Supply Chain Management – in Theory and Practice

Citation

Young, R.R. (2005), "Supply Chain Management – in Theory and Practice", International Journal of Physical Distribution & Logistics Management, Vol. 35 No. 8, pp. 612-613. https://doi.org/10.1108/09600030510623366

Supply chain management (SCM), as a concept, represents nearly 50 years of agglomerating business processes under systems theory. Certainly, materials management and physical distribution management represent the genesis of this phenomenon. Ultimately these merged to form logistics management.

In the 1980s and 1990s two forces drove businesses to think beyond their corporate boundaries. One was outsourcing where suppliers became part of an extended enterprise and purchasing became the equivalent of manager of external manufacturing. Second, was the quality revolution where rationalized supply bases served to reduce variation; buyers and suppliers began communicating across a range of functional activities. They soon learned that this communications dramatically improved relationships. Assuming that one firm's supplier is another firm's customer industry arrived at the concept of the supply chain.

Jespersen and Skjøtt‐Larsen's offering on the subject could be divided into several sections: background, tools, and implementation. The background section begins by offering definitions as well as a differentiation between logistics and SCM. It then proceeds to decompose into management components, a typology of supply chains, levels of SCM cooperation, and characteristics of successful SCM cooperation. The authors then expand the discussion of the network structure, business processes and management components, otherwise the equivalents of whom, what and how.

Clearly, the authors provide some valuable reminders to readers, whether novice or seasoned. First, SCM in its purist form cannot be found in any supply chain, but rather is a vision to which firms will continually need to work. Second, supply chains are either stable or dynamic depending upon market conditions, frequency of changes to internal processes, and products vis‐à‐vis their life cycles. Finally, SCM should only undertaken if it contributes to customer value and, as many others have posited, can become the key means to compete.

The middle section, or tools, provides a useful discussion of what have become the acronyms of SCM, most notably supplier relationship management (SRM), customer relationship management (CRM), collaborative planning, forecasting and replenishment (CPFM), efficient consumer response (ECR), and vendor managed inventory (VMI), as well as how these function together. To this, the authors add a preface differentiating functional from process management and explain the importance of teaming. Here one of the principal messages is not to look at SCM as a series of dyadic relationships, but a dynamic network possessing several flows and multifaceted cooperative efforts between many participants.

The final section, or implementation, contains three chapters; namely performance measurement, implementation per se, and a case study of a firm building a successful supply chain. The measurement chapter views the topic from a high level electing to consider the contributions of CRM and SRM through the lens of the economic value added (EVA) model – despite such coverage perhaps being more appropriate following the implementation chapter. Curiously, the authors state little for use of lower level measurement criteria such as supplier delivery and quality performance, supplier lead time, outbound order and line fill rates, and order cycle times.

Insofar as implementation is concerned, much useful advice is provided including the need to recognize such potential problems as opportunistic behavior, engaging inappropriate partners, the difficulty of measuring cooperation, and the distribution of gains and risks. If a practitioner were to use this section as a guide, they should be encouraged to use the provided high‐level questions to drive enquiry into more detailed issues that will potentially affect all parts of the organization. The final chapter is the case of Sanistaal, a Danish industrial goods wholesaler, and is useful for illustrating how many of the concepts tie together, but also where problems occurred.

The book does have its shortcomings. Whereas most now recognize supply chains to be three flows, physical, informational, and financial, it is noteworthy that the authors ignore the role of financial flows. For that matter, there is no mention of the leading model of SCM, the supply chain operational reference (SCOR) model as developed and refined by the Supply Chain Council.

Another problem, albeit small, is reference to the whiplash effect when the literature consistently refers to the phenomenon as the bull whip effect. Finally, the discussion on total cost of ownership failed to identify equipment downtime, the need for providing spare parts and operating supplies throughout an asset's useful life, and the ultimate cost of disposal.

Nevertheless, this book has clear appeal. It could prove useful primer on SCM to senior managers, but also serve as supplemental reading in a graduate course where SCM needs to be put into context. It provides a high level view of supply chains, explains many of the information technology applications currently in vogue, and combines those systems into a trans‐enterprise approach to doing business. Finally, it does all of this in a small volume written by a practitioner/consultant and an academic, a combination that adds credence in the eyes of multiple audiences.