Current Evolution of Supply Chain Management

Daniel Dumke — Mon, 02 May 2011 13:17:00 +0000

One very important part of supply chain management research is the historical analysis of supply chain practices and properties over time. Just recently I published an article on the development of supply chain strategies over the course of 20 years.
Today I want to highlight a more short term, nonetheless interesting analysis done using two surveys from 2003 and 2004 on the current state and evolution of supply chain management practices.

Surveys and Foundation

The results of the first survey were published in 2003. The 2004 study was meant as a follow up. Overall 209 participants mainly from North America and Europe from more than 20 different industries took part in the survey.
A major part of the survey consists of rating the performance in different areas of supply chain management (eg. purchasing, transportation, planning, inventory management…) based on a supply chain maturity model (figure 1). The differences between the results were then analyzed.

Figure 1: Supply Chain Maturity Model (Poirier and Quinn, 2004)

Results

There is some identifiable progress between the two years in terms of the maturity level. Figure 2 shows the results of the self assessment for 2004. The authors state that especially the high tech sector and retail show a high percentage of level 4 and 5 companies. Comparing 2003 with 2004 the results suggest a forward movement in all key areas except for the supply chain software and technology bit.

Figure 2: Results Maturity Level in Supply Chain Functions (Poirier and Quinn, 2004)

Another part of the surveys was the strategy development within the companies. The authors conclude that

overall strategy development continues to be a weak spot among the responding companies.

Especially due to a missing link between supply chain and business strategy. In 2004, over half of the companies reported to have no supply chain strategy. Only 25% agreed that their SC strategy is integrated into the business strategy. But still, the strategies are only shared with their entire supply chain by about 15%.
The authors infer that short term cost-reduction efforts still seam to be the major focus of supply chain management. This is also confirmed by a greater focus of the companies towards supply chain initiatives on reducing cost than increasing revenues.

The authors see the following hypothesis confirmed:

Companies and industries will vary widely in terms of their evolution agains the supply chain framework
Impacts of supply chain initiatives will be significant and well-documented, particularly with regard to cost savings and revenue improvements.
Companies will adopt technology solutions before improving their related processes, thereby foreclosing on the technology’s full benefits
Inter-enterprise collaboration will be a mark of the advanced firms
Customers will be the driving force behind many supply chain initiatives

Conclusion

Long term historical supply chain research can be a key in understanding the political drivers behind supply chain development within a company. And of course improving as a result. The research presented here is a good start in this direction but should be supported by a longer term continuity.
To be honest I was surprised that this short term view even spotted significant differences, since reaching another level in this maturity model usually would take more than one year (this then again shines back on the validity of the sample). And sadly I was not able to find a follow up article from one of the last years which repeated the study.

As always with questionnaire based surveys, especially those which have to be filled without guidance by one of the researchers, the results may heavily be biased by the interviewee and his environment.

From the deduction particularly the third hypothesis (“companies will adopt technology before changing processes”) seems to be hard to confirm in a survey alone and the presented evidence looks weaker than the others.

Reference:

Poirier, C.C., & Quinn, F.J. (2004). How are we doing – A Survey of Supply Chain Progress Supply Chain Management Review, 8 (8), 24-31

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development

history

maturity

strategy

supply chain management

empirical research

Analysis of Logistics Strategies from 1990 to 2008

Daniel Dumke — Mon, 21 Mar 2011 16:02:00 +0000

Do supply chain strategies evolve over time? Are there the same strategic options nowadays compared to 20 years ago?
Since at least the meaning of the term logistics has evolved during the last 20 years, especially due to the emergence of supply chain management, logistics and supply chain management are used interchangeable in this article.

In 1987 Bowersox and Daugherty created a logistics strategy framework, concluding that there are basically three SC strategies:

Process Strategy
management of the traditional logistics activities with a primary goal of controlling costs
Market Strategy
management of selected traditional logistics activities across business units with the goal of reducing complexity faced by customers
Information Strategy
management as a system, with the goal of achieving inter-organizational coordination and collaboration through the channel.

Hypothesis

Building on this framework McGinnis, Kohn, Spillan (2010) executed and analyzed four surveys from the years 1990, 1994, 1999, 2008 with the above mentioned research questions in mind. The following hypothesis were designed:

Importance of Bowersox framework remained constant
Dependent variables (statistical data on the survey participants like: logistics coordination effectiveness, customer service commitment and competitiveness) remained constant
Within a logistics strategy, process strategy, market strategy, and information strategy will be of equal importance.

Results

First, the results show, that the dependent variables and the perception of the strategies did not change too much to make a comparison between the studies impossible.
To analyze the results further the authors clustered the respondents into three strategy clusters (intense, intermediate and passive cluster), depending on their propensity for the mentioned strategies. Here is what they found:

Intense Logistics Strategy increased
That means that either the importance of logistics strategy in U.S. manufacturing firms increased in importance or the firms were more intensely managed overall, including logistics
Relative Importance
Process strategy (cost control) is generally more important than market strategy (reducing complexity faced by customers), and that both are more important than information strategy (inter-organizational cooperation and collaboration).

The authors conclude that the Bowersox and Daugherty (1987) typology still provides an excellent framework and that strategy is more stable over time than expected. The primary focus of an intense supply chain strategy is cost efficiency and complexity reduction; furthermore it appears that cost efficiency and reduced customer complexity are facilitated by the information strategy in the intense logistics cluster.

Conclusion

I think this kind of historical analysis is much to seldom in current research. In the popular reporting very often the hypothesis is made: This topic has experienced growing attention / relevance / … But has the world really become eg. more dangerous haven’t there always been violent attacks on people and property? I think McGinnis et al. provide a great basis for this kind of discussion. The answer is: Yes, there have been to the logistics strategies used by companies in the last 20 years, but not so much though. Of course this does not make a great headline like…

Reference:

McGinnis, M.A, Kohn, J.W., & Spillan, J.E. (2010). A Longitudinal Study of Logistics Strategy: 1990-2008 Journal of Business Logistics, 31 (1), 217-235

Bowersox, D.J., & Daugherty, P.J. (1987). Emerging Patterns of Logistical Organization Journal of Business Logistics, 8 (1), 46-60

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