SUPPLY CHAIN MANAGEMENT IMPLEMENTATION AND PRIORITY STRATEGIES IN DANISH ORGANIZATIONS

Journal of Business Logistics, 2006 by Kotzab, Herbert, Grant, David B, Friis, Anders

There has been little discussion on how to prioritize and implement SCM strategies within organizations. This paper presents a decision tool to identify prioritized strategies for improving SCM implementation and validates its use in a study amongst SCM managers of 100 Danish organizations.

Key Words: Supply Chain Management, Corporate Strategy, Strategic Implementation, Strategic Prioritization, Denmark

INTRODUCTION

This paper presents selected results from a research project that investigated how supply chain management (SCM) is developed and implemented within Danish business organizations (see Friis et al. 2004, Kotzab et al. 2006). The goal of this paper is to provide insights for prioritizing strategic decision making when implementing SCM in an organization. We use the SCM definition of the Council of Supply Chain Management Professionals (CSCMP) from Grant et al. (2006 p. 15) as "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" (our emphasis in italics).

SCM is seen as an internal and external integration of business processes with customers and suppliers in order to add customer value (Cooper and Ellram 1993; Cooper et al. 1997). SCM thus incorporates different implementation requirements provided by several actors between the point of origin and point of consumption, but mainly seen from a single actor's point of view (Lee and Billington 1992; Handfield and Nichols 1999). The need to implement SCM within organizations stems mainly from changes in competition that nowadays is between networks rather than between single actors (Corbett et al. 1999; Christopher 2000). Organizations therefore have to incorporate SCM into their existing competitive strategies.

Lambert et al. (2005, p. 25) argue that SCM "is implemented by integrating corporate functions using business processes within and across companies." However, there is a lack of literature regarding SCM implementation, integration and an organization's competitive strategies. Heusler (2004) identified some important implementation factors and how managers might prioritize and apply those factors to implement SCM in their organizations. However, he recognized this lack of literature and called for more quantitative empirical research, rather than qualitative research, to investigate company-wide implementation of SCM.

In a Danish context the need for more specific research on SCM implementation has arisen from work by Christiansen and Maltz (2001) and Bagchi et al. (2003), who noted problems of SCM implementation within Danish organizations. Although SCM has been regarded as a powerful management concept for many years in Denmark, only a few large Danish companies consider SCM in their corporate strategies, while the majority of Danish companies only consider SCM in a limited manner (Jespersen and Skjoett-Larsen 2000; Breil-Hansen 2004).

This paper builds upon the results of a study by Kotzab et al. (2006) that developed driving forces of SCM implementation within Danish organizations and presents an implementation and prioritization tool derived from theoretical concepts of Johnson and Gustafsson (2000) and Heusler (2004) to assist managers in determining influential factors affecting SCM implementation within their organizations. The tool is an application of Johnson and Gustafsson's (2000) importance-performance analysis and can be used to assess the current degree of SCM implementation within an organization and set implementation priorities in order to increase this degree of implementation.

The article is structured as follows. We first examine the literature on theory and frameworks for SCM implementation and the resultant Kotzab et al. (2006) empirical study. We then turn to the development and application of our SCM implementation and strategy prioritization tool to this extant work. Finally, we provide a critical summary and outlook for further research.

LITERATURE AND BACKGROUND

SCM's main features include long-term relationships between supply actors, a customer orientation, mutual benefits and/or sharing of information, profits and risks (Arlbj0m 2002). Kopczak and Johnson (2003) call this a 'supply chain management effect' that shifts business focus from crossfunctional to cross-enterprise. This effect may help to increase a firm's competitiveness or organizational effectiveness relative to competitors by lowering costs and increasing profits and customer satisfaction (Elmuti 2002, Tan 2002, Wisner 2003).

A key problem is how to identify the start and end of such interwoven supply chains. Ganeshan et al. (1999) limited the scope of a supply chain to inter-connected activities in planning, coordinating and controlling materials, pans, and finished goods from supplier to customer concerned with only two distinct flows, material and information, through the organization. They also raised a responsibility problem, i.e. who is responsible for the supply chain? This issue of who is in control, either as a legitimate 'channel captain' or as an actor with inordinate power, is also important for determining how much influence any one firm has throughout the entire supply chain? (Grant 2005). The potential power of an individual actor to change a given supply chain set up leads to questions such as 'who is in charge of SCM?' or 'what, where and how much of SCM can be used?' (New 1997; Bretzke 2005; Gudehus 2005). These questions refer to implementation problems, however they are difficult to investigate. We now turn to how SCM can be theoretically modeled before we can discuss implementation.