A STRATEGIC FRAMEWORK FOR SUPPLY CHAIN ORIENTED LOGISTICS

Journal of Business Logistics, 2005 by Stank, Theodore P, Davis, Beth R, Fugate, Brian S

INTRODUCTION

The Council of Logistics Management (CLM) recently changed its name to the Council of Supply Chain Management Professionals (CSCMP). CLM defined SCM as the planning and management of all activities involved in sourcing and procurement, conversion, and logistics management activities, including coordination and collaboration with suppliers, intermediaries, thirdparty service providers, and customers to facilitate integration of supply and demand management within and across companies (Council of Logistics Management 2004). Logistics management, according to CLM, is that part of SCM that plans, implements, and controls the efficient, effective forward and reverse flow and storage of goods, services, and related information between the point of origin and the point of consumption in order to meet customers' requirements.

The CLM definitions clearly establish that SCM is more broadly conceived than merely "logistics outside the firm" (Lambert 2004; Lambert, Cooper, and Pagh, 1998, p. 2). Recent research supports this conception, portraying SCM as a strategic level concept. Mentzer et al. (2001), for example, consider SCM to be "the systemic, strategic coordination of the traditional business functions within a particular company and across businesses within the supply chain, for the purposes of improving the long-term performance of the individual companies and the supply chain as a whole" (p. 18). Lambert, Cooper, and Pagh (1998) highlight SCM as the integration of key business processes across the supply chain for the purpose of adding value for customers and stakeholders. The emphasis of each of these definitions is that the objective of SCM is creation of strategic differential advantage obtained by the total value delivered to end-customers. The strategic perspective on SCM emerges from Porter's conceptualization of the value chain and value system (1991). According to Porter, a value chain is manifested by the way in which a firm configures and links its internal activities to provide customer value. A value system extends outside the firm to encompass the activities of suppliers, channels, and buyers.

Building on the strategic elements of the Porter framework, the SCM perspective facilitates a better understanding of the relationship between strategic level and functional level activities. Consistent with the Resource Based View (RBV) of strategic management, functional activities are derived from resources that may be developed to a greater or lesser extent depending upon their fit with a firm's overarching strategic orientation (Barney 1991; Deshpande, Parley, and Webster 1993; Mentzer et al. 2001). Existing literature, however, does not specifically explain the relationship between SCM and firm strategy, nor does it foster an understanding of the interactions among SCM and functional activities. The purpose of this paper, therefore, is to present a theoretically-based framework that establishes SCM as a strategic level phenomenon and promotes a better understanding of the relationship between SCM and traditional functional areas. Specifically, the relationship between SCM and logistics is explored.

The paper is organized as follows: first, paradigms from strategic management and marketing are used to delineate a generic framework to link corporate strategy, business unit orientation, and functional competence and capabilities. Next, we apply the generic framework to the specific case of supply chain orientation, supply chain management, and logistics such that a clear logistics identity in the broader supply chain arena is established to guide thought and development in the discipline. The framework posits researchable propositions regarding the nature of supply chain oriented logistics. Finally, we draw implications and conclusions for future research and teaching.

BACKGROUND AND LITERATURE REVIEW

Competitive advantage traditionally involved the choice regarding the markets in which a firm would compete, defending market share in clearly defined segments using price and product performance attributes (Day 1994). Today, however, competition is considered a "war of movement" (p. 62) that depends on anticipating market trends and quick response to the changes in customer needs (Stalk, Evans, and Schulman 1992). Competitive advantage emerges from the creation of superior competencies that are leveraged to create customer value and achieve cost and/or differentiation advantages, resulting in market share and profitability performance (Barney 1991; Coyne 1986; Day and Wensley 1988; Prahalad and Hamel 1990). Sustaining competitive advantage requires that firms set up barriers that make imitation difficult through continual investment to improve the advantage, making this a long-run cyclical process (Day and Wensley 1988).

Porter's approach to competitive advantage centers on a firm's ability to perform interrelated economic activities at a collectively lower cost than rivals, or to perform some activities in unique ways that create end-customer value (Porter 1991). Internal value chain activities include production, marketing, and delivery as well as support activities necessary to acquire and accumulate internal assets. Performing these activities creates assets in the form of skills, organizational routines, and knowledge. Linking these activities externally with suppliers, channels, and buyers form the basis of competing via the value system. The Porter framework, however, does not provide specific guidance regarding how to manage those activities to create a competitive advantage.