




Radical Increm. Radical Increm. Increm. Radical22 Blockbuster Inc. Rental DVD Packaging

Supply Chain X X

23 Campell SalesCompany and FoodLion

Secondary PackagingRedesign X X

24 Hewlett-Packard Design for Supply ChainPrograme X X

25 Hewlett-Packard(winner)

Procurement RiskManagement (PRM) at HPCompany

X X

26 Kraft Foods Elevating Supplier Value:The Kraft Foods SupplierRelationship ManagementBridge

X

27 Lexmark Cash to Cash Cycle TimeImprovement X X

28 NOV National Oilwell VarcoX X

29 United Technologies: Supplier Insight for BetterBusiness Performance X

30 USTRANSCOM Bridging the Gap BetweenStrategic and TheaterDistribution

X X

Documents

Arlbjorn and de Haas Framework 2009